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Economic Advisor
 
Economic Advisor: June 13, 2018
June 13, 2018


 

Consumer credit saw a small uptick, while wholesale inventories grew, and layoffs fell slightly.

Consumer Credit

Consumer borrowing grew 2.9 percent in April to hit $3.882 trillion, according to last week’s report from the Federal Reserve. April’s credit gains marked the smallest increase in seven months.

Growth in consumer credit was balanced between the two main categories: revolving debt, such as credit cards, and non-revolving debt, such as student and car loans. Revolving debt increased 2.6 percent in April to hit $1.03 trillion for the month. Non-revolving debt grew 3 percent to hit $2.85 trillion.

The real story here is that revolving debt saw a gain after suffering its biggest drop since 2012 in March, which posted a 1.3 percent decline. Revolving debt has seen weak performance since November 2017, so the increase was welcome.

Wholesale Inventories

Total inventories for merchant wholesalers grew to $630.2 billion at the end of April, representing a 0.1 percent gain over March, according to last week’s report from the Census Bureau. Compared to the same period last year, inventories were up 5.8 percent from April 2017 level.

Wholesale inventories are important to monitor because they indicated anticipated retail activity. When wholesalers expand inventories, they are anticipating more demand from retailers. That’s a good sign, because consumer spending drives 70 percent of U.S. economic activity.

Meanwhile, wholesale sales for April hit $493.3 billion, which was 0.8 percent up from March. This put April’s inventories-to-sales ratio at 1.28. For comparison, April 2017’s ratio was 1.3.

Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 2 ticked down to 222,000, a dip of 1,000 claims over the prior week’s total of 223,000, according to last week’s report from the Employment and Training Administration. 

The four-week moving average, which is considered a more stable measure of jobless claims, grew to 225,500, a gain of 2,750 claims from the preceding week’s average of 222,750 claims. 

This latest report marked the 170th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. The Administration added that it continues to experience hurricane-related reporting difficulties in the Virgin Islands and Puerto Rico.

This week, we can expect:

  • Tuesday — Consumer Price Index for May from the Bureau of Labor Statistics; Federal budget for May from the Treasury Department.
  • Wednesday — Producer Price Index for May from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; import prices for May from the Bureau of Labor Statistics; retail sales for May, and business inventories for April from the Census Bureau.
  • Friday — Consumer sentiment for June from the University of Michigan Surveys of Consumers; industrial production and capacity utilization for May from the Federal Reserve.

 

Posted in Economic Advisor



Economic Advisor: June 6, 2018
June 6, 2018


 

Construction spending hit a record high, while the unemployment rate dropped to a level not seen for nearly 20 years. Meanwhile, layoffs fell further than expected.

Construction
Spending

After seeing a decline in March, construction spending rebounded to a record high in April, growing 1.8 percent to an annual rate of $1.31 trillion, according to last week’s report from the Census Bureau. Compared to last year, April’s spending was 7.6 percent higher than April 2017’s pace of $1.21 trillion.

Looking specifically at housing, spending on residential construction in April shot up to an annual rate of $556.3 billion, which was 4.5 percent higher than March’s pace of $532.4 billion. While April’s spending on single-family home construction was virtually unchanged from March’s $285 billion, when compared to last year, it was a whopping 9.6 percent higher than April 2017’s $260.7 billion.

“The April jump reversed the March drop, but the bigger picture here is that this is the fifth 1-percent-plus increase in the past six months,” Pantheon Macroeconomics Chief Economist Ian Shepherdson told MarketWatch. “The strength is across the board, public and private, residential and commercial, with the only softer spot being the state and local government sector, where huge volatility is normal.”

Employment

The economy added 223,000 jobs in May pushing the unemployment rate down to 3.8 percent, the lowest level since April 2000, the Bureau of Labor Statistics reported last week. The big growth sectors for jobs last month were retail, healthcare and construction.

