MONDAY, December 10th
The pending home sale index, a leading indicator of existing home sales that tracks the number of signed contracts in a given month, increased 0.6% in October to 87.2 from a reading of 86.7 in September. It was the second straight monthly gain however the index remains 18.4% below the index level of 106.8 in October last year. The NAR’s chief economist predicts that existing home sales will rise gradually in 2008 over exceptionally low levels in the final months of 2007.
TUESDAY, December 11th
As widely expected, the FOMC cut key, short-term interest rates by 25 basis points at their policy-setting session today. This was the third consecutive cut in the fed funds target which now stands at 4.25%. The Board also approved a 25 basis point decrease to 4.75% in the discount rate. In the policy statement, the Fed cited slower growth related to the housing market correction and increased financial market strains as reasons for easing.
WEDNESDAY, December 12th
Import prices jumped 2.7% in November led by a 9.8% surge in petroleum prices. Over the past year oil prices have soared by 53.0%, pushing overall import prices up 11.4%. Non-petroleum import prices climbed 0.7% on the month and were up 3.0% over the past year. Outside of energy, imported goods inflation remains moderate but is still placing upward pressure on both producer and consumer prices.
The international trade deficit widened to $57.8 billion in October from a downwardly revised deficit of %57.1 billion in September. For the first 10 months of this year, the trade deficit has averaged $58.6 billion compared to a monthly average trade deficit of $64.0 billion in 2006. Robust export growth, related to strong global economies and a weak dollar is responsible for the improvement in the trade picture.
The MBA mortgage applications index rose 2.5% to 811.8% for the week ending December 7. This follows a 22.5% advance in the previous week. The applications index is at its highest level since mid-2005. The purchase index increased 1.7% on the week while the refinance index rose 4.3%. The refinance share of mortgage applications was 59% of the number and 58% of the dollar volume. Falling mortgage interest rates will continue to support application activity going forward.
One day after the Fed eased monetary policy and disappointed financial markets with their policy statement, the Federal Reserve announced a plan to increase liquidity into global money markets. The Fed will lend at $40 billion in two separate auctions this month with the size of two more auction to be determined next month, at rates far lower than discount rate. The discount rate is the rate at which the Fed loans money overnight directly to banks. Other major central banks will hold auctions similar to the Fed’s and be able to make loans in dollars instead of other much stronger currencies. The hope is that it will relieve pressure on interbank lending rates, especially the Libor.
THURSDAY, December 13th
Retail sales jumped 1.2% in November nearly double expectations and helped by colder weather, an early Thanksgiving and sharply higher gasoline prices. Consumers remain quite resilient in the face of the housing correction and higher energy prices. Spending will likely decelerate this quarter from a robust third quarter pace however it will not be excessively weak, much to the relief of financial markets.
The producer price index surged 3.2% in November driven higher almost entirely by energy prices, which rose 14.1%. This is the second highest reading since the index was started in 1973. Excluding food and energy prices from the index, core producer prices gained a 0.4% last month, which was still a bit above trend. Over the past year the PPI was up 7.7%, its highest level in over 25 years, while the core PPI gained just 1.9%, considered by the Fed the safety zone for wholesale inflation.
FRIDAY, December 14th
The consumer price index soared 0.8% in November compared to expectations for a 0.6% increase. Higher energy prices were once again behind the larger than expected gain in headline consumer prices last month. Excluding food and energy prices core consumer inflation rose 0.3% on the month and gained 2.3% on the year. The yearly gain is higher than the Fed would like to see but inflationary pressures should soften in the near term under slower economic growth.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13339.85 13625.58 -285.73 or -2.10%
NASDAQ 2635.74 2706.16 -70.42 or -2.60%
WEEK IN ADVANCE
In the coming week market players will be looking at further developments in the financial services industry; oil prices and other issues that could affect consumer spending and data from the housing sector: homebuilder sentiment and housing starts.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Monday, December 17, 2007
Economic Highlights for the Week Ending December 14, 2007
Friday, December 07, 2007
Economic Highlights for the Week Ending December 7, 2007
MONDAY, December 3rd
The ISM manufacturing index came in a 50.8% in November down just slightly from a reading of 50.9% in October. New orders and production maintained well during the month while employment contracted and input prices increased. The level of the index suggests that national factory activity is still growing, albeit at a very slow pace. The weak tone and sluggish growth in the manufacturing sector provide more fodder for a Fed easing when policy makers meet next week.
Motor vehicle sales increased 0.9% in November to an annual rate of 16.2 million units. Auto sales increased 6.7% to 7.47 million while light truck sales declined 4.2% to 8.22 million units. Consumers are probably shopping for more gas efficient cars hence the decline in truck sales.
