Monday, April 9th
The economy created 180,000 new jobs in March according to Labor market data released last Friday. The stronger than expected gain last month followed upward revisions in the prior two months for a net job gain of 32,000. Average hourly earnings increase 0.3% on a monthly basis and are up 4.0% over the past year. The unemployment rate dropped to 4.4% from 4.5% in February. Such low joblessness could result in upward wage pressures going forward.
Tuesday, April 10th
Money magazine reported that option ARMs, no-doc and other exotic loans still have a market despite the recent subprime sector drubbing. Brokers are still finding banks willing to lend to borrowers with average credit scores who want riskier mortgages. Nearly 40% of loans made in 2006 fell into the subprime or Alt-A category.
Wednesday, April 11th
The FOMC minutes from the March 20/21 meeting provided more detail on the Fed's economic and interest rate outlook and policy stance. The Fed said that inflation remained uncomfortably high with risks biased to the upside while downside risks to growth remained because of sluggish business investment. Policymakers changed the policy statement language so as to increase policy response flexibility because of increased risks to both inflation and growth. However; in the minutes they indicated that rate increases may prove necessary.
The National Association of Realtors projects that existing home sales will fall 2.2% in 2007 to 6.34 million while new home sales will drop 14.2% to 904,000. Previous forecasts called for a 0.9% decline in existing home sales and a 10.4% decline in new home sales. Slower sales will weigh on appreciation rates. The median existing home sales prices is expected to decline 0.7% this year to $220,300 while median new home prices are expected to increase 0.4% to $246,200.
The MBA mortgage applications index fell 0.4% to 646.6% for the week that ended April 6. In a hopeful sign for the spring selling season, purchase applications increased 2.7% during the week. The refinance index tumbled 4.0% last week under higher mortgage interest rates.
Thursday, April 12th
Import prices jumped 1.7% in March due to a 9.0% surge in petroleum prices. Excluding petroleum, import prices rose just 0.3%. Over the past year import prices have increased 2.8% while petroleum prices increased 2.4%. Outside of the energy complex, imported goods inflation remains moderate.
Chain store sales surged 5.9% in March from March one year ago according to the International Council of Shopping Centers. Most retail segments posted strong results with the exception of furniture store sales which fell 13.5%. An early Easter shifted holiday sales to March; consequently, sales are expected tumble in April. Jobless claims increased 19k to 342k for the week that ended April 7.
The outsized gain last week was related to seasonal effects of the Easter holiday. Looking ahead, volatility in claims is expected to continue amid increased construction job layoffs and slower economic conditions.
Lenders raised mortgage rates last week as yields in the bond market moved higher on data showing stronger than expected payroll gains in March. 30-year fixed rate mortgages averaged 6.22% this week compared to 6.17% last week according to Freddie Mac's mortgage market survey.
Friday, April 13th
The producer price index shot up 1.0% in March led by higher food and energy costs. Food prices increased 1.4% while energy costs jumped 3.6% over the last month. Overall producer prices have increased 3.1% over the past year. Excluding food and energy prices from the index, the core PPI was unchanged in March and rose a mild 1.6% over the past year.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12612.13 12560.20 +51.93 or +0.41%
NASDAQ 2491.94 2471.34 +20.60 or +0.83%
Monday, April 16, 2007
Monday, April 09, 2007
Economic Highlights for the Week Ending April 6, 2007
Monday, April 2nd
The ISM manufacturing index fell to 50.9% in March from 52.3% in February. The level of the index portrays sluggish activity as manufacturers continue to work through an inventory correction cycle.
The economic data ran the gamut last week from weaker new home sales to stronger incomes and spending to robust, regional manufacturing activity. Also the Fed Chairman reiterated the need for vigilance against inflation and flexibility in monetary policy response. Interest rate expectations were little changed amid mixed economic data and Bernanke's remarks last week. Fed funds futures traders are expecting no change in the fed funds rate for the next three meetings in May, June and August. Traders have priced in roughly a 60% chance of a rate cut in September and fully priced in a cut at the October meeting.
Tuesday, April 3rd
The NAR reported that its pending home sales index rose to 109.3% in February from 108.5% in January. The index represents the number of signed contracts in February and is considered a leading indicator of existing home sales. The unexpected gain in the index should result in fairly stable demand for exiting homes in the next month or two.
Motor vehicle sales fell to a seasonally adjusted annual pace of 16.3 million units in March, down from a pace of 16.6 million in February. Weak fleet sales weighed on domestic auto manufacturers sales results last month while Toyota's sales increased 12%. Also, car sales rose modestly while truck sales declined as consumers shopped for more fuel efficient models.
Wednesday, April 4th
The ISM non-manufacturing index fell to 52.4% in March from 54.3% in February. Expectations were for a mild gain. Business activity in the service sector has slowed sharply in the last year or so but continues to expand modestly. This is in part related to the housing market correction. Weakness is expected in service sector growth going forward as the overall economy continues to slow.