All told, the number of unemployed Americans dropped to 6.1 million in May. For the year, the unemployed population has fallen by 772,000 and the unemployment rate has declined 0.5 percent.

Average hourly earnings notched up eight cents in May to $26.92. Over the past 12 months, average hourly earnings have grown by 71 cents, or 2.7 percent. Those income gains, paired with the employment increases, led many economists to conclude that the Federal Reserve will likely increase rates.

“The strength of the labor market supports our forecast for the Fed to raise rates three more times this year,” Moody’s Analytics senior economist Ryan Sweet told the Reuters news service. “The Fed is going to get antsy that the labor market will blow too far past full employment.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending May 26 tumbled to 221,000, a fall of 13,000 claims from the preceding week’s total of 234,000, the Employment and Training Administration reported last week. This was considerably lower than the 228,000 layoff claims that job market watchers had anticipated.

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — grew to 222,250, a gain of 2,500 claims from the prior week’s average of 219,750. Last week’s report also marked the 169th week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

The Administration added that the impacts of hurricanes Harvey, Irma, and Maria continued to throw off reporting of layoffs.

This week, we can expect

  • Monday — Factory orders for April from the Census Bureau.
  • Wednesday — Balance of trade for April from the Census Bureau; labor productivity for the first quarter from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; consumer credit for April from the Federal Reserve.
  • Friday — Wholesale inventories for April form the Census Bureau.

 

Posted in Economic Advisor



Economic Advisor: May 30, 2018
May 30, 2018


 

Sales of existing and new homes declined, while layoffs increased.

Existing Homes Sales

Sales of existing single-family homes, townhomes and condominiums fell 2.5 percent in April to an annual rate of 5.46 million, down from March’s rate of 5.6 million, the National Association of Realtors reported last week. Compared to the same period last year, April’s sales were down 1.4 percent from April 2017.

Once again, low inventory levels were to blame for the drop-off in sales volume, according to NAR Chief Economist Lawrence Yun.

“The root cause of the underperforming sales activity in much of the country so far this year continues to be the utter lack of available listings on the market to meet the strong demand for buying a home,” Yun noted in a public statement. “Realtors say the healthy economy and job market are keeping buyers in the market for now even as they face rising mortgage rates. However, inventory shortages are even worse than in recent years, and home prices keep climbing above what many home shoppers are able to afford.”

Looking at price, April’s median price for existing homes of all types grew to $257,900, which was 5.3 percent higher than April 2017’s price of $245,000. This marked the 74th consecutive month of year-over-year price gains.

Looking at supply, the inventory of homes for sale at the end of April grew 9.8 percent over March to reach 1.8 million existing homes for sale. However, when compared to last year, that was down 6.3 percent from April 2017’s 1.92 million units.

New Home Sales

Transactions for new, single-family homes dropped to an annual rate of 662,000 in April, which was 1.5 percent below March’s rate of 672,000, the Census Bureau and the Department of Housing and Urban Development jointly reported last week. April’s new home sales were 11.6 percent higher than April 2017’s pace of 593,000.

Looking at price and supply, April’s median sales price for new homes was $312,400, and the average price was $407,300. The inventory of new homes for sale in April totaled 300,000, representing a 5.4-month supply at April’s sales rate.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending May 19 shot up to 234,000, an increase of 11,000 claims over the prior week’s total of 223,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average, which is considered a more stable measure of jobless claims, grew to 219,750, a gain of 6,250 claims from the preceding week’s average of 213,500 claims.

This latest report marked the 168th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. The Administration added that it continues to experience hurricane-related reporting difficulties in the Virgin Islands and Puerto Rico.

This week, we can expect:

  • Tuesday — Consumer confidence for May from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; personal incomes and spending for April from the Bureau of Economic Analysis.
  • Friday — Car and truck sales for May from the auto manufacturers; construction spending for April from the Census Bureau; payrolls, unemployment rate, hourly earnings and average workweek for May from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: May 23, 2018
May 23, 2018


 

Housing starts dropped, while retail sales enjoyed a boost, and layoffs saw a sizable jump.

