Consumer Spending, Labor Costs, Consumer Sentiment

October 30, 2015

Friday – October 30

The Commerce Department reported on Friday that consumer spending registered its lowest reading in eight months, while incomes barely rose. This signals an ease in domestic demand as the holiday shopping season draws near. Personal Spending rose a scant 0.1% in September, just below the 0.2% expected. Personal Incomes rose 0.1%, also below the 0.2% expected. Consumer spending accounts for more than two-thirds of U.S. economic activity.

Labor costs across the nation rose in the third quarter, though it hasn’t been reflected in higher wages for employees. The Labor Department’s Employment Cost Index rose 0.6% in the July-August-September period after a 0.2% increase in the first quarter of this year. The figure includes wages and salaries. Benefits rose 0.5%.

Consumer Sentiment edged higher in October, but the rise was mainly concentrated in the lower-income households. Those Americans in higher income levels were less confident due to the recent turbulence surrounding the financial markets. The Consumer Sentiment Index came in at 90.0 for the final reading in October, above the 87.2 in September. A spokesperson for the survey said that “consumers will continue to make increases in their buying plans contingent on the availability of price discounts and low interest rates.”

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Economic Growth, Pending Home Sales, Mortgage Rates

October 29, 2015

Thursday – October 29

Economic growth in the third quarter of 2015 slowed across the nation, but it was mainly due to a big decline in inventories, particularly goods that are being exported. The Bureau of Economic Analysis reported that the first reading on Gross Domestic Product (GDP) in the third quarter rose 1.5%, well below the 3.9% recorded in the second quarter. GDP measures the value of goods and services produced by the nation’s economy. Many of the component’s within the report were positive, with consumer spending a standout up 3.2% after a big gain in the second quarter.

The National Association of REALTORS® reported on Thursday that Pending Home Sales fell 2.3% in September from August and are just 3% higher than a year ago. The -2.3% was the second straight monthly decline and the second lowest number for 2015. The Northeast experienced the biggest drop, down 4%, followed by a 2.5% drop in the Midwest, -2.6% in the South and flat in the West. The Pending Home Sales Index is based on signed contracts for existing single-family homes, condos and co-ops.

Mortgage rates continued to hover just above historic lows this week. Government sponsored entity Freddie Mac reported that the 30-year fixed conventional mortgage rate fell to 3.76% this week when paying 0.6 in points and fees. Mortgage rates are below last year’s levels of near 4% as inflation runs below the Federal Reserve’s target range and as global economies continue to run slow.

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FRB, Apple iPhone, REI

October 28, 2015

Wednesday – October 28

Federal Reserve bank members will end their two-day meeting on the health of the U.S. economy today in Washington, D.C. with a 2:00 p.m. ET release of its Monetary Policy Statement. There is little chance that the short term Fed Funds Rate will rise from near zero percent levels, given low inflation, mixed economic data and global economic uncertainty. The Fed Funds Rate is the interest rate at which depository institutions lend balances to each other on an overnight basis.

Tech giant and consumer products maker Apple Inc. reported strong quarterly earnings on Tuesday after the markets closed on Wall Street. Profits rose 31% on demand for its popular iPhone selling 48.04 million of the devices in the latest quarter. The company reported earnings per share of $1.96 versus the $1.88 expected and up from $1.42 in the previous quarter. iPhone sales in China rose a staggering 99%, where the brand has become akin to Prada bags or Rolex watches.

Talk about bucking the trend. Not only is one U.S. retailer not going to open their doors for business on Thanksgiving, it will also not be open on Black Friday. Outdoor gear shop REI announced that its stores will be closed on Black Friday so that its 12,000 employees, who will be paid for the vacation day, can spend some time outdoors with their families. REI President Jerry Stritzke said “Black Friday is getting out of hand” with the melees that occur over that big screen TV and the latest toy craze. Mr. Stritzke went on to say that the company is paying their employees “to go outside and enjoy the day after Thanksgiving with their families.”

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Home Prices, Manufacturing Slows, US Job Market

October 27, 2015

Tuesday – October 27

Home prices across the nation rose in August signaling there is some momentum in the sector headed into year-end. The Case Shiller 20-city Home Price Index rose by 5.1% year-over-year in August, just above the 5.0% expected. From July to August, there was an increase of 0.1%. For the entire nation, prices rose 4.7% in the 12 months ended in August. Case-Shiller offers a delayed picture of how the housing market is faring.