Factory orders rose 1.0% in February after a 5.7% decline in January. A downward revision to durable goods orders led to the slower than expected increase in factory activity in February. The factory sector continues to pare down inventories under weakened demand. Manufacturing weakness will continue to detract from economic growth in Q1, possibly more so than in Q4.
The MBA mortgage applications index fell 3.2% to 649.5% for the week that ended March 30. Both purchase and refinancing activity decreased on the week but refinancing activity was up 27.9% from year ago levels. The purchase index was 8.1% below its year ago level. The decline in mortgage application activity indicates weaker housing fundamentals. The housing market is expected to weaken further this year before mounting any significant rebound.
Thursday, April 5th
Mortgage rates edged higher last week but gains were limited as the financial markets weighed the most recent economic data. The data remains mixed and the outlook for interest rates, the housing market and the economy is unclear. 30-year fixed rate mortgages averaged 6.17% this week compared to 6.16% last week according to Freddie Mac's mortgage market survey.
Jobless claims increased 11,000 to 321,000 for the week that ended March 31. Despite the gain, the four week moving average which smoothes out weekly volatility, continues to trend lower. Higher claims suggest additional layoffs last week however, the level of jobless claims remains relatively low indicating still tight labor market conditions.
Friday, April 6th
GOOD FRIDAY
Equity Markets Closed
The ISM manufacturing index fell to 50.9% in March from 52.3% in February. The level of the index portrays sluggish activity as manufacturers continue to work through an inventory correction cycle.
The economic data ran the gamut last week from weaker new home sales to stronger incomes and spending to robust, regional manufacturing activity. Also the Fed Chairman reiterated the need for vigilance against inflation and flexibility in monetary policy response. Interest rate expectations were little changed amid mixed economic data and Bernanke's remarks last week. Fed funds futures traders are expecting no change in the fed funds rate for the next three meetings in May, June and August. Traders have priced in roughly a 60% chance of a rate cut in September and fully priced in a cut at the October meeting.
Tuesday, April 3rd
The NAR reported that its pending home sales index rose to 109.3% in February from 108.5% in January. The index represents the number of signed contracts in February and is considered a leading indicator of existing home sales. The unexpected gain in the index should result in fairly stable demand for exiting homes in the next month or two.
Motor vehicle sales fell to a seasonally adjusted annual pace of 16.3 million units in March, down from a pace of 16.6 million in February. Weak fleet sales weighed on domestic auto manufacturers sales results last month while Toyota's sales increased 12%. Also, car sales rose modestly while truck sales declined as consumers shopped for more fuel efficient models.
Wednesday, April 4th
The ISM non-manufacturing index fell to 52.4% in March from 54.3% in February. Expectations were for a mild gain. Business activity in the service sector has slowed sharply in the last year or so but continues to expand modestly. This is in part related to the housing market correction. Weakness is expected in service sector growth going forward as the overall economy continues to slow.
Factory orders rose 1.0% in February after a 5.7% decline in January. A downward revision to durable goods orders led to the slower than expected increase in factory activity in February. The factory sector continues to pare down inventories under weakened demand. Manufacturing weakness will continue to detract from economic growth in Q1, possibly more so than in Q4.
The MBA mortgage applications index fell 3.2% to 649.5% for the week that ended March 30. Both purchase and refinancing activity decreased on the week but refinancing activity was up 27.9% from year ago levels. The purchase index was 8.1% below its year ago level. The decline in mortgage application activity indicates weaker housing fundamentals. The housing market is expected to weaken further this year before mounting any significant rebound.
Thursday, April 5th
Mortgage rates edged higher last week but gains were limited as the financial markets weighed the most recent economic data. The data remains mixed and the outlook for interest rates, the housing market and the economy is unclear. 30-year fixed rate mortgages averaged 6.17% this week compared to 6.16% last week according to Freddie Mac's mortgage market survey.
Jobless claims increased 11,000 to 321,000 for the week that ended March 31. Despite the gain, the four week moving average which smoothes out weekly volatility, continues to trend lower. Higher claims suggest additional layoffs last week however, the level of jobless claims remains relatively low indicating still tight labor market conditions.
Friday, April 6th
GOOD FRIDAY
Equity Markets Closed
Wednesday, April 04, 2007
Economic Highlights for the Week Ending March 30, 2007
Monday, March 26th
New home sales fell 3.9% in February to an annual rate of 848,000 after plunging 15.8% in January. Weaker sales and rising inventories indicate that the housing market remains mired in its correction. Looking forward, expect continued weakness as builders sell off excess inventories amid slower demand and tighter credit standards.
Tuesday, March 27th
The leading measure of U.S. home prices showed year over year declines for the first time in 11 years. The S&P Case/Shiller (CSI) house price index covering 10 metro areas fell 0.7% in January from a year earlier while the index of 20 major metros was down 0.2%. The growth rate of the 10 metro composite index is at its lowest level since 1994.
The consumer confidence index fell to 107.2% in March from 111.2% in February. Waning consumer optimism was related to the recent jump in gas prices. Consumers indicated their confidence in current conditions but downgraded their expectations for the future.
