A busy economic calendar will help to clarify economic performance after the Q2 rebound. The indicators are light on housing but heavy on other sectors of the economy, mainly manufacturing and labor. Signs of solid economic activity could help quell the volatility in the stock market and put a floor under Treasury yields.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Monday, July 30, 2007
Saturday, July 28, 2007
Economic Highlights for the Week Ending July 27, 2007
Monday, July 23rd
Based on solid economic indicators excluding the housing sector, fed funds futures traders expect key short term rates to stay at 5.25% when the Fed meets in August. Traders are pricing in a 90% chance that the Fed will remain on hold at the October 30 meeting, up from 85% last week. In the second half of this year, mortgage equity withdrawal declines and slower consumption growth could keep the economy below its long-term potential of slightly below 3%.
Tuesday, July 24th
National mortgage lender leader Countrywide Financial revealed that more good credit borrowers are lagging on loan payments, and a housing market recovery may not start until 2009 because of housing prices declines not seen in decades. Countrywide's stark assessment signaled a change in how housing executives are publically describing the market. The comments initiated a steep stock market sell-off today, the most volatile in a year.
Wednesday, July 25th
Existing home sales fell 3.8% in June to an annual pace of 5.75 million, shy of an expected 5.87 million pace. Rising mortgage rates combined with tightening lending standards are quashing demand for homes. Inventories declined but at the weakened sales pace, the month's supply of homes for sale remained unchanged at 8.8. Median prices rose slightly for the first time in 11 months gaining 0.3% over the past year to $230,100. Credit market distress and a still high level of inventories mean that the correction in the housing market will continue.
The Fed's survey of economic conditions in the twelve Federal Reserve Banking Districts known as the beige book was mostly positive with most areas reporting moderate activity in June and early July. Gains in manufacturing and commercial real estate were offset by the drag from residential housing. Demand for loans also weakened. Consumer spending was modest with some districts reporting mixed results while labor markets remained strong. Cost pressures were evident across the board with almost every single region reporting higher oil and gas prices. Survey results showing a steady economy and contained inflation means the Fed will remain on hold when they meet next month and possibly through the remainder of this year.
Thursday, July 26th
New home sales plunged 6.6% in June to an annual rate of 834k. Expectations were centered on an annual rate of 900k. Over the past year sales have declined 22.3% and are 40% lower than their July 2005 peak. Regionally, home sales plunged in the Northeast, Midwest and West but climbed higher in the South. Inventories were unchanged last month but because of the reduced sales pace the month's supply rose to 7.8 from 7.4 in May. Home prices were mixed with median prices down 2.2% to $237,900 and average prices climbing 3.7% to $316,200. The housing market is still searching for the trough. New home sales are expected to decline going forward as builders work off high inventory levels under weakened demand.
Bleak housing market demand and credit market risks placed downward pressure on rates this week. Housing demand is being stymied by tighter lending standards and a 40 basis point jump in average 30-year fixed rates in June. Rates eased this week though with 30-year fixed rate mortgages averaging 6.69% this week compared to 6.73% last week according to Freddie Mac's mortgage market survey.
Friday, July 27th
Economic growth rebounded in the second quarter as GDP grew at a 3.4% annual rate, compared to an anemic pace of 0.6% in the first quarter. Less of a drag from housing, robust inventory building and stronger exports all contributed to the revived growth rate. Consumer spending however, slowed sharply. An economy wide inflation gauge slowed to 2.7% last quarter from 4.2% in Q1.
Wednesday, July 25, 2007
America's best jobs in the hottest markets
I came across this article and wanted to share it with you. CNN Money Magazine identified Phoenix as #5 nationally in forecasting 2 yr job growth
America's best jobs in the hottest marketsThe great American hiring boom is slowing down--but as labor cools with the rest of the economy, a few choice regions will stay red-hot. You just have to know where to look.By Paul Kaihla, Business 2.0 Magazine senior writer - CNN Money Magazine
Phoenix ranks #5
2-year job-growth forecast: 5.6%
Metropolitan-area population: 4.0 million
Who's hiring now: ASU, Banner Health, suburban schools
Hottest jobs: Senior software developer ($84,800), IT project manager ($78,600), semiconductor process engineer ($78,000), physician's assistant ($76,200), construction project manager ($74,000)
In each of the past three years, the Phoenix area has created about 95,000 new jobs, many of them fueled by an unprecedented construction boom. This year's number is pegged at about 60,000--a major drop-off, to be sure, but still enough in the context of the national slowdown to place Phoenix solidly in the top 10. Low income taxes and sunny weather are still attracting a steady stream of newcomers, primarily from the Northeast and Midwest; 114,000 are expected this year, continuing to stoke demand for new roads, schools, and health-care facilities. So while Phoenix's homebuilding sector will likely be down about 40 percent in 2007, employment linked to long-term infrastructure projects will stay hot. Still, Phoenix remains largely a mom-and-pop economy, with small business expected to drive most of the job expansion.