Housing Starts

New home construction hit a downturn in April, with starts on housing construction falling to an annual rate of 1.28 million last month, which was 3.7 percent below March’s pace of 1.33 million, according to last week’s report from the Census Bureau. That said, when compared to the same period a year ago, April’s housing starts were 10.5 percent higher than April 2017’s rate of 1.16 million.

While any drop in the creation of new housing is generally considered bad news to a real estate market that is looking for more inventory, TD Economics Senior Economist Leslie Preston, wrote in a research note that construction would trend upwards for the year.

“We expect housing starts to continue to gain ground through 2018, supported by positive fundamentals such as low unemployment and healthy wage increases, which are expected to offset higher mortgage rates,” Preston stated. “At the same time, tight inventories and rising prices will continue to support homebuilding.”

Retail Sales

Retail sales hit $497.6 billion in April, marking a 0.3 percent increase over March, the Census Bureau reported last week. Sales were also up when compared to the same period a year ago. April’s sales were 4.7 percent higher than April 2017’s.

March and April’s gains appear to signal a rebound from January and February’s poor performance. Since consumer spending drives approximately 70 percent of the U.S. economy, some economists were encouraged by the combined gains in March and April.

“Consumption growth is on track for a big rebound in the second quarter, which should push overall GDP growth up to more than 3 percent,” Capital Economics Senior U.S. Economist Michael Pearce told the New York Times.

Categories that helped drive April’s gains included several niches that signal healthy consumer-spending activity. They included sales at clothing and clothing accessories stores, which grew 1.4 percent for the month; miscellaneous retailers, such as online retailers and kiosks, which increased 0.9 percent; and furniture and home furnishings stores, which notched up 0.8 percent.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending May 12 spiked to 222,000, an increase of 11,000 claims from the preceding week’s total of 211,000, the Employment and Training Administration reported last week. The Administration added that the impacts of hurricanes Harvey, Irma, and Maria continued to skew reporting of layoffs.

Meanwhile, the four-week moving average — regarded as a more reliable measure of initial jobless claims — fell to 213,250, a drop of 2,750 claims from the prior week’s average of 216,000. This was the lowest level for the four-week average since December 13, 1969’s average of 210,750. Last week’s report also marked the 167th 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:

  • Wednesday — New home sales for April from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; existing home sales for April from the National Association of Realtors.
  • Friday — Durable goods orders for April from the Census Bureau; consumer sentiment for May from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: May 16, 2018
May 16, 2018


 

Consumer credit growth continued to grow, but at a tapering rate, while wholesale inventories ticked up, and layoffs flattened.

Consumer Credit

Consumer credit grew to $3.874 trillion in March, which was 3.6 percent higher than February’s total of $3.863 trillion, according to last week’s report from the Federal Reserve. While consumers continue to borrow more, this was the slowest pace of growth in six months.

There are two main types of debt: revolving, such as credit cards, and non-revolving, such as car and student loans. For March, non-revolving debt was the clear driver for the month’s credit growth, growing six percent from February’s $2.833 trillion to hit a total of $2.847 trillion.

Meanwhile, revolving debt fell 3 percent in March from February’s $1.029 trillion to $1.027 trillion for the month. Could that reticence to whip out the plastic at the cash register signal a future slow-down in consumer spending? So far, recent retail sales continue to grow (up 0.6 percent for March according to last month’s report from the Census Bureau), so what we might be seeing is better credit card discipline.

Wholesale Inventories

Wholesale inventories grew 0.3 percent to hit $627.4 billion in March, the Census Bureau reported last week. Moreover, when compared to the same period last year, March’s inventories were 5.5 percent higher than March 2017’s level.

When wholesalers stock up their inventories, this indicates that they expect increased demand from the retail sector. So, the increase was a welcome sign that continued consumer spending is anticipated. That said, analysts had anticipated a 0.5 percent gain, so the growth wasn’t as substantial as expected.