Wednesday, March 28th
In testimony to the Joint Economic Committee today Fed Chairman Ben Bernanke said that the Fed continues to see higher inflation as the predominate risk to the economy but that downside risks to growth have increased on housing market weakness and softer business spending. The Chairman indicated the change of language in the last policy statement reflected these uncertainties and injected more flexibility into policy decisions. Bernanke believes the subprime situation will remain contained and that for now, steady monetary policy is the correct path to take for the economy.
The MBA mortgage applications index slipped 0.2% to 671.0% for the week that ended March 23. Purchase activity increased marginally last week while refinancing activity decreased. Nevertheless, refinancing applications were 41.0% above their year ago level.
Thursday, March 29th
Growth was slightly stronger in the fourth quarter compared to previous estimates. GDP grew at an annualized pace of 2.5% in Q4, up from 2.2% in the preliminary estimate. Inventory investment was not as weak as estimated and net exports were stronger. Even with the upward adjustment, growth remains slow mainly due to the housing market correction which shaved a full percentage point from growth during the period.
Mortgage rates were little changed again this week as slower growth indicators offset higher inflation readings. 30-year fixed rate mortgages averaged 6.16% this week, the same as last week according to Freddie Mac's mortgage market survey.
Jobless claims fell 10k to 308k for the week that ended March 24. Lower jobless claims over the last several weeks indicate improvement in labor market conditions. However, improvements may be short lived as auto manufacturing and residential construction weakness will lead to more layoffs down the road.
Friday, March 30th
Personal income increased 0.6% in February while consumer spending expanded 0.6%. Both income and spending gains were higher than expected last month. Inflation accelerated in February. The core rate of inflation tracked in this data series grew 0.3% in February and was up 2.4% over the last year, still above the Fed’s comfort zone of 2.0%.
Construction spending increased 0.3% in February compared to expectations for a 0.5% decline. Strength in nonresidential and public construction spending led the gain in February but was not enough to offset residential construction weakness. Looking ahead, residential construction will continue to be a drag on quarterly economic growth through the first half of this year.
New home sales fell 3.9% in February to an annual rate of 848,000 after plunging 15.8% in January. Weaker sales and rising inventories indicate that the housing market remains mired in its correction. Looking forward, expect continued weakness as builders sell off excess inventories amid slower demand and tighter credit standards.
Tuesday, March 27th
The leading measure of U.S. home prices showed year over year declines for the first time in 11 years. The S&P Case/Shiller (CSI) house price index covering 10 metro areas fell 0.7% in January from a year earlier while the index of 20 major metros was down 0.2%. The growth rate of the 10 metro composite index is at its lowest level since 1994.
The consumer confidence index fell to 107.2% in March from 111.2% in February. Waning consumer optimism was related to the recent jump in gas prices. Consumers indicated their confidence in current conditions but downgraded their expectations for the future.
Wednesday, March 28th
In testimony to the Joint Economic Committee today Fed Chairman Ben Bernanke said that the Fed continues to see higher inflation as the predominate risk to the economy but that downside risks to growth have increased on housing market weakness and softer business spending. The Chairman indicated the change of language in the last policy statement reflected these uncertainties and injected more flexibility into policy decisions. Bernanke believes the subprime situation will remain contained and that for now, steady monetary policy is the correct path to take for the economy.
The MBA mortgage applications index slipped 0.2% to 671.0% for the week that ended March 23. Purchase activity increased marginally last week while refinancing activity decreased. Nevertheless, refinancing applications were 41.0% above their year ago level.
Thursday, March 29th
Growth was slightly stronger in the fourth quarter compared to previous estimates. GDP grew at an annualized pace of 2.5% in Q4, up from 2.2% in the preliminary estimate. Inventory investment was not as weak as estimated and net exports were stronger. Even with the upward adjustment, growth remains slow mainly due to the housing market correction which shaved a full percentage point from growth during the period.
Mortgage rates were little changed again this week as slower growth indicators offset higher inflation readings. 30-year fixed rate mortgages averaged 6.16% this week, the same as last week according to Freddie Mac's mortgage market survey.
Jobless claims fell 10k to 308k for the week that ended March 24. Lower jobless claims over the last several weeks indicate improvement in labor market conditions. However, improvements may be short lived as auto manufacturing and residential construction weakness will lead to more layoffs down the road.
Friday, March 30th
Personal income increased 0.6% in February while consumer spending expanded 0.6%. Both income and spending gains were higher than expected last month. Inflation accelerated in February. The core rate of inflation tracked in this data series grew 0.3% in February and was up 2.4% over the last year, still above the Fed’s comfort zone of 2.0%.
Construction spending increased 0.3% in February compared to expectations for a 0.5% decline. Strength in nonresidential and public construction spending led the gain in February but was not enough to offset residential construction weakness. Looking ahead, residential construction will continue to be a drag on quarterly economic growth through the first half of this year.
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