Friday, September 30, 2016

Consumer Sentiment Edged up in September

Consumer Sentiment rose 1.4 points in September to 91.2, according to the University of Michigan Consumer Sentiment Index.

The Current Economic Conditions Index fell 2.8 points to 104.2, while the Index of Consumer Expectations rose 4.0 points to 82.7.

“Confidence edged upward in September due to gains among higher income households, while the Sentiment index among households with incomes under $75,000 has remained at exactly the same level for the third consecutive month,” said Richard Curtin, Chief Economist of UM Surveys of Consumers. “All of the September gains were concentrated in the Expectations Index, while assessments of current economic conditions were slightly less favorable.”

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Personal Income Increased for Sixth Consecutive Month

Personal income increased 0.2% ($39.3 billion) in August according to the Bureau of Economic Analysis, down from a 0.4% increase in July. Personal consumption expenditures also increased, rising less than 0.1% or $6.2 billion. Real disposable personal income – personal income less personal taxes – increased 0.1% after rising 0.3% in July.

The personal savings rate – personal savings as a percentage of personal income – was 5.7%, up from the July rate of 5.6%.

The Price index for PCE increased 0.1%. Excluding food and energy, the index increased 0.2%.

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Thursday, September 29, 2016

Second Quarter GDP Revised up to 1.4%

Real GDP for the second quarter of 2016 grew at an annual rate of 1.4%, according to the Bureau of Economic Analysis’s third estimate, up from the second estimate of 1.1%. The general picture of economic growth remained the same, as revisions to GDP components were small.

The changes reflected minor upward revisions to nonresidential fixed investment, private inventory investment, and exports.

The revision to nonresidential fixed investment was accounted for by an upward revision to structures. The revision to private inventory investment reflected an upward revision to farm inventories, which was partially offset by a downward revision to nonfarm inventories. The revision to exports was due to exports of travel and government goods and services.

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Wednesday, September 28, 2016

Durable Goods Orders Unchanged in August

New orders for manufactured durable goods were virtually unchanged in August, following a 3.6% increase in July, according to the U.S. Census Bureau.

New orders excluding defense decreased 1.0% on the month, as orders of nondefense capital goods fell 4.4% to $65.0 billion.

Shipments of manufactured durable goods fell 0.4% to $231.7 billion, after being virtually unchanged in in July.

Inventories of manufactured durable goods rose 0.1% to $383.7 billion, following a 0.4% July increase. Machinery led the increase, rising 0.5% to $65.7 billion.

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Tuesday, September 27, 2016

New Home Sales and Prices Down in August

New single-family home sales declined to a seasonally adjusted annual rate of 609,000 in August, according to the U.S. Census Bureau and the Department of Housing and Urban Development. The August level was 7.6% below the revised July level of 659,000 but 20.6% above the August 2015 level.

Sales fell 34.3% in the Northeast, 12.3% in the South, and 2.4% in the Midwest, but rose 8.0 in the West in August.

The available supply of new homes would cover 4.6 months of sales at the current pace, up from a 4.3 months in July.

The median price of a new home was $284,000 and the average price was $353,600, down 3.1% and up 0.4%, respectively, from the previous month. August’s median price was down 5.4% while the average price was up 1.4% from a year earlier.

Read the Census/HUD release.

Consumer Confidence Improved Again in September

The Conference Board’s Index of Consumer Confidence rose to 104.1 in September, up from 101.8 in August and 96.7 in July. The Present Situation index rose to 128.5 (a fourth straight gain) while the Expectations Index increased to 87.8 (a second consecutive gain).

The labor market outlook also improved in September. The share of consumers expecting more jobs henceforth rose 0.7 points to 15.1%, while the share anticipating fewer jobs fell 0.5 points to 17.0%.

Income expectations varied, as 17.1% expected family incomes to rise in coming months (down from 18.5% in August) while 10.3% expected decreases (down from 11.0%).

According to Lynn Franco, Director of Economic Indicators at The Conference Board, “Consumers’ assessment of present-day conditions improved, primarily the result of a more positive view of the labor market. Looking ahead, consumers are more upbeat about the short-term employment outlook, but somewhat neutral about business conditions and income prospects. Overall, consumers continue to rate current conditions favorably and foresee moderate economic expansion in the months ahead.”

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Home Price Gains Continued in July

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index in July rose 5.1% from a year earlier, up from 5.0% in June. The 10-City Composite posted a 4.2% annual gain, down from 4.3% the previous in June, while the 20-City Composite rose 5.0% year-over-year, down from 5.1% in June.

