August 31, 2015
Investors around the globe will be eagerly awaiting the August Jobs Report, which is due to be released this Friday, September 4, at 9:30 a.m. ET. It is expected that employers added 217,000 new jobs during the month, down from the February high of 266,000. The Unemployment Rate is expected to fall to 5.2%, which would be the lowest level since April 2008. The jobs numbers will be one of the key deciding factors in the Federal Reserve’s decision as to whether or not to raise the Fed Funds Rate, the country’s benchmark interest rate in September.
The first of three key readings in the manufacturing sector was reported today showing that business activity in the Midwest region declined marginally in August, but still managed to show expansion. The Chicago PMI Index came in at 54.4, just shy of the 54.7 expected and down from the 54.7 recorded in July. Readings over 50 indicate expansion, below 50, contraction. The national ISM Manufacturing Index will be released on Tuesday.
August 28, 2015
Inflation remained tame in July due to falling prices at the gas pumps, which could give the Federal Reserve reason to hold off on an interest rate hike in September. The Commerce Department’s Bureau of Economic Analysis (BEA) reported that Core Personal Consumption Expenditure (PCE), which measures the prices paid by consumers for goods and services minus food and energy, rose by 0.1% in July, inline with expectations. The Core PCE on an annual basis rose by 1.2%, below the 1.3% expected.
Within the report from the BEA, it also showed that Americans continued to spend on goods and services at a decent clip in July. Personal Spending rose by 0.3%, which was just below the 0.4% expected, while Personal Income rose by 0.4%, also matching expectations. In addition, the personal savings rate was 4.9% in July, up from 4.7% in June.
The recent decline in U.S. Stock markets coupled with the slowdown in growth in China led consumer attitudes lower in August. The Consumer Sentiment Index fell to 91.9 this month, down from the initial August reading of 92.9 and down from the June reading of 93.1. The index for expectations six months from now dropped to 83.4, the lowest since November, while Americans views of their personal finances declined to a three-month low.
August 27, 2015
Economic growth in the U.S. surged in the second quarter led by rising business investments and consumer spending. The Bureau of Economic Analysis reported that the second reading for second quarter Gross Domestic Product (GDP) rose by 3.7%, above the first reading of 2.3% and well above the anemic 0.6% recorded in the first quarter. GDP measures the value of all goods produced in the U.S. The consumer spending component of GDP rose by 3.1% compared to the 1.8% registered in the first quarter.
The National Association of REALTORS® (NAR) reported on Thursday that July Pending Home Sales were mostly unchanged, but did see a modest rise for the sixth time in seven months. Pending Home Sales rose by 0.5% versus the 1% expected and the index has increased year-over-year for 11 consecutive months. Lawrence Yun, NAR chief economist, says the housing market began the second half of 2015 on a positive note, with pending sales slightly rising in July.
Mortgage rates edged lower this week led by turmoil in the Chinese Stock markets. The 30-year conforming fixed-rate mortgage fell to 3.84% this week with 0.6 in points and fees. A year ago, the rate was 4.10%. The 3.84% is the lowest level since May and the fifth consecutive week with a rate below 4%, said a Freddie Mac official. Mortgage rates remain just above the historical lows and has given a boost to the housing market.
August 26, 2015
The Mortgage Bankers Association (MBA) reported on Wednesday that a recent study showed that housing demand will surge over the next ten years. The MBA feels that between 13.9 and 15.9 million households will be formed by 2023, making the next 10 years one of the strongest in housing in U.S. history. The MBA went on to say that the housing demand will be driven by Hispanics, Baby Boomers and Millennials.
Online real estate company Zillow reported on Wednesday that it sees the housing market slowing down a bit as home prices saw their first negative monthly change since the recovery four years ago. Zillow said that home prices declined 0.1% in July, falling to $179,900. On an annual basis, prices rose 3.0% from July 2014 to July 2015, down from 3.4% in the year ended in June. Of the 517 metro cities covered by Zillow, 204 saw a slowdown in prices and were back to more normal levels of appreciation.