Sales for wholesalers grew at a similar 0.3 percent pace in March to hit $497.9 billion, which put March’s inventory-to-sales ratio at 1.26. Looking at a year ago, March 2017’s ratio was 1.28, which is a relatively healthy level.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending May 5 hovered at 211,000, which was unchanged from the prior week’s total of 211,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average, which is considered a more stable measure of jobless claims, dipped to 216,000, a decline of 5,500 claims from the preceding week’s average of 221,500 claims. This was the lowest level for the average since December 20, 1969’s 214,500.

This latest report marked the 166th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. The Administration added that it continues to experience hurricane-related reporting difficulties in the Virgin Islands and Puerto Rico.

This week, we can expect:

  • Tuesday — Retail sales for April and business inventories for March from the Census Bureau.
  • Wednesday — Housing starts and building permits for April from the Census Bureau; industrial production and capacity utilization for April from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for April from the Conference Board.

Posted in Economic Advisor



Economic Advisor: May 9, 2018
May 9, 2018


 

The economy’s employment situation continued to improve, with the unemployment rate falling below four percent. Meanwhile, layoffs ticked up and construction spending declined.

Employment

The big economic headline last week was the Bureau of Labor Statistics’ announcement that the unemployment rate had fallen to 3.9 percent. This was the first time unemployment fell below four percent since 2000, during the dot-com boom.

All told, the economy added 164,000 more jobs in April. Key job growth sectors included professional and business services, manufacturing, healthcare and mining. That number could indicate that the pace of jobs being added is slowing down, as economists had expected the economy to add at least 184,000 jobs.

“The moderation in job gains over the past two months may mark the beginning of the slow deceleration to a sustainable pace of job gains, which we estimate to be around or a little below 100,000 per month,” JPMorgan Economist Michael Feroli told the New York Times.

Looking at wages, average hourly earnings for all employees rose by four cents to $26.84. Over the year, average hourly earnings have grown by 67 cents, which is 2.6 percent higher than a year ago. Will the tightening job market finally spur some increased wages?

“We are getting closer and closer to that flashpoint, but we don’t know exactly when it is going to happen,” Ellen Zentner, chief U.S. economist for Morgan Stanley, told the Times.

Initial Jobless Claims

In related news, first-time claims for unemployment benefits filed by the newly unemployed during the week ending April 28 grew to 211,000, an increase of 2,000 claims from the preceding week’s total of 209,000, the Employment and Training Administration reported last week. The Administration added that the impacts of hurricanes Harvey, Irma, and Maria continued to skew layoffs data.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — fell to 221,500, a drop of 7,750 claims from the prior week’s average of 229,250. This was the lowest level for the four-week average since March 3, 1973’s average of 221,250. Last week’s report also marked the 165th week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

Construction Spending

Construction spending dipped to an annual rate of $1.284 trillion in March, which was 1.7 percent below February’s pace of $1.306 trillion, according to last week’s report from the Census Bureau. While spending was down for the month, when compared to the same period a year ago, March’s spending was 3.6 percent higher than March 2017’s rate of $1.239 trillion.

Residential construction declined in a similar fashion, falling to an annual rate of $536.8 billion in March, which was 3.5 percent below February’s rate of $556.5 billion. However, it is important to note that residential construction’s drop was fueled mainly by a 2.7 percent fall in multi-family homes. Construction on single-family homes only ticked down 0.4 percent.

For a real estate market starved for additional inventory, the decline in residential spending wasn’t welcome news.

This week, we can expect:

  • Monday — Consumer credit for March from the Federal Reserve.
  • Wednesday — Producer prices for April from the Bureau of Economic Analysis; wholesale inventories for March from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; consumer prices for April from the Bureau of Economic Analysis; federal budget for April from the Treasury.
  • Friday — Import prices for April from the Bureau of Labor Statistics; consumer sentiment for May from the University of Michigan Surveys of Consumers.