Among urban areas, Portland, Seattle and Denver reported the highest annual gains, up 12.4%, 11.2%, and 9.4%, respectively. Price increases were higher than the previous year in nine of the 20 cities. For July alone, seasonally adjusted prices rose in 12 cities, fell in six, and were unchanged in two.

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Thursday, September 22, 2016

Low Inventories and High Prices Suppressed Existing Home Sales in August

Existing-home sales fell 0.9% to a seasonally adjusted annual rate of 5.33 million in August, according to the National Association of Realtors (NAR). High prices and low inventories appear to have suppressed sales.

“It is very concerning to see that inventory conditions not only show no signs of improving but have actually worsened in recent months from their already suppressed levels a year ago,” says NAR Chief Economist Lawrence Yun. “While recent data from the U.S. Census Bureau shows that household incomes rose strongly last year, home prices are still outpacing incomes in many metro areas because of the persistent shortage of new and existing homes for sale.”

Total housing inventory fell 3.3% to 2.04 million homes available for sales, while the median existing-home price moved up 5.1% to $240,200.

Year-over-year sales were 0.8% higher. The annual sales rate rose 6.1% in the Northeast, but fell 0.8% in the Midwest, 2.7% in the South and 1.6% in the West.

Distressed sales comprised 5% of sales in August, the lowest share since the NAR began tracking them in 2008. Four percent of August sales were foreclosures and 1% were short sales. On average, foreclosures and short sales sold for discounts of 12% and 14% respectively.

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Wednesday, September 21, 2016

No Fed Hike in September

The Federal Open Market Committee (FOMC) maintained the current target for the federal funds rate at 25-50 basis points in September. In a post-meeting statement, the Committee noted that the case for an increase in rates “has strengthened,” but decided to “wait for further evidence of continued progress toward its objectives.”

“Our decision does not reflect a lack of confidence in the economy,” said Federal Reserve Chair Janet Yellen during a post-meeting press conference. “Conditions in the labor market are strengthening, and we expect that to continue.”

“Near-term risks to the economic outlook appear roughly balanced,” said the FOMC in their written statement following the meeting. “The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further.”

The decision to maintain accommodative monetary policy was not unanimous. Kansas City President Esther George, Cleveland President Loretta Mester, and Boston Federal Reserve President Eric Rosengren dissented from today’s meeting action; each of whom expressed a preference to raise the target range to 50-75 bps.

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Tuesday, September 20, 2016

Housing Starts Down in August Following Three Monthly Gains

Housing starts fell to a seasonally adjusted annual rate of 1.142 million in August, 5.8% below the revised July rate of 1.212 million, but 0.9% above the August 2015 rate.

Housing activity increased in most regions, rising 7.6% in the Northeast, 5.6% in the Midwest, and 1.8% in the West. These increases were more than offset by a 14.8% decline in the South, however.

New building permits also slipped during the month, falling 0.4% to 1.139 million. Permits were down 2.3% from the August 2015 rate.

Housing completions were at a seasonally adjusted annual rate of 1.043 million, down 3.4% from the revised July estimate, but 8.3% above the August 2015 rate.

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Monday, September 19, 2016

Builder Confidence Surged in September

The National Association of Home Builders/Wells Fargo Housing Market Index increased 6 points to 65 in September, up from a downwardly revised reading of 59 in August. September’s reading marked the highest HMI since October 2015.

“With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them,” said NAHB Chief Economist Robert Dietz. “Though solid job creation and low interest rates are also fueling demand, builders continue to be hampered by supply-side constraints that include shortages of labor and lots.”

All three index components posted gains in September. The component measuring current sales conditions increased 6 points to 71, and the index measuring sales expectations increased 5 points to 71. The buyer traffic component rose 4 points to 48.

The regional three-month moving averages varied. The Northeast and South both rose 1 point to 42 and 64 respectively. The West rose 4 points to 73, while the Midwest was unchanged at 55.

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Friday, September 16, 2016

Household Net Worth Up, Savings Rate Down, in Second Quarter

Household net worth rose in the second quarter of 2016 to $89.1 trillion, a 1.2% increase from the previous quarter and a 3.1% increase from a year earlier.

Household nonfinancial assets increased 1.7% during the second quarter, Most of this increase came from real estate holdings, which grew by $473.9 billion. Growth in wealth derived from consumer goods increased by $45.5 billion, compared to a $65.1 billion increase in the first quarter.