TUESDAY, December 4th
Extremely low yields in the bond market curtailed demand for Treasuries Tuesday. Treasuries inversely followed stock market action but ended lower on the day before a slew of economic data on Wednesday and the employment report, Friday. In late trading the 10-year note was down 12/32 to 102-28/32 to yield 3.89%.
WEDNESDAY, December 5th
Productivity was revised even higher in Q3 growing at a 6.3% rate up from the first reading of 4.9%. This was its fastest quarterly pace in 4 years. Nevertheless, productivity has been trending lower over the past several years. Unit labor costs were revised sharply lower, to -2.0% from -0.2% originally.
The ISM non-manufacturing index fell 1.7 points to 54.1% in November, less than expectations of a reading of 55.0%. Business activity in the service sectors of the economy expanded at a slow pace last month in part because of the turmoil in housing and mortgage finance industries. Higher energy costs and the housing correction pose downside risks to service sector growth going forward.
The MBA mortgage applications index surged 22.5% to 791.8% for the week that ended November 30. Purchase applications increased 15.2% and refinance applications increased 31.9%. Lower fixed rates are behind the increase in application activity. More rate declines will continue to support mortgage activity in the near term.
THURSDAY, December 6th
Jobless claims fell 15k to 338k for the week that ended December 1. The level of claims remains elevated suggesting some deterioration in labor market conditions. Tomorrow’s employment report should clarify the labor picture and help determine the size of the Fed’s next rate cut.
Stocks climbed another leg higher Thursday as jobless claims decreased and Bush announced his plan to help troubled borrowers. The gist of it is to freeze, for five years, adjustable rates on mortgages due to reset between 2008 and 2010. The mortgage bailout plan was delivered right on the heels of a report detailing a high number of mortgage delinquencies and foreclosures in the third quarter. Homebuilder stocks helped led the gain with the Dow up 174.93 to 13619.89. The NASDAQ gained 42.67 to 2709.03.
Slower consumer spending and income gains for October as well as reports of weaker house price appreciation boosted Treasury prices and lowered yields substantially in the past few weeks and mortgage rates followed with the average 30-year fixed rate falling below the key 6.0% level for the first time since October 2005. 30-year fixed rates averaged 5.96% this week compared to 6.10% last week according to Freddie Mac’s mortgage market survey.
FRIDAY, December 7th
Payroll employment rose by 94k in November, exceeding estimates for a 70k gain. However, job growth continues to trend lower with revisions in the past two months resulting in a net 48k fewer jobs. Jobs were gained in services and retail while job losses occurred in manufacturing, construction and financial services. Average hourly earnings jumped 0.5% last month while the unemployment rate was unchanged at 4.7%. On balance, the mixed report supports a quarter point rate cut by the Fed next week.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13625.58 13371.72 +253.86 or +1.90%
NASDAQ 2706.16 2660.96 +45.20 or +1.70%
WEEK IN ADVANCE
With most signs pointing to year-end weakness, the Fed will likely cut the target fed funds rate by a quarter point to 4.25% when the FOMC meets to decide policy on Tuesday, December 11. Other than that, economists and financial markets will be keen on inflation indicators throughout the remainder of the week
Payroll employment rose by 94k in November, exceeding estimates for a 70k gain. However, job growth continues to trend lower with revisions in the past two months resulting in a net 48k fewer jobs. Jobs were gained in services and retail while job losses occurred in manufacturing, construction and financial services. Average hourly earnings jumped 0.5% last month while the unemployment rate was unchanged at 4.7%. On balance, the mixed report supports a quarter point rate cut by the Fed next week.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
The ISM manufacturing index came in a 50.8% in November down just slightly from a reading of 50.9% in October. New orders and production maintained well during the month while employment contracted and input prices increased. The level of the index suggests that national factory activity is still growing, albeit at a very slow pace. The weak tone and sluggish growth in the manufacturing sector provide more fodder for a Fed easing when policy makers meet next week.
Motor vehicle sales increased 0.9% in November to an annual rate of 16.2 million units. Auto sales increased 6.7% to 7.47 million while light truck sales declined 4.2% to 8.22 million units. Consumers are probably shopping for more gas efficient cars hence the decline in truck sales.
TUESDAY, December 4th
Extremely low yields in the bond market curtailed demand for Treasuries Tuesday. Treasuries inversely followed stock market action but ended lower on the day before a slew of economic data on Wednesday and the employment report, Friday. In late trading the 10-year note was down 12/32 to 102-28/32 to yield 3.89%.
WEDNESDAY, December 5th
Productivity was revised even higher in Q3 growing at a 6.3% rate up from the first reading of 4.9%. This was its fastest quarterly pace in 4 years. Nevertheless, productivity has been trending lower over the past several years. Unit labor costs were revised sharply lower, to -2.0% from -0.2% originally.