Posted in Economic Advisor



Economic Advisor: May 2, 2018
May 2, 2018


 

Existing home sales grew for the second month in a row, and new home sales climbed as well. Meanwhile, layoffs enjoyed an almost historic drop.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops, hit an annual rate of 5.6 million in March, which was 1.1 percent higher than February’s rate of 5.54 million, the National Association of Realtors reported last week. That said, when compared to the same period last year, sales were still 1.2 percent below March 2017’s rate.

“Robust gains last month in the Northeast and Midwest — a reversal from the weather-impacted declines seen in February — helped overall sales activity rise to its strongest pace since last November at 5.72 million,” NAR Chief Economist Lawrence Yun said in a public statement.

However, Yun noted that sales were lagging due to “woefully low” inventory levels that were pushing home prices out of reach of many buyers.

“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets – especially those out West,” he added.

To that point, the median price for existing homes hit $250,400, which was 5.8 percent higher than March 2017’s median price of $236,600. March’s existing home inventory grew 5.7 percent over February to hit 1.67 million homes for sale. That said, this was 7.2 percent below March 2017’s 1.8 million-home supply.

New Home Sales

New home sales also saw good news. Sales of new single-family homes in March grew to an annual rate of 694,000, which was 4 percent higher than February’s rate of 667,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development. Compared to the same period a year ago, this was 8.8 percent over March 2017’s pace of 638,000.

Looking at price and supply, the average sales price of new homes sold in March was $369,900 and the median price was $337,200. The inventory of new homes for sale at the end of March was 301,000, which represented a 5.2-month supply at March’s sales rate.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending April 21 plummeted to 209,000, a plunge of 24,000 claims from the prior week’s total of 233,000, according to last week’s report from the Employment and Training Administration. This was the lowest level since December 6, 1969’s 202,000.

The four-week moving average, which is considered a more stable measure of jobless claims, dipped to 229,250, a decline of 2,250 claims from the preceding week’s average of 231,500 claims.

This latest report marked the 164th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. The Administration added that it continues to experience hurricane-related reporting difficulties in the Virgin Islands and Puerto Rico.

This week, we can expect:

  • Monday — Personal incomes and spending for March.
  • Tuesday — Construction spending for March from the Census Bureau; car and truck sales for April from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; factory orders for March from the Census Bureau; the trade deficit for March from the Bureau of Economic Analysis.
  • Friday — Unemployment rate, payrolls, average hourly earnings, and average workweek for April from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: April 25, 2018
April 25, 2018


 

A surge in apartment construction drove starts on new housing construction. Meanwhile, retail sales finally enjoyed some growth and layoffs saw a small dip.

Housing Starts

Despite unseasonably cold weather, home construction enjoyed a shot in the arm. Starts on private housing of all categories grew 1.9 percent in March to hit an annual rate of 1.31 million over February’s pace of 1.29 million, the Census Bureau reported last week. Compared to last year, March’s housing starts were 10.9 percent higher than March 2017’s rate of 1.18 million.

The key driver for the March’s growth? Surprisingly, it was a surge in multi-unit housing. Starts on buildings containing five or more units shot up 16.1 percent to 439,000 from February. Meanwhile, starts on single-family homes fell 3.7 percent in March to an annual rate of 867,000, down from February’s pace of 900,000.

Building permits issued in March grew 2.5 percent to an annual rate of 1.35 million from February’s rate of 1.32 million. Compared to last year, March’s permits were 7.5 percent higher than March 2017’s rate of 1.26 million.

Once again, multi-family housing drove March’s growth increase, with permits issued for housing consisting of five or more units growing 22.9 percent to a rate of 473,000 units. Meanwhile, permits issued for single-family homes dipped 5.5 percent to an annual rate 840,000.

Housing market watchers were left to consider whether or not the growth in nascent apartment construction outpaced starts on single-family homes indicated a slow-down in the housing market. That’s premature. Considering that in February starts on multi-family housing plummeted 28 percent while single-family home starts grew 2.9 percent, it’s clear that a single month doesn’t signal a trend.

