Friday, July 28, 2017

Consumer Sentiment Declined in July

Consumer Sentiment fell 1.8 points in July to 93.4, according to the University of Michigan Consumer Sentiment Index.  
The Current Economic Conditions Index rose 0.8 point to 113.4, while the Consumer Expectations Index decreased 4.1 points to 80.5. 
Consumer confidence remained largely unchanged at the same favorable level recorded at mid-month. The overall Sentiment Index has declined by 5.1 Index-points since the January peak, which was the highest figure in a dozen years,” said Richard Curtin, chief economist of UM Surveys of Consumers. “The relatively small decline still left the Sentiment Index higher in the first seven months of 2017 than in any other year since 2004. The size of the decline was tempered by record favorable views of Current Economic Conditions, which rose to its highest level since July of 2005.

Read the University of Michigan Surveys of Consumers release
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Second Quarter GDP Grows 2.6%

Real GDP grew at a seasonally adjusted annual rate of 2.6% during the second quarter of 2017, according to the Bureau of Economic Analysis’s “advance” estimate, up from 1.2% in the first quarter. The acceleration in real GDP reflected positive contributions from personal consumption expenditures, nonresidential fixed investment, exports, and federal government spending. These were partly offset by negative contributions from private residential fixed investment, private inventory investment, and state and local government spending.
Consumption accounted for 1.9% of the gain, up from 1.3% during the first quarter. Fixed investment slowed after a high previous quarter, adding a total of 0.4% to GDP. Inventories did not have a net impact on GDP this quarter after subtracting 1.5% in the first.
Government spending increased during the quarter, as federal government spending led with a 0.2% contribution to the GDP increase, while state and local spending saw a marginal decrease.  

Net exports were positive, adding 0.2% to GDP.

Read the BEA release.
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Thursday, July 27, 2017

Durable Goods Orders Climbed 6.5% in June

New orders for manufactured durable goods increased 6.5% in June to $245.6 billion, following a 0.1% May decrease, according to the U.S. Census Bureau.
New orders excluding defense grew 6.7% on the month, while orders of nondefense capital goods jumped 21.0% to $84.6 billion.

Shipments of manufactured durable goods, down in three of the last fourth months, decreased $0.1 billion, virtually unchanged at $236.0 billion. This followed a 1.2% increase in May.

Inventories of manufactured durable goods continued to rise, growing 0.4% to $397.0 billion, following a 0.1% May increase and growth in eleven of the last twelve months. 

Read the Census release.
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FOMC: Balance Sheet Reduction to Begin ‘Soon’

At its meeting that concluded yesterday, the Federal Open Market Committee said it plans to begin "relatively soon" to reduce the Fed’s balance sheet, which is swollen with $4.5 trillion in securities purchased as part of quantitative easing programs between 2008 and 2014.

According to a statement from the FOMC released yesterday, the committee said it expects to begin the process “provided that the economy evolves broadly as anticipated.” At their previous meeting in June, the committee agreed to publicly communicate the plan once it has been agreed upon.

FOMC members decided at the same meeting to maintain the target federal funds rate of 1 to 1.25 percent, saying they expect “moderate” economic growth and continued job gains in the near term.

The statement noted that the labor market has continued to strengthen with solid job gains and expanding household spending and business fixed investment. According to the FOMC, overall inflation and the measure excluding food and energy prices have declined, running below the Fed's 2% target rate.

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Wednesday, July 26, 2017

New Home Sales Increased in June

New single-family home sales rose to a seasonally adjusted annual rate of 610,000 in June, according to the U.S. Census Bureau and the Department of Housing and Urban Development. The June level was 0.8% above the revised May rate of 605,000 and 9.1% above the June 2016 estimate.
Sales grew in two regions, 10.0% in the Midwest and 12.5% in the West. The South posted a loss of 6.1%, while the Northeast’s sales remained unchanged.

The median price of a new home was $310,800, down 4.2% from May. The average price was $379,500.