The ISM non-manufacturing index fell 1.7 points to 54.1% in November, less than expectations of a reading of 55.0%. Business activity in the service sectors of the economy expanded at a slow pace last month in part because of the turmoil in housing and mortgage finance industries. Higher energy costs and the housing correction pose downside risks to service sector growth going forward.
The MBA mortgage applications index surged 22.5% to 791.8% for the week that ended November 30. Purchase applications increased 15.2% and refinance applications increased 31.9%. Lower fixed rates are behind the increase in application activity. More rate declines will continue to support mortgage activity in the near term.
THURSDAY, December 6th
Jobless claims fell 15k to 338k for the week that ended December 1. The level of claims remains elevated suggesting some deterioration in labor market conditions. Tomorrow’s employment report should clarify the labor picture and help determine the size of the Fed’s next rate cut.
Stocks climbed another leg higher Thursday as jobless claims decreased and Bush announced his plan to help troubled borrowers. The gist of it is to freeze, for five years, adjustable rates on mortgages due to reset between 2008 and 2010. The mortgage bailout plan was delivered right on the heels of a report detailing a high number of mortgage delinquencies and foreclosures in the third quarter. Homebuilder stocks helped led the gain with the Dow up 174.93 to 13619.89. The NASDAQ gained 42.67 to 2709.03.
Slower consumer spending and income gains for October as well as reports of weaker house price appreciation boosted Treasury prices and lowered yields substantially in the past few weeks and mortgage rates followed with the average 30-year fixed rate falling below the key 6.0% level for the first time since October 2005. 30-year fixed rates averaged 5.96% this week compared to 6.10% last week according to Freddie Mac’s mortgage market survey.
FRIDAY, December 7th
Payroll employment rose by 94k in November, exceeding estimates for a 70k gain. However, job growth continues to trend lower with revisions in the past two months resulting in a net 48k fewer jobs. Jobs were gained in services and retail while job losses occurred in manufacturing, construction and financial services. Average hourly earnings jumped 0.5% last month while the unemployment rate was unchanged at 4.7%. On balance, the mixed report supports a quarter point rate cut by the Fed next week.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13625.58 13371.72 +253.86 or +1.90%
NASDAQ 2706.16 2660.96 +45.20 or +1.70%
WEEK IN ADVANCE
With most signs pointing to year-end weakness, the Fed will likely cut the target fed funds rate by a quarter point to 4.25% when the FOMC meets to decide policy on Tuesday, December 11. Other than that, economists and financial markets will be keen on inflation indicators throughout the remainder of the week
Payroll employment rose by 94k in November, exceeding estimates for a 70k gain. However, job growth continues to trend lower with revisions in the past two months resulting in a net 48k fewer jobs. Jobs were gained in services and retail while job losses occurred in manufacturing, construction and financial services. Average hourly earnings jumped 0.5% last month while the unemployment rate was unchanged at 4.7%. On balance, the mixed report supports a quarter point rate cut by the Fed next week.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Economic Highlights for the Week Ending November 30, 2007
MONDAY, November 26th
Financial markets continue to call for additional easing from the Fed and are almost fully pricing in a quarter point rate cut when the FOMC meets December 11. The economic data becomes all important between now and then and if weaker than expected may be enough to tip the scales in favor of lower rates.
TUESDAY, November 27th
The S&P/Case-Shiller Home Price Indexes, the U.S. National, 10-City Composite and 20-City Composite continued to show steep annual price declines. The quarterly U.S. National Home Price Index was down 1.7% from Q207 and off 4.5% from the third quarter of last year. The quarter/quarter decline was the largest in the index's 21-year history. The 10-metro house price index was down 5.5% year over year while the 20-metro index declined 4.9%. The indexes are highly regarded as an accurate measure of house price changes. Shiller, the chief economist behind the indexes, notes that the housing cycle is very important to the business cycle and that home price movements are an important indicator of the overall economy.
WEDNESDAY, November 28th
Existing home sales fell 1.2% in October to an annual rate of 4.97 million, off slightly from an expected pace of 5.00 million units. Total existing home sales remain down 20.7% from a year ago.
The MBA mortgage applications index fell 4.3% to 652.5% for the week that ended November 23. Purchase applications gained 6.1% for the week while refinancings tumbled 15.3%. Total applications remain 8.9% above their year ago level. Other housing indicators show that the market has not yet bottomed out and save for a sharp drop in rates application activity in the next month is expected to remain slow.
The Fed's round-up of economic activity in the twelve Federal Reserve Banking Districts, called the beige book, showed that the expansion continued in most areas during October and early November but at a slower pace than previously. Housing was the main source of weakness though retail spending was softer too. Businesses outside of housing and the real estate industries remain cautiously optimistic because the spillover effects have been relatively minor thus far. The pace of hiring was slower while wage and other inflationary pressures remained subdued. The tone of the report was decidedly more downbeat than before which financial markets took to mean that the Fed will once again cut rates when they meet December 11.