With oil prices continuing to decline in world markets due to slowing demand and a surge in supply, prices at the gas pumps are falling. The national average price for a regular gallon of gasoline is at $2.55, down from $2.72 a month ago. Recently, gas prices have been slow to push lower with the big drop in oil and this is due to outages at several major refineries. Gas analyst Tom Kloza from the Oil Price Information Service sees prices below $2 per gallon by Thanksgiving. Mr. Kloza says that the summer driving season ends this month and with refineries able to refine oil into gas at less expensive prices for its winter blend, prices will begin declining.
August 25, 2015
Housing news was abundant today showing positive gains for the sector. The Case Shiller 20-city Index rose 5% in the year ended in June, which was near expectations and matched the May reading. On a month-over-month basis, the index was down 0.1%. The big gains were seen in Denver (10.2%), San Francisco (9.5%) and Dallas (8.2%). The component that covers the entire nation was up 4.5% in the past 12 month.
The Commerce Department reported on Tuesday that New Home Sales in July rose 5.4% from June to an annual rate of 507,000 units. The increase of 5.4% comes after a 7.7% decline from May to June. Sales were up nearly 29% from July 2014, while the median price of a new home rose 2% from a year ago to $285,900. On the supply side, the inventory of New Homes for sale was up almost 2% to 218,000, the highest level since March 2010, though still less than half below of what it was at the height of the housing boom.
Consumer across the nation felt confident in August over the current state of the U.S. economy, which was fueled by an improving labor market. The Conference Board reported that its Consumer Confidence Index rose to 101.5 in August, the best reading since January and well above the 93.0 expected. In addition, it was the second highest reading since the Great Recession began in late 2007. “Consumers’ assessment of current conditions was considerably more upbeat, primarily due to a more favorable appraisal of the labor market,” said Lynn Franco, Director of economic indicators at the Conference Board.
August 24, 2015
After last week’s selloff in the Stock markets the Dow Jones Industrial Average shed 1000 points. The closely watched Stock Index fell 1,100 points to begin this week after global Stock markets plunged overnight. Concerns of a slowing global economy, falling commodity prices and the specter of rising rates here in the States has pushed investors to cash in their chips and take some profits. Stocks are now more than 10% off their highs seen back in May, which officially has turned into a correction.
Home prices continued their steady rise in June as the sector seems to be hitting on most of its cylinders, though not fully recovered. The Black Knight Financial Home Price Index (HPI) rose 0.9% from May to June, up 4.9% since the beginning of the year and up 26% since the start of 2012, which was near the bottom. At $252,000, the national level HPI is now just 5.8% off its June 2006 peak of $268,000. The index covers home prices as of their transaction date in 18,500 U.S zip codes.
Fannie Mae released its August 2015 Economic and Housing Outlook saying that economic growth in the second half of the year is less optimistic than was previously stated. Fannie went on to say that “headwinds from a strong dollar and renewed declines in crude oil prices, are expected to continue to pose challenges in the current quarter, although consumer and government spending will likely provide support. Housing also is expected to contribute to 2015’s growth, with year-to-date main housing indicators staying well above year-ago levels.”
August 21, 2015
Stock prices around the globe continue to melt down as global growth fears fuel the selloff. Both the Dow Jones Industrial Average and the S&P 500 are now in negative territory for the year. In addition to the growth fears, U.S. Stocks have been pushing lower ahead of interest rate hikes by the U.S. Federal Reserve expected in the coming months. Since hitting its all-time closing high of 2,130 back in mid-May, the closely watched S&P 500 is down nearly 6%, while the Dow is down nearly 9% in the same time period.
Manufacturing activity across the U.S. slowed to its slowest pace in almost two years in August, while employment activity edged lower. The August Markit Manufacturing Purchasing Managers’ Index declined to 52.9, the lowest since October 2013. The employment index fell to 52.2, the lowest level seen since July 2014. “August’s survey highlights a lack of growth momentum and continued weak price pressures across the U.S. manufacturing sector, which adds some fuel to the dovish argument as policymakers weigh up tightening policy in September,” said Tim Moore, senior economist at Markit.
