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Weekly Economic Update for July 28, 2014

WeeklyMarketUpdate.jpgYEARLY INFLATION AT 2.1%

In June, the headline Consumer Price Index recorded annualized inflation at that level for a second consecutive month. Back in February, yearly consumer inflation was down at 1.1%. June saw the CPI rise 0.3% and the core CPI (minus food and energy prices) advance 0.1%; core CPI was up 1.9% year-over-year.1

   

CONTRASTING HOME SALES NUMBERS IN JUNE

The Census Bureau announced an 8.1% June drop in new home buying, which left 5.8 months of inventory in the market (the most since October 2011). New home prices were up 5.3% year-over-year. Existing home sales picked up 2.6% in June; that was the second straight monthly gain, pushing the seasonally adjusted annual sales rate above the 5 million mark for the first time since October.2

       

MORE DEMAND FOR DURABLES

Hard goods orders improved 0.7% in June; analysts polled by Bloomberg projected a 0.5% advance. The Commerce Department also announced a 3.5% yearly gain.3

  

MIXED WEEK FOR MAJOR U.S. INDICES

Across five days filled with earnings news and geopolitical concerns, the Dow fell 0.83% to 16,960.57, the Nasdaq gained 0.40% to 4,449.56, and the S&P 500 went flat for the week, retreating just 0.03 points and settling Friday at 1,978.34.4,5

 

Weekly Economic Update for July 21, 2014

WeeklyMarketUpdate.jpgSTOCKS ADVANCE, EVEN WITH ANXIETIES

The crash of Malaysia Airlines Flight 17 in Ukraine, a ground offensive by Israel into Gaza: these headlines gave investors pause, but M&A action and earnings reports sent stocks higher for the week. Thursday, the CBOE VIX jumped 32% to settle at 14.54, yet the S&P 500 closed just 1.2% lower. The 5-day scorecard: DJIA, +0.92% to 17,100.18; S&P 500, +0.52% to 1,978.22; NASDAQ, +0.38% to 4,432.15.1,2,6

   

RETAIL SALES, WHOLESALE PRICES RISE IN JUNE

Overall U.S. retail sales were up 0.2% last month; the gain was 0.4% with car buying factored out. The Commerce Department revised the May gain 0.2% higher to 0.5%. After retreating 0.2% in May, the headline Producer Price Index advanced 0.4% in June; the core PPI rose 0.2%. Annually, producer prices were up 1.9%.3,4

      

FEWER HOUSING STARTS LAST MONTH

The Census Bureau noted 9.3% less groundbreaking in June, plus a 4.2% retreat in building permits. Single-family starts dipped 9.0% to the slowest annualized pace since November 2012.5

  

HOUSEHOLD SENTIMENT DIPS

July’s preliminary University of Michigan consumer sentiment index came in at 81.3, missing expectations (economists surveyed by Briefing.com forecast an 84.0 reading). The index was down 1.2 points from its final June mark.3

Weekly Economic Update for July 14, 2014

WeeklyMarketUpdate.jpgFED PLANS TO STOP EASING THIS FALL

June’s Federal Reserve policy meeting minutes outlined the central bank’s exit plan from QE3. The Fed will continue tapering its monthly asset purchases in a series of $10 billion cuts, then make a last $15 billion cut in late October. The June minutes offered no hint of change on interest rates; Fed officials are widely expected to adjust short-term rates in 2015. The Fed actually lessened its medium-term inflation forecast, and the minutes showed general agreement for reinvesting proceeds from maturing bonds until a rate hike occurs.1,2

   

U.S. BUDGET DEFICIT COULD BE SMALLEST IN 6 YEARS

According to the Congressional Budget Office, the federal deficit totaled $366 billion nine months into the current fiscal year – a 28% reduction from the previous year. (Chalk that up partly to federal tax receipts increasing 8% for FY 2014.) The CBO sees a $492 billion federal deficit for the full budget year ending Sept. 30.3

      

OIL DIPS BELOW $101 AS SUPPLY FEARS DIMINISH

Futures dropped 3.1% last week, closing at $100.83 Friday on the NYMEX. Risks to supplies in Iraq and Libya lessened, and American crude inventories expanded.4

Weekly Economic Update for July 7, 2014

WeeklyMarketUpdate.jpgDOW TOPS 17,000 AFTER TERRIFIC JOBS REPORT

America’s jobless rate is fast approaching the Federal Reserve’s 6% target. Thanks to employers adding 288,000 new hires, unemployment dropped 0.2% to 6.1% in June. The U-6 rate (unemployed + underemployed) declined to 12.1%, a low unseen since October 2008; from June 2013 to June 2014, the number of Americans out of work for more than six months shrank by 1.2 million. The news helped inspire a rally: at the closing bell Friday, the Dow settled at a new all-time high of 17,068.26.1,2