At the end of June, the estimated supply at the current sales rate remained unchanged at 5.4 months.

Read the Census/HUD release.

Tuesday, July 25, 2017

Consumer Confidence Grew in July

The Conference Board Consumer Confidence Index increased to 121.1 in July, rebounding from declines in the three preceding months. Last month’s index was downwardly revised from 118.9 to 117.3. The Present Situation Index rose 3.9 points to 146.3, the third consecutive monthly increase. The Expectations Index grew 3.7 points to 103.3 after declining in the three preceding months.
“Consumer confidence increased in July following a marginal decline in June,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions remained at a 16-year high (July 2001, 151.3) and their expectations for the short-term outlook improved somewhat after cooling last month. Overall, consumers foresee the current economic expansion continuing well into the second half of this year.”

Consumers’ labor market outlook improved in July. The percentage of consumers expecting more jobs in the coming months was unchanged at 19.2%, but the share anticipating fewer jobs decreased from 14.6% to 13.3%. Income expectations dipped, as 20.0% of consumers expected their incomes to increase in coming months, down from 20.9% in June.

Read the Conference Board release.

Monday, July 24, 2017

Existing-Home Sales Declined in June

Existing-home sales decreased 1.8% to a seasonally adjusted annual rate of 5.52 million in June, according to the National Association of Realtors (NAR). Despite the decline, sales are 0.7% above a year ago.
"Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that's straining their budget," said Lawrence Yun, NAR chief economist. "The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines."

The total housing inventory fell 0.5% to 1.96 million homes available for sale, while the median existing home price climbed to $263,800, up 6.5% from June 2016 ($247,600) as the new peak median sales price. This marks the 64th straight month of year-over-year gains.

Distressed sales were 4% of the total in June, down from 6% a year ago and matching last September as the lowest share of sales since NAR began tracking in October 2008. Three percent of sales were foreclosures and 1% were short sales.

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Wednesday, July 19, 2017

Housing Starts Grew in June

Housing starts increased to a seasonally adjusted annual rate of 1.215 million in June, 8.3% above the revised May rate of 1.122 million and 2.1% above the June 2016 rate.
Housing activity increased 1.6% in the West and jumped 83.7% in the Northeast. The Midwest’s housing activity grew 22.0%, while the South’s decreased 3.8%.
New building permits increased during the month, rising 7.4% to 1.254 million. Permits were up 5.1% from the June 2016 rate.

Housing completions were at a seasonally adjusted annual rate of 1.203 million, up 5.2% from the revised May estimate and 8.1% above the June 2016 rate.

Read the Census release.

Tuesday, July 18, 2017

Builder Confidence Declines Slightly in July

The National Association of Home Builders/Wells Fargo Housing Market Index slowed to 64 in July, a two point decrease from July’s downwardly revised reading of 66.

“Our members are telling us they are growing increasingly concerned over rising material prices, particularly lumber,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “This is hurting housing affordability even as consumer interest in the new-home market remains strong.”

All three HMI components posted losses in July but remained at historically solid levels. The component measuring current sales conditions fell two points to 70; the component measuring sales expectations in the next six months decreased two points to 73, and the component measuring buyer traffic moved down one point to 48.

The regional three-month moving averages for HMI scores showed gains in just one of the four regions. The Northeast edged one point up to 47, while the Midwest and West each dropped one point to 66 and 75, respectively. The South fell three points to 67.

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Friday, July 14, 2017

Industrial Production Rose 0.4% in June

Industrial production grew 0.4% in June after an upwardly revised 0.1% May increase, according to the Federal Reserve. May’s jump was the fifth consecutive month of growth
Manufacturing output grew 0.2% in June after a 0.4% decline in May. Production of durable goods and nondurables both edged up 0.5% during the month. Capacity utilization for manufacturing increased by 0.1 percentage point to 75.4%, a rate that is 3.4 percentage points below its long-run average.

The output of mining continued to rise, increasing 1.6% in June, following a 1.9% May jump. The index in June was 9.9% higher than its year-earlier level.