August 20, 2015
The National Association of REALTORS® (NAR) reported that Existing Home Sales in July were up 2% from June to an annual rate of 5.59 million units, the highest pace since February 2007. The 5.59 million was above the 5.42 million expected. Since July 2014, sales are up 10%. A spokesperson from the NAR said that tight inventories are driving prices up and that a more robust housing market could provide further support for the U.S. economy.
The Federal Reserve released the minutes from its July 29 meeting on Wednesday with a majority of the members saying the time is coming for interest rates to rise. “Most judged that the conditions for policy firming had not yet been achieved, but noted that conditions were approaching that point.” Many analysts have been pointing towards a rate hike in September, but after the minutes were released, rates could rise later in the year and not next month.
Oil prices continue to edge lower this week, due to an over supply of oil around the globe. The price of West Texas Intermediate oil has fallen to $41/barrel, a six and a half year low. The drop in oil has lowered the price of gas at the pumps for most of the country. In parts of New Jersey, the price for a regular gallon of gasoline is at $2.07. The current national average price for a regular gallon of gas is at $2.66. Many gas analysts see the price of gas moving lower to a national average of $2 sometime in late fall.
August 19, 2015
Inflation at the consumer level remained tame in July as rising housing costs were offset by by little changes in most other consumer goods. The Bureau of Labor Statistics reported on Wednesday that the inflation reading Consumer Price Index rose 0.1% in July, below the 0.2% expected and down from the 0.3% registered in June. It was the smallest increase in six months. Shelter costs rose 0.4%, the biggest gain in more than eight years, while year-over-year housing costs are up 3.1%, the largest annual increase since 2008.
Mortgage application volume rose in the latest week as interest rates to purchase and refinance remained near historic lows. The Mortgage Bankers Association (MBA) reported that its Market Composite Index, a measure of total loan application volume, rose 3.6% in the latest week. Within the numbers it showed that the refinance index was up 7%, while the purchase index gained 0.1%. The MBA also reported that the average contract rate for a 30-year fixed rate mortgage with conforming loan balances ($417,000 or less) decreased to 4.11% with points increasing to 0.37.
Breakfast may be getting more expensive in the coming months as egg prices soar at supermarkets. Due to the worst avian flu outbreak in 30 years there is limited supply which has caused egg prices to spike this year, and prices will continue to rise. The current price for a dozen of eggs are at a range between $1.99 to $4.49 and could hit $6 per dozen by the fall. So don’t be surprised by the higher price of a bacon, egg and cheese at your local breakfast spot in the coming months either.
August 18, 2015
The Commerce Department reported on Tuesday that July Housing Starts are approaching eight-year highs, signaling that the economy has moved to greener pastures. Housing Starts were up 0.2% from June to an annual rate of 1.206 million, above the 1.200 million expected. June was revised higher to 1.204 million from 1.174 million. Housing Starts are up 10% from July 2014. Low mortgage rates continue to lure in buyers as the 30-year fixed conventional rate ($417,000 or less) continues to hover near 4%, a historically low level.
WalMart, the world’s largest retailer, reported quarterly earnings that were lower than expected and also cut its full-year guidance due to high currency fluctuations coupled with pay raises for its U.S. employees. Earnings per share for WalMart came in at $1.08, below the $1.12 expected. The retailer expects a profit of $4.40 to $4.70 per share this fiscal year, below the $5.05 per share originally projected. WalMart’s numbers were also hurt as consumers are spending the incremental dollar away from traditional retailers, paying down debt or putting the cash into savings accounts.
The IRS hacking problems just grew larger this week as the agency reported that the breach is three times larger than originally stated. There have been over 600,000 accounts affected, which are being accessed by hackers through an application called Get Transcript. This program allows users to view their tax account transactions that is reported to the IRS. Get Transript, however, was shut down in May. USA Today reports that “taxpayers whose information was potentially breached will get letters in the mail from the IRS in the coming days. They will also get access to free credit protection and identity protection PINs,” according to the IRS.