Monday, September 18th
The NAHB housing market index fell to 30 in September from 33 in August. The index is 53% below year ago levels and has dropped to its lowest point since early 1991. All three components of the index, current sales of single family homes, sales six months from now and foot traffic through model homes continued to decline. Homebuilders' outlook has decidedly turned pessimistic which will continue to impact residential investment and new construction starts going forward.
Tuesday, September 19th
The producer price index rose just 0.1% in August compared to an expected gain of 0.2%. Slower energy price growth led to the smaller gain in wholesale prices. Over the past year energy prices have increased 13.1% adding 1.1 percentage points to an annual 3.6% gain in the PPI. Excluding food and energy, core consumer prices fell 0.4% led by tumbling auto prices. Computer prices also fell. Core producer prices are up 0.9% in the last twelve months.
New residential construction activity tumbled last month as widely telegraphed by a bevy of other housing market indicators. Housing starts fell 6.0% in August to a seasonally adjusted annual rate of 1.665 million, less than the anticipated rate of 1.75 million. Moreover, July starts were revised lower to 1.77 million. Total housing starts are off 20% from their year ago pace and declines appear to be accelerating.
Wednesday, September 20th
The FOMC opted not to raise key short term interest rates again today, leaving the target for the fed funds rate at 5.25%. It was widely expected that the Fed would hold rates steady. The Fed paused in their tightening campaign that began in June 2004 for the first time at the last policy setting meeting in August. The post-meeting policy statement was quite similar to the one released in August. In it, policy makers did acknowledge that "some inflation risks remain" but that a continued moderation in economic growth and cooling in the housing market should help ease inflationary pressures over time. The Fed also cited the recent drop in energy prices and previous rate hikes as factors helping to contain inflationary pressures. The FOMC left the door open for additional firming of monetary policy if incoming data and the evolution of the outlook for both inflation and growth deem it necessary.
The MBA mortgage application index rose 2.0% to 595.8% for the week that ended September 15. Retreating mortgage rates in the last eight weeks has boosted interim application activity. Refinancing applications surged 9.5% on the week as many homeowners moved to convert their adjustable rate mortgages to fixed rates. The purchase index slid 3.0% which corroborates continued slowing in housing market conditions.
Thursday, September 21st
Jobless claims rose 7k to 318k for the week that ended September 16. The level of claims was higher than expected last week however, the four week moving average which smoothes out weekly fluctuations was unchanged at 315,000. The current level of jobless claims indicates a relatively low number of layoffs and moderate hiring.
The Philadelphia Fed survey fell 18.9 points in September to a level of -0.4%. The negative index reading signals worse conditions in the Mid Atlantic manufacturing sector this month compared to last month. Other regional manufacturing surveys for this month have shown continued expansion. Based on these surveys, the ISM index of national manufacturing activity is expected to solid growth but at a slower pace.
Mortgage rates slid again for the eighth time in nine weeks on economic data that shows slowing economic and housing market conditions and alleviation of sharp price gains. 30-year fixed rate mortgages averaged 6.40% this week compared to 6.43% last week according to Freddie Mac's mortgage market survey. Economists at Freddie Mac expect mortgage rates to remain low going forward as a slower economy keeps inflation in check.
Friday, September 22nd
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 11508.10 11560.77 -52.67 or -0.45%
NASDAQ 2218.93 2235.59 -16.66 or -0.74%
WEEK IN ADVANCE
This week wraps up a busy month on the economic and interest rate fronts. While the outlook has come into clearer view the extent to which the economy is slowing and how that will effect policy going forward remains to be seen. The cooling housing market plays a central role in the outlook which places emphasis upcoming home sales data.
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