News & Events

Economic Advisor: July 5, 2018
July 5, 2018


 

New home sales saw their biggest jump of the year, while consumers fretted over tariffs, and layoffs jumped.

New Home Sales

Sales of new single-family homes hit a six-month high in May growing to an annual rate of 689,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. May’s sales were 6.7 percent higher than April’s pace of 646,000. When compared to last year, May’s sales towered 14.1 percent over May 2017’s estimate of 604,000.

Housing market watchers noted that while the sales jump was welcome, inventory still needs to grow to keep prices in check.

“While growth is a step in the right direction, there is still plenty of additional room for new home sales, with high price points being the major stumbling block,” noted Realtor.com Chief Economist Danielle Hale in a public statement. “Demand is strongest for affordable homes, but land, labor and materials costs are significant challenges. Builders who can successfully build lower-priced homes will find success.”

Looking at price, May’s average new home price was $368,500 and the median new home price rang in at $313,000. In terms of inventory, the number of new homes for sale at the end of May totaled 299,000, which represented a 5.2-month supply at May’s sales rate.

Consumer Outlook

Two key metrics for monitoring how consumers feel about the economy weakened in June. The Conference Board reported last week that its Consumer Confidence Index dipped to 126.4 in June (a baseline of 100 was set in 1985), down from 128.8 in May. The Present Situation Index — how consumers feel about the current state of the economy — hovered at 161.1, virtually unchanged from 161.2 in May. The Expectations Index — how consumers feel the economy will fare in the near future — fell from 107.2 in May to 103.2 in June.

Meanwhile, the Index of Consumer Sentiment, produced by the University of Michigan’s Surveys of Consumers, still grew, but at a much slower pace. June’s index ticked up slightly to 98.2 from 98 in May. The Current Economic Conditions Index increased to 116.5 in June, up from 111.8 in May, while the Index of Consumer Expectations dropped from 89.1 in May to 86.3 in June. That decline was primarily due to concerns about trade tariffs, according to Surveys of Consumers Chief Economist Richard Curtin.

“The potential impact of tariffs on the domestic economy was spontaneously cited by one-in-four consumers, with most expecting a negative impact on the domestic economy (21 percent out of 26 percent),” he noted in a public statement. “The primary concerns were a downshift in the future pace of economic growth and an uptick in inflation. A longstanding belief of consumers is that trade with other countries results in a broader range of available goods at lower prices.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 23 jumped to 227,000, a gain of 9,000 claims from the preceding week’s total of 218,000, the Employment and Training Administration reported last week. This was higher than the 220,000 layoff claims that job market watchers had anticipated. 

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — skirted up to 222,000, a slight increase of 1,000 claims from the prior week’s average of 221,000. Last week’s report also marked the 173rd week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — Construction spending for May from the Census Bureau.
  • Tuesday — Factory orders for May from the Census Bureau; car and truck sales for June from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Payrolls, unemployment rate, hourly earnings and average workweek for June from the Bureau of Labor Statistics; foreign trade for May from the Bureau of Economic Analysis.

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