   

ISM INDICES SINK SLIGHTLY 

The Institute for Supply Management’s latest factory sector and service sector PMIs didn’t quite meet expectations, but they were still well above 50 (the demarcation between sector growth and contraction). ISM’s manufacturing PMI came in at 55.3 for June, ticking down 0.1 points from May; its non-manufacturing PMI had a June reading of 56.0 compared to May’s 56.3 mark. Economists polled by MarketWatch had forecast June’s ISM factory PMI to hit 55.7 and expected no change in its service sector PMI. Factory orders also decreased in May, as the Federal Reserve reported an 0.5% retreat following the 0.8% rise in April.3

      

PENDING HOME SALES JUMP 6.1%

The May gain was the greatest monthly improvement noted by the National Association of Realtors since April 2010 (when the first-time buyer tax credit was set to expire). Analysts polled by Bloomberg believed May would bring a gain of 1.5%.4

Weekly Economic Update for June 30, 2014

WeeklyMarketUpdate.jpgA LITTLE MORE CONFIDENCE IN THE ECONOMY

The Conference Board’s consumer confidence index rose 3.0 points for June to 85.2, exceeding the 84.0 consensus forecast of analysts polled by Briefing.com. Those analysts thought the University of Michigan’s final June consumer sentiment index would come in at 81.7; it climbed to 82.5 instead. In related news, the Commerce Department found personal spending up a decent 0.2% for May and up 3.7% in a year. As the Bureau of Economic Analysis downgraded Q1 GDP from -1.0% to -2.9% last week, all this was welcome. One more item of interest: the Federal Reserve’s PCE index showed yearly inflation at 1.8% in May, a 19-month peak.1,2

   

SO MUCH FOR THE SLUMP IN HOME SALES 

Wall Street certainly liked the 4.9% rise in existing home sales for May noted by the National Association of Realtors. A day later, the Census Bureau announced an 18.6% jump in new home buying for May. Economists surveyed by Reuters had predicted May gains of 2.2% for resales and 1.6% for new home sales. April’s S&P/Case-Shiller Home Price Index showed a 1.1% overall monthly gain and a 10.8% overall annualized advance.3

      

DURABLE GOODS ORDERS LESSEN IN MAY

Minus transportation orders, they contracted 0.1%. With transportation orders factored in, the retreat was 1.0%. Analysts contacted by Briefing.com predicted gains of 0.4% in the headline and core indicators.1

Weekly Economic Update for June 23, 2014

WeeklyMarketUpdate.jpgINFLATION PICKS UP

The Consumer Price Index increased 0.4% in May – the biggest monthly rise in over a year, with food prices up 0.5%. Labor Department data showed the core CPI (minus energy and food prices) up 0.3% for May; that was its largest monthly advance since August 2011. All this put the annualized gain in the headline CPI at 2.1% and the yearly gain in core CPI at 2.0%. Analysts polled by Reuters thought the overall CPI would increase 0.2% last month. The turmoil in Iraq could help to drive consumer prices higher this summer.1

   

MAY SEES LESS NEW RESIDENTIAL CONSTRUCTION

Reduced home buying eventually means reduced groundbreaking. May’s housing numbers from the Census Bureau reflected that – housing starts slipped 6.5% last month while building permits fell 6.4%. Housing starts are still maintaining a million-unit seasonally adjusted annual pace.1

      

OIL SETTLES AT A 9-MONTH HIGH

$107.26 a barrel – that was where NYMEX crude for July delivery closed at Friday. Even so, prices leveled off last week as ISIS insurgents in Iraq remained far away from Basra, that country’s hub for oil exports.2

 

Weekly Economic Update for June 16, 2014

WeeklyMarketUpdate.jpgUNREST IN IRAQ SENDS OIL TOWARD $107

NYMEX crude settled at $106.91 Friday, up 4.1% for the week in reaction to the Sunni-led ISIS militant movement seizing control of Mosul and other cities in northern and eastern Iraq. It was oil’s biggest weekly spike since December. While the price of unleaded gasoline fell a cent for the week to $3.65 a gallon according to AAA, a short-term increase seems imminent. Iraqi oil supplies were not seriously impacted as of the weekend: most oil production in Iraq occurs in the nation’s southern half, and Iraq hasn’t exported oil from its northern regions since March.1,2

   