America's best jobs in the hottest marketsThe great American hiring boom is slowing down--but as labor cools with the rest of the economy, a few choice regions will stay red-hot. You just have to know where to look.By Paul Kaihla, Business 2.0 Magazine senior writer - CNN Money Magazine
Phoenix ranks #5
2-year job-growth forecast: 5.6%
Metropolitan-area population: 4.0 million
Who's hiring now: ASU, Banner Health, suburban schools
Hottest jobs: Senior software developer ($84,800), IT project manager ($78,600), semiconductor process engineer ($78,000), physician's assistant ($76,200), construction project manager ($74,000)
In each of the past three years, the Phoenix area has created about 95,000 new jobs, many of them fueled by an unprecedented construction boom. This year's number is pegged at about 60,000--a major drop-off, to be sure, but still enough in the context of the national slowdown to place Phoenix solidly in the top 10. Low income taxes and sunny weather are still attracting a steady stream of newcomers, primarily from the Northeast and Midwest; 114,000 are expected this year, continuing to stoke demand for new roads, schools, and health-care facilities. So while Phoenix's homebuilding sector will likely be down about 40 percent in 2007, employment linked to long-term infrastructure projects will stay hot. Still, Phoenix remains largely a mom-and-pop economy, with small business expected to drive most of the job expansion.
Monday, July 23, 2007
Economic Highlights for the Upcomming Week July 27, 2007
The financial markets will be keen on new and existing home sales data in the coming week for the latest reading on the state of the housing market. Also important to the outlook and the direction of interest rates is the advance estimate of second quarter GDP due out on Friday.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 8.25% 8.25% 8.25%
Fed Discount 6.25% 6.25% 6.25%
Fed Funds 5.25% 5.24% 5.25%
11th District COF 4.293% 4.358% 3.884%
10-Year Note 4.96% 4.77% 5.07%
30-Year Treasury Bond 5.06% 4.86% 5.11%
30-Yr Fixed (FHLMC) 6.73% 6.23% 6.80%
15-Yr Fixed (FHLMC) 6.38% 5.98% 6.41%
1-Yr Adj (FHLMC) 5.72% 5.51% 5.80%
6-Mo Libor (FNMA) 5.3817% 5.3651% 5.6382%
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 8.25% 8.25% 8.25%
Fed Discount 6.25% 6.25% 6.25%
Fed Funds 5.25% 5.24% 5.25%
11th District COF 4.293% 4.358% 3.884%
10-Year Note 4.96% 4.77% 5.07%
30-Year Treasury Bond 5.06% 4.86% 5.11%
30-Yr Fixed (FHLMC) 6.73% 6.23% 6.80%
15-Yr Fixed (FHLMC) 6.38% 5.98% 6.41%
1-Yr Adj (FHLMC) 5.72% 5.51% 5.80%
6-Mo Libor (FNMA) 5.3817% 5.3651% 5.6382%
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Economic Highlights for the Week Ending July 20, 2007
Monday, July 16th
Fears of subprime repercussions on the broader economy increased the possibility of a fed rate cut by year end. Consumer spending, a primary driver of economic activity, has also faltered on weaker housing markets. While no rate change is expected at the next two meetings in August and September, a slight 15% chance of a rate cut is being priced in for the October meeting up from no chance a few weeks ago.
Tuesday, July 17th
The producer price index fell 0.2% in June following an oversized 0.9% gain in May. The unexpected decrease was related to falling food and energy prices. Gasoline prices fell 3.9% last month. Excluding food and energy from the index, core producer price rose 0.3% on the month and rose 1.8% on the year, still within the Fed’s target zone for inflation.
Industrial production rose 0.5% in June on a robust 0.6% gain in manufacturing output. Utilities and mining output also gained 0.3% and 0.5% respectively. Stronger output pushed capacity utilization higher to 81.7% from 81.4% in May. These data confirm a strong second quarter rebound with tighter resource utilization.
The NAHB housing market index sank to 24 in July from a level of 28 in June. Home builders rate present single family sales and sales six months from now much lower while foot traffic through model homes decreased. Such a low level of home builder sentiment portends weaker new home construction and sales in the months ahead.