Utilities remained unchanged in June, following increases in the three previous months.

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Retail Sales Fell in June

There were $473.5 billion in retail and food service sales in June, down 0.2% from the previous month and up 2.8% from June 2016, according to the U.S. Census Bureau. 
Core retail sales – excluding automobiles and parts – also fell 0.2%. Year-over-year core sales increased 2.4%. 

Retail trade sales decreased 0.1% from May and are up 3.0% from last year. Sales at nonstore retailers increased 0.4% from May, while increasing 9.2% year-over-year.

Sales at gasoline stations decreased 1.3% during the month but are up 0.3% from a year ago.

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Consumer Prices Unchanged in June

The Consumer Price Index remained flat in June on a seasonally adjusted basis, according to U.S. Bureau of Labor Statistics. Over the last 12 months, the all-items index rose 1.6%. 
Prices for all items less food and energy, the “core CPI,” increased 0.1% in June, the same as in May. The index rose 1.7% for the 12 months ending in June. 

The food index was unchanged after five consecutive monthly increase. Prices for food at home fell 0.1%, while prices for food away from home remained flat. Over the past 12 months, food prices are up 0.9%.

The energy index decreased 1.6% in June, led by the fuel oil index falling 3.7%.

Read the BLS release.
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Thursday, July 13, 2017

Producer Prices Increased 0.1% in June

Producer prices increased 0.1% in June, seasonally adjusted, after remaining unchanged in May, according to the U.S. Bureau of Labor Statistics. Producer prices rose 2.0% for the twelve months ended June 2017. 
The index for final demand goods increased 0.1% in June after falling 0.5% in the previous month. The index for final demand energy fell 0.5%, the second consecutive monthly decline. Prices for final demand foods climbed 0.6%. 

Prices for final demand services moved up 0.2% in June. Most of the increase can be traced to prices for final demand services less trade, transportation and warehousing, which advanced 0.3%.

Read the BLS release.
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Wednesday, July 12, 2017

Beige Book: Economic Activity Expanding at a Slight to Moderate Pace

Economic activity continued to expand at a slight to moderate pace across the twelve Federal Reserve Districts in June, according to the just-released Federal Reserve Beige Book.

Consumer spending softened this period, particularly in auto retail sales which declined in half of the Districts. Manufacturing and non-financial services continued to expand at a modest to moderate pace across the Districts. Agricultural conditions were mixed as regions reported varying moisture conditions. Energy activity improved since the most recent Beige Book, driven by growth in oil and natural gas but somewhat offset by sluggish coal production.

Employment expanded across most Districts at a modest to moderate pace. Labor markets once again remained tight, and employers in most Districts continued to report greater difficulty attracting and retaining qualified workers.

Modest to moderate wage growth was seen in most Districts, with many reporting tight labor market conditions driving wage gains. Prices increased modestly in the majority of districts. Several Districts reported higher construction materials costs but lower gasoline and agricultural prices.

Read the full Federal Reserve report
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Tuesday, July 11, 2017

Small Business Optimism Dips in June, Remains Historically High

The NFIB Small Business Optimism Index dipped to 103.6 in June but maintained the high level of post-election optimism. June’s index was 0.9 point lower than May’s 104.5 reading. Four of the ten index components rose, while five declined.
Reported job creation fell 5 points, as 54% of businesses reported hiring or trying to hire. However, 46% reported few or no qualified applicants for the positions they were trying to fill. Fifteen percent of employers surveyed cited the difficulty of finding qualified workers as their top business problem. A seasonally adjusted net 15% of owners plan to create new jobs, down three points from the previous month. 

Seasonally adjusted, the net percent of owners expecting better business conditions fell six points to a net 33%. The percent of owners reporting higher sales in the past three months compared to the prior three months was negative 4%, a 9-point decline from May’s reading. Seasonally adjusted, the net percent of owners expecting higher real sales volumes fell five points to a net 17% of owners. Capital spending moved down five points as 57% of owners reported capital outlays. The percent of owners planning capital outlays in the next 3 to 6 months increased three points to 30%, which is the highest reading since September 2007.