RETAIL SALES, SENTIMENT INDEX UNDERWHELM

U.S. retail sales rose 0.3% in May, beneath the 0.7% gain forecast economists polled by the Wall Street Journal. With car buying and gasoline purchases factored out, they were actually flat for the month. (In better news, the Commerce Department revised April’s retail sales increase north to 0.5% and sales are up 4.3% in the past 12 months.) If consumer purchasing was a bit disappointing, so was the University of Michigan’s initial June index of consumer sentiment, which fell from its previous level of 81.9 to 81.2.3,4

      

PRODUCER PRICES RETREAT

The Producer Price Index pulled back 0.2% for May, its largest decline since October; the core PPI dipped 0.1% for May. Bureau of Labor Statistics data shows both the headline and core PPI up 2.0% in the past 12 months, however.4

Weekly Economic Update for June 9, 2014

WeeklyMarketUpdate.jpgHIRING CORRESPONDS TO EXPECTATIONS

Employers added 217,000 new jobs in May, just 1,000 less than analysts polled by Reuters had forecast. Over the past year, payrolls have expanded by average of 197,000 new hires a month. The jobless rate remained at 6.3% in May, but the U-6 rate (the unemployed + the underemployed) sank to 12.2%, a low unseen since October 2008.1

   

SERVICE SECTOR EXPANDS AT A FASTER PACE

At 56.3, the Institute for Supply Management’s non-manufacturing purchasing manager index rose 1.1 points to hit a 10-month high in May. ISM corrected its May manufacturing PMI twice last Tuesday; the final reading was at 55.4, up half a point from April’s mark. May also brought a 0.7% improvement in factory orders, following a (revised) 1.5% gain for April.2,3

      

PRECIOUS METALS RISE, OIL STAYS FLAT

Silver futures rose 1.7% last week on the COMEX, ending the week at $18.99 an ounce. Five days of trading left gold futures 0.5% higher at $1,252.50 an ounce at Friday’s close. In base metals, copper slipped 2.3%. As for NYMEX crude, it declined just 0.05% for the week to $102.66 a barrel.4,5

Weekly Economic Update for June 2, 2014

WeeklyMarketUpdate.jpgHOW OPTIMISTIC ARE CONSUMERS?

No firm conclusion can be drawn from May’s major consumer economic polls. The Conference Board’s consumer confidence index rose 1.3 points to 83.0. That was its second-best reading in the past six years. The University of Michigan’s final May consumer sentiment index dipped to 81.9 from April’s reading of 84.1. Fresh Commerce Department data also sent mixed signals. Consumer spending contracted 0.1% in April even as consumer incomes rose 0.3%.1,2

   

PENDING HOME SALES IMPROVE AGAIN

They rose 0.4% for April, the National Association of Realtors said; this follows a 3.4% March increase. March’s S&P/Case-Shiller home price index showed an overall 12.4% annualized gain in house prices – quite good, but down appreciably from the 12.9% yearly advance recorded in the February edition.2

       

Q1 GDP REVISED DOWN; BETTER NEWS FOR DURABLES

Reviewing declines in exports, business investment and business stockpiles, the Commerce Department said Thursday that the economy actually shrank 1.0% in the first quarter even with a 3.1% advance in personal spending. April’s durable goods orders surprised to the upside, however – they were up 0.8%. Economists polled by MarketWatch had forecast they would retreat 0.8%.2,3

Weekly Economic Update for May 26, 2014

WeeklyMarketUpdate.jpgHOME SALES PICK UP AGAIN

Economists, investors and homeowners welcomed the news that existing home sales improved 1.3% for April. Complementing that announcement from the National Association of Realtors, the Census Bureau said new home sales rose 6.4% in April. In annualized terms, the sales pace has flagged: new home sales have slowed 4.2% over the past 12 months, resales 6.8%. Still, house prices have appreciated nicely: the median price of an existing home sold in April was $201,700, up 5.2% in a year, while the median sales price for a new home last month was $275,800. According to NAR, most of the sales growth in the last 12 months has come at the high end of the market (existing homes valued at more than $750,000).1

  

HINTS OF A BETTER QUARTER

April brought the fourth straight monthly gain for the Conference Board’s index of leading economic indicators. It rose 0.4% in April, and its March gain was revised up to 1.0% (its largest gain since last September). The index looks at 10 factors to project the health of the American economy 3-6 months ahead.2

     

NYMEX CRUDE JUMPS 2% IN 5 DAYS

When Friday’s trading day ended, oil was valued at $104.35 a barrel in New York. Gasoline futures closed at $3.02 Friday, the highest settlement price since April 25. Gold eked out a 0.1% weekly gain to $1,291.70 Friday on the COMEX; copper futures advanced 0.6% on the week, silver and platinum futures 0.5%.3

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