The Federal Reserve in conjunction with state authorities announced a plan today to regulate subprime mortgage lenders by conducting compliance reviews to uncover possible abuses in subprime lending practices. Regulators will analyze underwriting standards and cross reference them against consumer protection laws and take enforcement actions where necessary. The pilot program, targeting about a dozen lenders will begin in the fourth quarter of this year.
Wednesday, July 18th
The consumer price index increased 0.2% in June on a 0.5% decline in energy prices. Excluding food and energy from the index, core consumer prices rose 0.2% on the month to bring the yearly gain to 2.2%. The annual gain in the core rate is still out of the Fed’s comfort zone but it has receded somewhat in the past few months.
Housing starts increased 2.3% to 1.467 million in June. Single family starts declined 0.2% to 1.151 million while multifamily starts surged 12.9% to 281,000. Permit issuance, often used as a proxy for future building activity, fell 7.5% to 1.406 million. New construction activity is expected to decline further in coming months as the housing market continues its search for the bottom.
The MBA mortgage applications index fell 0.9% to 631.6% for the week that ended July 13. The purchase index slipped 1.6% while the refi index gained 4.9%. Application activity remains healthy but its direct correlation to actual sales and refinancing appears to be tenuous during this housing market correction.
Thursday, July 19th
Mortgage rates were little changed this week on contained inflation expectations. Both core consumer and producer price gains over the last year were moderate. Chairman Bernanke indicated in testimony this week that the Fed expects inflation to continue to moderate further from here. 30-year fixed rate mortgages averaged 6.73% this week, the same as last week according to Freddie Mac's mortgage market survey.
Jobless claims fell 8k to 301k for the week that ended July 14. The low level of claims suggests healthy labor market conditions but with a slightly weaker pace of hiring this year compared to 2006 trends.
Fears of subprime repercussions on the broader economy increased the possibility of a fed rate cut by year end. Consumer spending, a primary driver of economic activity, has also faltered on weaker housing markets. While no rate change is expected at the next two meetings in August and September, a slight 15% chance of a rate cut is being priced in for the October meeting up from no chance a few weeks ago.
Tuesday, July 17th
The producer price index fell 0.2% in June following an oversized 0.9% gain in May. The unexpected decrease was related to falling food and energy prices. Gasoline prices fell 3.9% last month. Excluding food and energy from the index, core producer price rose 0.3% on the month and rose 1.8% on the year, still within the Fed’s target zone for inflation.
Industrial production rose 0.5% in June on a robust 0.6% gain in manufacturing output. Utilities and mining output also gained 0.3% and 0.5% respectively. Stronger output pushed capacity utilization higher to 81.7% from 81.4% in May. These data confirm a strong second quarter rebound with tighter resource utilization.
The NAHB housing market index sank to 24 in July from a level of 28 in June. Home builders rate present single family sales and sales six months from now much lower while foot traffic through model homes decreased. Such a low level of home builder sentiment portends weaker new home construction and sales in the months ahead.
The Federal Reserve in conjunction with state authorities announced a plan today to regulate subprime mortgage lenders by conducting compliance reviews to uncover possible abuses in subprime lending practices. Regulators will analyze underwriting standards and cross reference them against consumer protection laws and take enforcement actions where necessary. The pilot program, targeting about a dozen lenders will begin in the fourth quarter of this year.
Wednesday, July 18th
The consumer price index increased 0.2% in June on a 0.5% decline in energy prices. Excluding food and energy from the index, core consumer prices rose 0.2% on the month to bring the yearly gain to 2.2%. The annual gain in the core rate is still out of the Fed’s comfort zone but it has receded somewhat in the past few months.
Housing starts increased 2.3% to 1.467 million in June. Single family starts declined 0.2% to 1.151 million while multifamily starts surged 12.9% to 281,000. Permit issuance, often used as a proxy for future building activity, fell 7.5% to 1.406 million. New construction activity is expected to decline further in coming months as the housing market continues its search for the bottom.
The MBA mortgage applications index fell 0.9% to 631.6% for the week that ended July 13. The purchase index slipped 1.6% while the refi index gained 4.9%. Application activity remains healthy but its direct correlation to actual sales and refinancing appears to be tenuous during this housing market correction.
Thursday, July 19th
Mortgage rates were little changed this week on contained inflation expectations. Both core consumer and producer price gains over the last year were moderate. Chairman Bernanke indicated in testimony this week that the Fed expects inflation to continue to moderate further from here. 30-year fixed rate mortgages averaged 6.73% this week, the same as last week according to Freddie Mac's mortgage market survey.
Jobless claims fell 8k to 301k for the week that ended July 14. The low level of claims suggests healthy labor market conditions but with a slightly weaker pace of hiring this year compared to 2006 trends.
Subscribe to:
Comments (Atom)