Household and non-profit holdings of financial assets increased 1.0% from the previous quarter. The increase was largely due to an increase in corporate equities, which increased 2.3% ($328.0 billion). Household debt increased at an annual rate of 4.4% in the second quarter, as consumer credit increased 6.4%. Mortgage debt grew at a 2.5% annual rate. The household savings rate slipped to 5.7% in the second quarter, down from 6.1% in the first quarter.

Federal government debt increased at a rate of 5.0% in the second quarter of 2016. State and local government debt rose at a rate of 2.2% in the second quarter, up from 0.8% in the previous quarter.

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CPI Up 0.2% in August

The Consumer Price Index increased 0.2% while the “core CPI” index jumped 0.35 in August on a seasonally adjusted basis. Over the last 12 months, the all-items index rose 1.1%.

The energy index was unchanged in August. Major energy component indexes were mixed however, as increases in the indexes for natural gas and electricity offset declines in the indexes for gas and fuel oil.

The food index was also unchanged. The food-at-home index fell for the fourth consecutive month, which offset an increase in the food-away-from-home index.

Prices for all items less food and energy, the “core CPI,” increased 0.3% in August, the largest rise since February 2016. Prices for medical care commodities rose sharply during the month, increasing by 1.1%. Over the past year, the index for all items less food and energy increased 2.3%.

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Thursday, September 15, 2016

Producer Prices Unchanged in August

Producer prices were unchanged in August, according to the U.S. Bureau of Labor Statistics, as an increase in the index for final demand services offset a decrease in the index for final demand goods. Year-over-year producer prices were also unchanged.

Prices for final demand services rose 0.1% in August, after a 0.3% July decrease. Much of the advance was due to prices for final demand services less trade, transportation, and warehousing, which increased 0.5%. In contrast, the index for final demand trade services fell 0.6%.

The index for final demand goods fell 0.4% in August, the same as in July. Eighty percent of the decrease was due to a decline in the index for final demand foods which fell by 1.6%. The index for final demand energy also fell, declining by 0.8%.

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Retail Sales Fell in August

There were $456.3 billion in retail and food service sales in August, down 0.3% from the previous month and 1.9% from August 2015, according to the U.S. Census Bureau.

Core retail sales – excluding automobiles and parts – fell 0.1% after falling 0.4% in July. Year-over-year core sales increased 2.0%.

Retail trade sales fell 0.5% from July but rose 1.4% from last year. Sales at nonstore retailers fell 0.3% from July, but increased 10.9% year-over-year.

Sales at gasoline stations continued to decline, falling 0.8% during the month and 9.5% from a year ago.

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Industrial Production fell in August

Industrial production fell 0.4% in August after rising 0.6% in July, according to the Federal Reserve. The decline was largely due to falling output in manufacturing and utilities. Industrial production is currently 1.1% below its year-ago level.

Manufacturing output fell 0.4% in August after gaining 0.4% in July. The decline was largely due to a drop in both durable and nondurable goods production. Many durable goods industries reported drops of 1.0% or more.

Capacity utilization for manufacturing fell 0.4% to 74.8%, a rate that is 3.7 points below its long-run average.

The mining index increased 1.0%, as a decline in coal mining was more than offset by increases in oil and gas extraction, along with metal ore and nonmetallic mineral mining.

The utilities index fell by 1.4% in August, but remained 1.7% above its year-ago level due to hot temperatures and increased usage of air conditioning.

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Tuesday, September 13, 2016

Small Business Optimism Slipped in August

The NFIB Small Business Optimism Index fell 0.2 points in August to 94.4. Five of the ten index components posted gains, while four declined.

Labor market conditions remained weak, as only 56% of small business owners reported hiring or trying to hire, up 3 points from July. Forty-eight percent of employers reported few or no qualified applicants for the positions they were trying to fill (up 2 points from July). Fifteen percent of employers surveyed cited the difficulty of finding qualified workers as their top business problem. A seasonally adjusted net 9% of employees plan to create new jobs, down 3 points from the previous month.

The percent of owners reporting higher sales in the past three months fell 1 point to a net negative 9%. Eleven percent of small business owners reported weak sales as their top business problem, down 1 point from July.

Capital spending slipped, as 57% of owners reported capital outlays, down 2 points. The percent of owners planning capital outlays in the next 3 to 6 months rose 3 points to 28%.

Credit conditions deteriorated slightly, as 4% of owners reported that all their borrowing needs were not met, up 1 point from the previous month. Only 2% of business owners surveyed reported that financing was their top business problem, the same as in July.