Credit conditions mostly held steady, as 4% of owners reported that all their borrowing needs were not met, one point higher than May but historically very low. Only 1% of business owners surveyed reported that financing was their top business problem, down one point from May.

Read the NFIB report.
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Monday, July 10, 2017

Consumer Credit Growth Accelerated in May

Consumer credit increased at a seasonally adjusted annual rate of 5.8% in May, up from a revised 4.1% rate in April. Total outstanding credit increased $18.4 billion during the month (compared with $12.9 billion in April) to $3.84 trillion.
Revolving credit grew at an annual rate of 8.7% to $1.0 trillion, compared to a 1.4% increase in April. Non-revolving credit rose at a 4.7% annual rate, or $11.1 billion, compared to April’s rate of $11.7 billion. Total non-revolving credit is now $2.82 trillion.
Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 38.7% of outstanding credit. Depository institutions and finance companies are secondary and tertiary holders, with 24.5% and 21.3%, respectively, of outstanding non-revolving credit.

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Friday, July 7, 2017

222,000 Jobs Added in June

Total nonfarm payroll employment rose by 222,000 in June, an increase from May’s upwardly revised figure of 152,000, according to the Bureau of Labor Statistics. The national unemployment rate nudged up to 4.4%.
Private service-providing industries added a net 162,000 jobs, led by gains in health care and social assistance, which added 59,100 during the month, and by the leisure and hospitality sector, which added 36,000.

Goods-producing employment rose by 25,000 jobs during the month, as gains in construction led the way for the second consecutive month by adding 16,000 in June.

The civilian labor force participation rate was 62.8%, a 0.1% increase from May. Workers unemployed for less than 14 weeks increased 124,000, while the number of long-term unemployed, those jobless for 27 weeks or more, was virtually unchanged at 1.67 million and accounted for 23.8% of the unemployed. The number of discouraged workers was 514,000, a 159,000 increase after four straight monthly declines.

Average hourly earnings increased by 4 cents to $26.25, after a 3-cent increase in May. Over the past year, average hourly earnings have risen by 63 cents, or 2.5%.

Read the BLS release.
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Thursday, July 6, 2017

ISM: Non-Manufacturing Sector Grew in June

The ISM Non-Manufacturing Index registered 57.4 points in June, 0.5 percentage point above May’s figure. This was the 90th consecutive month of growth. Sixteen non-manufacturing industries reported growth in June, while only one reported contraction. 
Growth in the Business Activity Index increased 0.1 point to 60.8. Fourteen industries reported increased business activity and one reported decreased activity. Respondents noted an increased demand for their services and general overall optimism in the economy. 

Non-manufacturing employment grew for the 40th consecutive month. The index decreased 2.0 points to 55.8. Fourteen industries reported increased employment, while two reported decreased employment. 

The New Orders Index grew 2.8 points to 60.5. Fifteen industries reported increased business activity and no industry reported decreased activity.

Supplier deliveries slowed for the 18th consecutive month, as the index registered 52.5 points (readings above 50 for this index indicate slower deliveries). Eight industries reported slower deliveries, while four reported faster deliveries. 

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ADP: 158,000 Jobs Added in June

The non-farm private sector added 158,000 jobs in June, according to the ADP National Employment Report. May’s figure was revised down from 253,000 to 230,000. Professional and business services jobs accounted for 43.6% of June’s growth.
Businesses of all sizes saw increases. Small businesses with fewer than 50 employees were sluggish, adding 17,000 jobs, while medium-sized businesses with 50-499 employees added 91,000. Large businesses added 50,000 jobs.

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market continues to power forward. Abstracting from the monthly ups and downs, job growth remains a stalwart between 150,000 and 200,000. At this pace, which is double the rate of labor force growth, the tight labor market will continue getting tighter.”