Consumer orders for products meant to last at least three years fell this month as the slowdown in the manufacturing sector continues. A strong dollar and cuts in the energy sector are two key factors in the decline. The Commerce Department reported that September Durable Orders fell 1.2% versus the -1.3% expected, which follows a 3% decline in August. The decline in September was fueled by a drop in commercial aircraft, which fell nearly 36% in September.

Consumers weren’t that upbeat on the job market in a survey conducted by the Conference Board this month. The Consumer Confidence Index fell to 97.6 in October, down from the 102.6 recorded in September and below the 102.5 expected. The move lower was due in part to the recent weakness in the U.S. jobs market after averaging just 139,000 jobs created in August and September, after averaging 200,000 monthly this year. “Consumers still rate current conditions favorably, but they do not anticipate the economy strengthening much in the near-term,” said Lynn Franco, director of economic indicators at the Conference Board.

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New Home Sales, Home Prices, Fed talks

October 26, 2015

Monday – October 26

The Commerce Department reported on Monday that September New Home Sales fell 11.5% from August to an annual rate of 468,000 units, below the 550,000 expected. August was revised lower to 529,000 from 552,000. The Northeast was the hardest hit with a near 62% decline from August. Despite the September declines, sales are up 2% since September 2014. Rounding out the report it showed that the median price was $296,000, up 13.5% from a year ago.

Home prices edged higher in August from July, led by rising prices in New York. Black Knight Financial Services reported that its Home Price Index (HPI) was up 0.3% in August from July and up 5.5% on a year-over-year basis. Since the beginning of 2015, prices are up 5.6% and are up 27% since the start of 2012. The Black Knight HPI summarizes sales concluded during each month using a repeat sales analysis of home prices as of their transaction dates.

The Federal Open Market Committee meeting will kick off Tuesday on Capitol Hill where Fed members will meet to discuss the economic conditions across the nation. The meeting will conclude on Wednesday with the 2:00 p.m. ET release of the Monetary Policy Statement. It is currently expected that the short term Fed Funds Rate will remain near zero percent at this meeting, due to global economic uncertainty, low inflation here in the U.S. and a mixed bag of economic data in the past two months.

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China, Conventional Mortgage, Halloween

October 23, 2015

Friday – October 23

In an unexpected move, the People’s Bank of China lowered two key interest rates today, which has fueled a global Stock rally. Central banks around the world continue to lower interest rates in an effort to bolster their economies. The move in China comes after yesterday’s signal that the European Central Bank may increase its current stimulus program as it battles weak growth and sagging inflation.

Government sponsored entity and mortgage provider Freddie Mac reported yesterday that the 30-year fixed conventional mortgage rate declined to 3.79% this week, down from 3.82% last week. To obtain that rate, a potential borrower would also have to pay 0.6 in points and fees. Last week, Federal Reserve Governor Daniel Tarullo said the U.S. central bank should not hike interest rates in 2015, which was one of the reasons behind the edge lower in mortgage rates.

On the lighter side. With Halloween fast approaching next week, here are a few facts to chew on. According to the National Retail Federation (NRF), some 157 million Americans plan to celebrate Halloween. The average person is expected to shell out $74.34 this year, compared to $77.52 last year. Total spending in the U.S. should be around $7 billion. Those celebrating Halloween will spend the most on adult costumes at $1.2 billion, while children costumes will ring up to $950 million.

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Housing, Existing Homes Sales, Jobless Claims

October 22, 2015

Thursday – October 22

Housing data was in the news today as the sector continues to see improvement. The Federal Housing Finance Agency reported today that its House Price Index (HPI) showed that home prices rose 0.3% in August from July. From August 2014 to August 2015, house prices were up 5.5%. The FHFA HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.

The National Association of REALTORS® (NAR) reported on Thursday that Existing Home Sales in September rose 4.7% from August to an annual rate of 5.55 million units, above the 5.39 million expected. All four major regions of the country experienced sales gains in September. Sales are up nearly 9% from September 2014. Lawrence Yun, NAR chief economist said, “September home sales bounced back solidly after slowing in August and are now at their second highest pace since February 2007 (5.79 million).”