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Thursday, September 8, 2016

Consumer Credit Grew 5.8% in July

Consumer credit increased at a seasonally adjusted annual rate of 5.8% in July, up from a 4.8% rate in June. Total outstanding credit rose $17.7 billion during the month (compared with $14.5 billion in June) to $3.66 trillion.

Revolving credit rose at an annual rate of 3.5% to $969.0 billion, compared to an 11.5% increase in June. Non-revolving credit rose at a 6.7% annual rate, or $14.9 billion, compared to June’s rate of 2.4%. Total outstanding non-revolving credit is now $2.69 trillion.

Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 37% of outstanding credit. Depository institutions and finance companies are the secondary and tertiary holders, with 25% and 23%, respectively, of outstanding non-revolving credit.

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Wednesday, September 7, 2016

Beige Book: Economy Expanding at Modest Pace

Economic activity expanded across most of the twelve Federal Reserve Districts, according to the August 2016 edition of the Federal Reserve’s Beige Book. Most Districts reported a “modest” or “moderate” pace of growth; however two Districts, Philadelphia and Richmond, reported that economic activity had slowed.

Banking conditions were favorable, as credit demand for businesses and consumers varied but grew overall. Credit quality remained favorable in most districts; however some oil and gas companies reported challenges obtaining credit. Contacts in the Atlanta Districts noted a drop in delinquencies and charge-offs.

Consumer spending remained positive, but showed little change since the last report. Inventory levels were in line with retailer expectations in several Districts, but higher than desired in the Chicago District. The pace of auto sales declined, but remained high in general. Only the Dallas District reported strong growth in sales.

Agricultural producers faced mixed conditions as lower prices pushed down revenues despite growth in volumes. In the Chicago District, the potential for a record national harvest pushed incomes down. In contrast, Dallas District dairy farmers benefitted from a price rally over the last six weeks.

Employment conditions expanded at a moderate pace, as the labor market remained tight in a handful of Districts. Contacts in Boston reported an unusually high number of job openings, while the Richmond District noted increased turnover for entry-level positions. Businesses in many Districts continued to report having trouble filling vacancies for high-skilled positions.

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Tuesday, September 6, 2016

ISM: Growth in Non-Manufacturing Sector Slowed

The ISM Non-Manufacturing Index registered 51.4 points in August, down 4.1 points from the previous month. Despite the decline, August marked the 79th consecutive month of growth as indicated by readings over 50 points. Eleven non-manufacturing industries reported growth in August, although the majority of respondents commented that growth had slowed.

Growth in the Business Activity Index slipped 7.5 points to 51.8. Nine industries reported increased business activity, while six reported contraction. Respondents noted that the mid-summer months traditionally have less activity due to scheduling issues and personnel availability.

Non-manufacturing employment grew in August for the third consecutive month, albeit at a slowing pace; the index slipped 0.7 points to 50.7. Some respondents cited headcount reductions due to restructuring, while others reported numerous open but unfilled positions. Nine industries reported increases in employment, while five industries, including other services and warehousing, reported contractions.

The New Orders index fell 8.9 points to 51.4, indicating that growth slowed significantly. Some respondents reported lower sales and delayed project spending. Eight industries, including finance and insurance, reported growth of new orders, while eight industries reported contraction.

Supplier deliveries slowed for the eighth consecutive month, as the index registered 51.5 points (readings above 50 for this index indicate slower deliveries). Seven industries reported slower deliveries, while seven reported faster deliveries.

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Friday, September 2, 2016

Manufactured Goods Orders Rose in July

New orders for manufactured goods rose 1.9% to $454.8 billion in July, according to the U.S. Census Bureau. The July reading followed two consecutive monthly decreases.

New orders for manufactured durable goods increased 4.4% to $228.6 billion, after remaining unchanged in June. Orders for transportation equipment led the increase, rising 10.6% to $78.9 billion.

Shipments of manufactured durable goods, up three of the last four months, increased 0.1% to $232.7 billion, following a 0.4% increase in June. Computers and electronic products drove the increase, rising 1.7% to $27.1 billion.

Inventories of manufactured durable goods increased 0.4% to $383.1 billion following six consecutive monthly decreases. Transportation equipment led the increase in inventories, rising 0.4% to $123.7 billion.

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International Trade Balance Narrowed in July

The international trade deficit narrowed in July to $39.5 billion, down $5.2 billion from June, according to the U.S. Census Bureau and the Bureau of Economic Analysis. The narrowing reflected to a $3.4 billion increase in exports along with a $1.8 billion decline in imports.

The goods deficit decreased $5.3 billion to $60.3 billion, while the services surplus decreased $0.1 billion to $20.9 billion.