Service-providing employment rose by 158,000 jobs, driven by the professional and business services sector which added 69,000. The health services sector had a robust report, adding 33,000 jobs. The education sector was the only reported setback in service-providing employment, losing 6,000 jobs. Goods-producing employment showed no job growth. The manufacturing industry gained 6,000 jobs, offsetting losses of 4,000 and 2,000 in the mining and construction sectors, respectively.

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Wednesday, July 5, 2017

Fed to Consider Shrinking Balance Sheet in Coming Months

The Federal Open Market Committee indicated support for continued gradual rate increases in minutes from their June 13-14 meeting. The Committee voted to lift rates 25 basis points in June and signaled one more hike in 2017 in updated projections. The minutes reflected continued division on the timing of shrinking the Fed’s balance sheet, though the Committee expects to begin implementing a normalization program this year.

Participants’ views on current conditions and the economic outlook questioned the cause of rising asset prices. Some participants suggested an “increased risk tolerance” might be contributing to elevated asset prices, while a few participants offered concern that subdued market volatility, along with a low equity premium, could increase risks to financial stability.

The Committee’s minutes noted that optimism about business prospects “appeared to have recently abated somewhat” as Congress continues to debate healthcare, diminishing the likelihood of a significant fiscal stimulus. “Contacts at some large firms indicated that they had curtailed their capital spending, in part because of uncertainty about changes in fiscal and other government policies,” the minutes showed.

Read the FOMC minutes.

Manufactured Goods Orders Fell in May

New orders for manufactured goods fell 0.8% to $464.9 billion in May, according to the U.S. Census Bureau. It was the second consecutive monthly decrease, following a 0.3% April slide.
New orders for manufactured durable goods decreased 0.8% for the second consecutive month, landing at $229.1 billion in May. Orders for transportation equipment drove the decline, falling 3.0% to $75.9 billion.

Shipments of manufactured durable goods, up following two consecutive monthly decreases, grew 1.0% to $235.8 billion.

Inventories of manufactured durable goods, up ten of the last eleven months, increased 0.2% to $395.8 billion.

Read the Census release.

Construction Spending Holds Steady in May

Construction spending was virtually unchanged in May, landing at a seasonally adjusted annual level (SAAL) of $1,230.1 billion, according to the Census Bureau. April’s spending estimate was revised to a rate of $1,230.4 billion. May’s figure is 4.5% greater than the May 2016 estimate of $1,177.0 billion.
Total private construction was $943.2 billion SAAL, a 0.6% decrease from the revised April estimate of $949.3 billion. Total private construction is 6.2% higher than the May 2016 figure.

Private residential construction was $509.6 billion SAAL, 0.6% below April’s downwardly revised rate. May’s figure is 11.2% greater than its May 2016 estimate.

Private nonresidential construction was $433.6 billion, 0.7% below April’s upwardly revised estimate. May’s estimate is 0.8% greater than the May 2016 figure.

Public construction increased 2.1% to $286.9 billion SAAL. May’s figure is 0.6% below the May 2016 estimate.

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Manufacturing Sector Expanded in June

The ISM Manufacturing Index registered 57.8 points in June, up 2.9 percentage points from the previous month, according to the Institute for Supply Management. June’s reading indicates a tenth consecutive month of expansion in manufacturing, as readings over 50 points denote expansion. Of the eighteen manufacturing industries, fifteen reported growth, while three reported contraction. Nine of the ten index components grew, while the inventories index was the only to contract.
The Employment Index increased 3.7 points to 57.2 in June, indicating expansion for the ninth consecutive month. Fourteen industries reported expansion, while two reported a decrease in employment.

The New Orders Index grew 4.0 points to 63.5 in June, indicating growth for the tenth consecutive month. Fifteen industries reported expansion, while three reported a decrease in employment.

Export orders increased 2.0 points to 59.5, indicating growth for the sixteenth consecutive month. Twelve industries reported growth while only one of the eighteen reported a decrease in new export orders.

The inventories index registered 49.0 points, down 2.5 points from the previous month. Six industries reported higher inventories, while six reported a decrease.

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