Retail Sales

Retail sales grew to $494.6 billion in March, an increase of 0.6 percent over February’s sales to $492 billion, according to last week’s report from the Census Bureau. Compared to the same period last year, March’s sales were 4.5 percent higher than March 2017.

Key drivers for March’s growth were sales at motor vehicle and parts dealers, which grew 2 percent; sales at health and personal care stores, which increased 1.4 percent; non-store retailers, such as e-commerce sites and kiosks, which rose 0.8 percent; and furniture and home furnishing stores, which notched up 0.7 percent.

After three consecutive monthly declines, March’s increase came as welcome news to retailers and economists alike, and hopefully indicates continued growth.

“The somewhat improved performance in March was too late to help the first quarter, but it does set the stage for a marked pickup in real consumer spending in the second quarter,” Amherst Pierpont Securities Chief Economist Stephen Stanley wrote in a public statement.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending April 14 skirted down to 232,000, a dip of 1,000 claims from the preceding week’s total of 233,000, the Employment and Training Administration reported last week. The Administration added that the impacts of hurricanes Harvey, Irma and Maria continued to skew layoffs data.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — notched up to 231,250, a gain of 1,250 claims from the prior week’s average of 230,000. Last week’s report also marked the 163rd 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 — Existing home sales for March from the National Association of Realtors.
  • Tuesday — Consumer confidence for April from The Conference Board; new home sales for March from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for March from the Census Bureau.
  • Friday — First quarter gross domestic product from the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: April 18, 2018
April 18, 2018


 

 

Consumer prices ticked down, but core inflation increased. Meanwhile, consumer sentiment slipped while layoffs declined.

Consumer Prices

The Bureau of Labor Statistics’ Consumer Price Index (CPI), which tracks prices on all consumer items, ticked down 0.1 percent for March. Over the past 12 months, the index has increased 2.4 percent, the Bureau reported last week.

March’s CPI drop was chiefly driven by gasoline prices, which shrank a whopping 4.9 percent. As a whole, energy prices were down 2.8 percent for the month. The price drop at the pump countered gains in other categories, such as healthcare (0.5 percent), shelter (0.4 percent), transportation (0.2 percent), and food (0.1 percent).

While gas prices were down for March, they increased 11.1 percent for the year and energy prices as a whole climbed 11.3 percent over the past 12 months.

While the CPI was down, core inflation, which removes the volatile price categories of food and energy, increased 0.2 percent for March. For the year, it was up 2.1 percent.

Inflation is important to watch both via the CPI and core inflation because the Federal Reserve adjusts interest rates to keep prices in check.

“U.S. inflation is warming up rather than heating up,” BMO Capital Markets Senior Economist Sal Guatieri told the Reuters news service. “Still, the upward trend could suffice to nudge the Fed three more times this year.”

Consumer Sentiment

How consumers look at the economy has dipped. The Consumer Sentiment Index dropped 3.6 percent to 97.8 in April, down from March’s 101.4, reversing two consecutive months of increases, according to last week’s report from the University of Michigan’s Surveys of Consumers.

“The small decline was widely shared by all age and income subgroups and across all regions of the country,” Surveys of Consumers Chief Economist Richard Curtin wrote in his research comments. “Importantly, confidence still remains relatively high, despite the recent losses that were mainly due to concerns about the potential impact of Trump’s trade policies on the domestic economy. Uncertainty surrounding the evolving trade policy has caused many small (and at times inconsistent) changes in expectations.”

Curtin added that 29 percent of consumers surveyed spontaneously mentioned trade policies in their feedback.

The Current Economic Conditions Index, which tracks how consumers feel about the present state of the economy, dropped 5.1 percent to 115 from March’s 121.2. The Index of Consumer Expectations fell 2.3 percent to 86.8 from March’s 88.8.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending April 7 dropped to 233,000, a decrease of 9,000 claims from the prior week’s total of 242,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average, which is considered a more stable measure of jobless claims, notched up to 230,000, a gain of 1,750 claims from the preceding week’s average of 228,250 claims.