Exports of goods increased $3.4 billion to $124.1 billion in July, driven almost entirely by an increase in exports of foods (soybeans in particular). Exports of services fell $0.1 billion to $62.3 billion, largely due to declines in transport and travel.

Imports of goods decreased $1.9 billion to $184.4 billion, mostly due to declines in consumer goods, such as pharmaceutical preparations and cell phones. Capital goods trade also fell significantly, as civilian aircraft imports fell by $0.9 billion. Imports of services increased $0.1 billion due to a rise in travel services.

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151,000 Jobs Added in August, Unemployment Holds at 4.9%

Total nonfarm payroll employment rose by 151,000 in August, down from July’s upwardly revised figure of 275,000. The national unemployment rate remained unchanged at 4.9%. The majority of the gains came from private service-providing industries. In contrast, most goods-producing industries shed jobs.

Private service-providing industries added a net 150,000 jobs, led by gains in education and health services and leisure and health services. Healthcare employment continued to trend up during the month (adding 14,000 jobs), but rose at a slower pace than the 39,000 job average over the past year. Professional and technical services added 20,000 jobs, generally in line with the 12-month average.

Goods-producing employment shed a net 24,000 jobs, led by durable goods manufacturing, which lost 16,000 jobs during the month. Mining employment also continued to trend down, shedding 4,000 jobs. After peaking in September 2014, mining industry employment has fallen by 223,000.

The civilian labor force participation rate was 62.8%, unchanged from July. The number of long-term unemployed, those jobless for 27 weeks or more, was also unchanged at 2.0 million and accounted for 26.1% of the unemployed. The number of discouraged workers was 576,000 in August, little changed from the previous year.

Average hourly earnings rose 3 cents to $25.73. Hourly earnings have increased 2.4% over the past year.

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Thursday, September 1, 2016

Manufacturing Contracted for the First Time in Nine Months

The ISM Manufacturing Index registered 49.4 points in August, down 3.2 points from July’s reading and indicating contraction in the manufacturing sector for the first time since February. Of the eighteen manufacturing industries, only six reported growth during the month while eleven reported contraction.

The Employment Index registered 48.3 points in August, down 1.1 points from July’s reading, indicating contraction for the second consecutive month. Only five industries reported employment growth, while nine industries, including transportation equipment and plastics, reported contraction.

The New Orders Index slipped 7.8 points to 49.1 in August, indicating the first contraction since December 2015. Six industries including computer and electronic products, and miscellaneous manufacturing reported growth in orders, while nine including wood products and electrical equipment, reported contraction.

Export orders were unchanged in August at 52.5, indicating growth in exports for the sixth consecutive month. Eight industries reported growth in exports, while six industries including, apparel, nonmetallic mineral products, and primary metals reported declines in exports.

The Inventories Index slipped 0.5 points to 49.0, indicating that raw materials inventories are contracting for the 14th consecutive month.

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Construction Spending Held Steady in July

Construction spending for July was estimated at a seasonally adjusted annual rate of $1,153.2 billion, virtually unchanged from the upwardly revised June estimate of $1,153.5 billion. During the first seven months of the year, construction spending amounted to $647.7 billion, up 5.6% from the first seven months of 2015.

Total private construction rose to a rate of $875.0 billion, up 1.0% from the revised June estimate of $866.5 billion.

Private residential construction was at a seasonally adjusted annual rate of $445.5 billion, 0.3% above June’s rate.

Private nonresidential construction rose 1.7% to $422.5 billion, due to gains in office and manufacturing-related construction projects.

Public construction fell 3.1% to a rate of $278.2 billion, in large part due to a decline in educational construction.

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Job Cuts Down Sharply in August

Employers announced plans to cut 32,188 jobs in August, according to a report issued by Challenger Gray & Christmas. August’s cuts were 29% lower than in July. Employers have announced 391,288 job cuts through the first eight months of 2016, down 10% from a year ago.

Cuts in the computer sector were heaviest during the month, as Cisco Systems announced plans to lay off 5,500 workers.

“Since January of last years, there has been a string of large scale job cuts from major players in the technology sector,” said John A. Challenger, CEO of Challenger, Gray & Christmas. “The surge in cuts does not necessarily signal weakness in the sector, but it certainly signals a shift. In most cases, we are seeing these firms move from making hardware to providing services.”

Job cuts in energy were also significant in August, as the sector announced layoffs for 2,430 workers. The majority of these cuts came from solar firms, where intense competition is keeping prices low.

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