Last week was one many of us would probably love to forget. Although it ended on a high note with the legislature and White House finally reaching compromise on a COVID-19 stimulus package, Thursday’s jobless claims show that the relief couldn’t come a minute too soon.
Let’s get right into the key economic reports.
As always, this report was compiled with assistance from economic summaries by Econoday. 1
New Home Sales
Sales of new homes were down 4.58% to a seasonally-adjusted annual rate of 765,000 in February. However, this follows a sharp upward revision to 100,000 in January. The February number also exceeded expectations of analysts.
Supply relative to sales came in at 5 months, with supply down 0.9% overall at 319,000 units. The median new home price was up more than $20,000 in February to $345,900.
Things were good before the virus hit the U.S., so it’ll be interesting to see where this number goes. It’ll certainly be down in March, but by how much?
MBA Mortgage Applications
Mortgage applications were down 29.4% last week and perhaps a sign of the early effects of COVID-19. The average rate for a 30-year fixed mortgage was up eight basis points to 3.82%.
Refinance applications were down 34% and purchase applications fell 15% on the week. People aren’t going out to look for homes right now.
Durable Goods Orders
New orders of durable goods were up 1.2% overall in February. The bad news is that core capital goods were down 0.8% on the month.
The good news is that orders and motor vehicles were up 1.8%, so the transportation drop likely came from airplanes, which are always a volatile sector, particularly with the issues at Boeing right now. However, auto production for March will be heavily impacted with Michigan under a stay-at-home order for nonessential businesses.
Electrical equipment, appliances and components got to join in the uptick for vehicles. On the downside, fabrications fell 1.2% as the primary metal production, down 0.9%. Machinery orders fell 0.5% while the computer and electronics category slid 0.8%.
FHFA House Price Index
In January, home prices were up 0.3% when homes were secured by conventional loans. The overall appreciation from last January was 5.2%. It’s important to note that these home price reports tend to lag by a couple months, so any impact of the current situation likely won’t show up for a while.
Gross Domestic Product (GDP)
In the final estimate of the fourth quarter, the economy grew at a rate of 2.1% on a seasonally-adjusted annual basis. Meanwhile, consumer spending was 0.1% higher than previously reported at 1.8%. Meanwhile, according to this index, prices were up 1.3% in the quarter.
Analysts are giving short shrift to this because the first quarter GDP is what people will be watching to see the impact of COVID-19.
International Trade In Goods
On the goods side, the U.S. trade deficit with other countries was down by $6 billion to $59.9 billion. These numbers cover February.
Goods exports were up 0.5%. There were gains for both industrial supplies and cars and trucks. Still, on the year, exports are down 1.4% on the year.
Imports were down 2.6% on the month and have fallen 5.9% on the year. This isn’t a great sign because analysts are now worried about a decline in U.S. consumption of goods and services, which isn’t good for the economy There was broad weakness across capital goods, food, consumer goods and industrial supplies.
This is where this report gets kind of ugly. Initial jobless claims last week came in at 3.283 million. The consensus had been for a million new claims, so the economic shutdown effects of COVID-19 are definitely here and people are applying for unemployment benefits already. The 4-week moving average was 998,250, but expect this to keep going up for a while. Especially hard-hit were the service industry as well as hospitality and food industries.
On the continuing claims side, these were up 101,000 to 1.824 million. The 4-week moving average of continuing claims was up 27,500 to 1.731 million.
Personal Income And Outlays
In February, personal incomes were up 0.6%, while consumer spending only increased 0.2% as Americans were saving more money heading into this period of economic uncertainty. Prices were up 0.1% overall and 0.2% in core categories. Inflation is up 1.8% overall and in core categories since last February.
Farmers got increased subsidy payments which helped boost the overall income numbers. Meanwhile, services spending on electricity and gas outweighed the downturn in goods caused by people not spending as much money on cars.
In the final reading of March, consumer sentiment was down 6.8 points to 89.1. This represents a precipitous 11.9-point drop since February, which is the fourth-largest such monthly move of the last half-century. It also represents a 4-year low.
Analysts do point out that during the 2008 financial crisis, the index got down into the 50s, and it’s nowhere near that. The weakness was pretty similarly spread across the index’s two components: current conditions and expectations for the future.
Meanwhile, consumers anticipated that inflation next year would be 2.2%, down 0.1% from the previous survey. Expectations over the next 5 years were flat at 2.3%.
Mortgage rates were down quite a bit again last week after rising quite a bit the week before. With the market being as all over the place as it is, we highly recommend relying on the guidance of your Home Loan Expert.
The average rate on a 30-year fixed mortgage with 0.7 points paid in fees was down 15 basis points to 3.5%. This has fallen from 4.06% of the same time a year ago.
Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.6 points paid was down 14 basis points to 2.92% and has fallen from 3.57% last year at this time.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage was up 23 basis points to 3.34% with 0.3 points paid. This is still down from 3.75% a year ago.
It was a bad Friday on Wall Street as the signing of the stimulus bill wasn’t enough to prevent the market from falling sharply as the U.S. became the country with the most cases of COVID-19. No company seems totally immune, but there are those that have been particularly hard hit. Chevron was down more than 8% as people aren’t buying gas. Disney had similar drops with people not visiting its parks.
The Dow Jones Industrial Average was still up 12.84% on the week despite falling 915.39 points Friday to close at 21,636.78. Meanwhile, the S&P 500 was down 88.6 points on the day to finish at 2,541.47, up 10.26% on the week. Finally, the Nasdaq finished the week at 7,502.38, a 9.05% weekly increase, but down 295.16 points to end the week.
The Week Ahead
Monday, March 30
Pending Home Sales Index (10:00 a.m. ET) – The National Association of REALTORS® developed the Pending Home Sales Index as a leading indicator of housing activity. Specifically, it’s a leading indicator of existing home sales – not new home sales.
Tuesday, March 31
S&P CoreLogic Case-Shiller HPI (9:00 a.m. ET) – The S&P CoreLogic Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S.
Consumer Confidence (10:00 a.m. ET) – The Conference Board surveys consumers on their feelings about current and future business and employment conditions as well as their future spending plans.
Wednesday, April 1
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
ISM Manufacturing Index (10:00 a.m. ET) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.
Thursday, April 2
International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The 4-week moving average of new claims smooths out weekly volatility.
Friday, April 3
Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.
This next week will be interesting because we get some of the first monthly reports that should really be affected by COVID-19. We’ll have it all covered in next week’s Market Update!
We know that economics and mortgage rates are the furthest thing from a lot of your minds. This virus has dealt many of us a blow, but we’re with you and we’ll get through this together. We’ve put together a COVID-19 resource guide. Stay healthy!
1Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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