This latest report marked the 162nd straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. The Administration added that it continues to experience hurricane-related reporting difficulties in the Virgin Islands and Puerto Rico.

This week, we can expect:

  • Monday — Retail sales for March and business inventories for February from the Census Bureau.
  • Tuesday — Housing starts for March from the Census Bureau; industrial production and capacity utilization for March from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.

Posted in Economic Advisor



Economic Advisor: April 4, 2018
April 4, 2018


 

Reports on how consumers feel about the economy were mixed, while consumer incomes and spending increased.

Consumer Sentiment

The Index of Consumer Sentiment grew 1.7 percent to 101.4 in March from February’s 99.7, according to last week’s report from the University of Michigan’s Surveys of Consumers. This was the index’s highest level since 2004, and compared to the same period last year, March’s index was 4.6 percent higher than March 2017’s 96.9.

The Current Economic Conditions index, which tracks how consumers feel about their present economic situation, grew 5.5 percent from 114.9 in February to 121.2 for March. March’s level marked a record high for the index. That said, the Index of Consumer Expectations, how they expect the economy to fare in the near term, dipped 1.3 percent from February’s 90 to 88.8 in March.

“The consensus expectation among consumers is that interest rates will increase in the foreseeable future,” the Surveys of Consumers Chief Economist Richard Curtin, wrote in a research note. “While consumers view the current level of interest rates as still relatively low, they understand that interest rate hikes are intended to dampen the future pace of economic growth. Their reaction will both emphasize borrowing-in-advance of those expected increases as well as heighten their precautionary savings motives.”

Consumer Confidence

Meanwhile, The Conference Board’s report had a different story to tell. The Board’s Consumer Confidence Index dropped to 127.7 in March from an 18-year high of 130 in February (a baseline of 100 was set in 1985). The Present Situation Index, which describes how consumers feel about their current economic circumstances, decreased from 161.2 in February to 159.9 in March. The Expectations Index, which tracks how consumers feel about their economic prospects for the near future, ticked down from 109.2 in February to 106.2 in March.

“Consumers’ assessment of current conditions declined slightly, with business conditions the primary reason for the moderation,” noted Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ short-term expectations also declined, including their outlook for the stock market, but overall expectations remain quite favorable. Despite the modest retreat in confidence, index levels remain historically high and suggest further strong growth in the months ahead.”

So, why the difference in the two reports? There are a few reasons for that: First, the Surveys of Consumers collects data throughout the month, whereas The Conference Board collects its data in the middle of the month. In terms of scale, the Surveys of Consumers asks more questions to a wider number of people. Also, the two reports emphasize different questions, with The Conference Board focusing more on jobs, while the Surveys of Consumers stressing consumer prices.

Personal Incomes and Spending

Looking at consumers’ actual activity, personal incomes grew $67.3 billion, or 0.4 percent in February according to last week’s report from the Bureau of Economic Analysis. Disposable personal income (DPI; money after taxes) increased $53.9 billion, or 0.4 percent, and personal consumption expenditures (PCE; money spent on goods and services) notched up $27.7 billion, or 0.2 percent.

Personal outlays — all the things that consumers pay for, such as interest on loans, bills, mortgages, as well as goods and services —increased $27.8 billion in February. Meanwhile, personal savings totaled $497.4 billion in February. This put the personal saving rate — personal saving as a percentage of DPI — at 3.4 percent for the month.

This week, we can expect:

  • Monday — Construction spending for March from the Census Bureau.
  • Tuesday — Car and truck sales for March from the auto manufacturers.
  • Wednesday — Factory orders for February from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; February’s trade deficit from the Census Bureau.
  • Friday — Consumer credit for February from the Federal Reserve; payrolls, unemployment rate, and average hourly earnings for March from the Bureau of Labor Statistics.

Posted in Economic Advisor



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