Americans filing for first-time unemployment benefits remained near 42-year lows in the latest week as the sector continues to improve. The Labor Department reported that Weekly Initial Jobless Claims rose by 3,000 in the latest week to 259,000, below the 265,000 expected. Claims have remained historically low as employers continue to retain workers, though the pace of new hires has eased a bit amid weakness in the oil sector and manufacturing.

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Mortgage Applications, MBA, Rental Prices

October 21, 2015

Wednesday – October 21

The Mortgage Bankers Association (MBA) reported on Wednesday that its Market Composite Index, a measure of total mortgage application volume, surged by 11.8% in the latest week. The index plunged in the previous week, but rebounded led by a sharp rise in government volume. The refinance index rose 9%, while the purchase index soared by 16%.

The MBA also reported that the average contract interest rate for 30-year fixed rate mortgages with conforming loan balances ($417K or less) decreased to the lowest since May at 3.95%, from 3.99%, with points declining to 0.29 from 0.41. The MBA sees mortgage rates rising in 2016, but they should remain below 5%.

Rental prices for apartments surged in 2014 and there doesn’t seem to be a pull back any time soon. Annual rental growth in September saw a 5.2% increase, the highest since July 2011 and the eighth consecutive month with gains at 5% or above. Apartment research firm Axiometrics said, “the eight months the rate has been above 5% is the longest period of strength we have seen. The last growth cycle was only four years, and this cycle is already five years long–with no sign of stopping.”

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Housing Starts, Purchase Originations 2016, Consumer Spending

October 20, 2015

Tuesday – October 20

Construction on new homes rose in September from August after declines in the two previous months. The Commerce Department reported that September Housing Starts rose 6.5% from August to an annual rate of 1.210 million units, above the 1.150 million expected. The report went on to reveal that single-family starts rose modestly, while there was a 17% increase in multi-family units. However, Building Permits, a sign of future construction, fell 5%.

The Mortgage Bankers Association (MBA) reported on Tuesday that it forecasts that purchase originations should increase by 10% in 2016 from 2015. However, the MBA sees refinance originations decreasing by one-third in the same time period. The MBA is forecasting purchase originations of $978 billion and refinance originations of $331 billion for a total of $1.31 trillion. “We are projecting that home purchase originations will increase in 2016 as the U.S. housing market continues on its path towards more typical levels of turnover based on steadily rising demand and improvements in the supply of homes for sale and under construction,” said Michael Fratantoni, MBA’s chief economist.

The National Retail Federation released its Holiday Consumer Spending Survey on Tuesday and expects the average spending per consumer this year will be $805.65, up slightly from 2014’s $802.45. That figure is the highest in the surveys 14-year history and includes food, gifts, decorations and other items. In addition, online purchases will make up 46% of consumer buying, above 2014’s 44.4%. Online retailer Amazon expects to hire 100,000 U.S. workers to handle holiday orders.

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Housing Market, Home Improvements, Weight Watchers

October 19, 2015

Monday – October 19

Home builders across the nation continued to be upbeat on their sector in October due in part to firm job creation, economic growth and the release of pent-up demand. The National Association of Home Builders reported on Monday that its Housing Market Index rose to 64 this month, above the 62 expected and up three points from September. It was the highest level seen since late 2005. Any number over 50 indicates that more builders view conditions as good rather than poor.

Home improvements and updates are on pace to set a record in 2015, fueled by home price gains and continued low mortgage rates. According to the Leading Indicator of Remodeling Activity released on Monday by the Remodeling Futures Program at the Joint Center for Housing Studies (JCHS) of Harvard University, improvements are expected to rise by 2.4% in the current quarter from the previous quarter. In addition, the study went on to say that remodeling will improve by nearly 7% in the second quarter of 2016. The rise in home prices enables homeowners to pull money in the form of home equity loans and lines of credit for remodeling jobs.

Shares of Weight Watchers are soaring today after billionaire TV personality Oprah Winfrey invested a 10% stake in the company. Ms. Winfrey will endorse the products from Weight Watchers and will also join its Board of Directors. The question will be whether or not Ms. Winfrey can jump start a company that is on the downturn. Weight Watchers had operating cash flow of $400 million in 2011, which has fallen to $230 million in 2014 and also carries about $2.5 billion in debt.

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