THURSDAY, November 29th
The preliminary estimate for GDP showed the economy grew at a 4.9% rate in the third quarter up significantly from the 3.9% rate in the advance estimate. Stronger inventory investment and exports were at cause for the strong upward revision.
New home sales rose 1.7% in October to an annual rate of 728k after a sharp downward revision to September data. September new home sales were adjusted from 770k to just 716k. New home sales are now 23.5% below their year ago level.
Jobless claims jumped 23k to 352k for the week that ended November 24. It could be Thanksgiving holiday related volatility but if this level is maintained for several weeks or more it indicates much weaker labor market conditions.
Long term mortgage rates fell again this week as Treasury yields in the bond market fell to multi-year lows. Worries over the subprime fallout on credit markets and housing weakness on the overall economy had investors seeking out the relative safety of government securities in the past few weeks. Stronger Treasury prices always result in a corresponding drop in yields, and mortgage rates followed suit. 30-year fixed rate mortgages averaged 6.10% this week compared to 6.20% last week according to Freddie Mac’s mortgage market survey.
FRIDAY, November 30th
Construction spending decreased 0.8% in October compared to expectations for a more modest decline of 0.3%. Residential construction led the weakness falling by 2.0% last month in its 20th straight monthly decline. Over the past year residential construction spending has fallen 16.2% reflecting the plunge in new housing starts.
Treasury prices were mixed today but gained a record amount over the past month on credit market concerns and a flight to safety bid. Treasuries sold off or gained today as traders absorbed Bernanke's remarks from last night and weak economic data. Expectations for another rate cut solidified on the Fed Chief's guidance with outlook unwinding some safe haven flows. In late trading the 10-year note was down 3/32 to 102-15/32 to yield 3.94%.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13371.72 12980.88 +390.34 or +3.01%
NASDAQ 2660.96 2596.60 +64.36 or +2.48%
WEEK IN ADVANCE
Recent Fed speak combined with weak economic readings have opened the door for a rate cut when the FOMC meets December 11. In the week ahead policymakers will be looking for more evidence of economic slowing in which to bolster their case. The economic data scheduled to be released will probably disappoint as manufacturing activity and November payrolls are expected to be on the weak side. Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Financial markets continue to call for additional easing from the Fed and are almost fully pricing in a quarter point rate cut when the FOMC meets December 11. The economic data becomes all important between now and then and if weaker than expected may be enough to tip the scales in favor of lower rates.
TUESDAY, November 27th
The S&P/Case-Shiller Home Price Indexes, the U.S. National, 10-City Composite and 20-City Composite continued to show steep annual price declines. The quarterly U.S. National Home Price Index was down 1.7% from Q207 and off 4.5% from the third quarter of last year. The quarter/quarter decline was the largest in the index's 21-year history. The 10-metro house price index was down 5.5% year over year while the 20-metro index declined 4.9%. The indexes are highly regarded as an accurate measure of house price changes. Shiller, the chief economist behind the indexes, notes that the housing cycle is very important to the business cycle and that home price movements are an important indicator of the overall economy.
WEDNESDAY, November 28th
Existing home sales fell 1.2% in October to an annual rate of 4.97 million, off slightly from an expected pace of 5.00 million units. Total existing home sales remain down 20.7% from a year ago.
The MBA mortgage applications index fell 4.3% to 652.5% for the week that ended November 23. Purchase applications gained 6.1% for the week while refinancings tumbled 15.3%. Total applications remain 8.9% above their year ago level. Other housing indicators show that the market has not yet bottomed out and save for a sharp drop in rates application activity in the next month is expected to remain slow.
The Fed's round-up of economic activity in the twelve Federal Reserve Banking Districts, called the beige book, showed that the expansion continued in most areas during October and early November but at a slower pace than previously. Housing was the main source of weakness though retail spending was softer too. Businesses outside of housing and the real estate industries remain cautiously optimistic because the spillover effects have been relatively minor thus far. The pace of hiring was slower while wage and other inflationary pressures remained subdued. The tone of the report was decidedly more downbeat than before which financial markets took to mean that the Fed will once again cut rates when they meet December 11.
THURSDAY, November 29th
The preliminary estimate for GDP showed the economy grew at a 4.9% rate in the third quarter up significantly from the 3.9% rate in the advance estimate. Stronger inventory investment and exports were at cause for the strong upward revision.
New home sales rose 1.7% in October to an annual rate of 728k after a sharp downward revision to September data. September new home sales were adjusted from 770k to just 716k. New home sales are now 23.5% below their year ago level.
Jobless claims jumped 23k to 352k for the week that ended November 24. It could be Thanksgiving holiday related volatility but if this level is maintained for several weeks or more it indicates much weaker labor market conditions.
Long term mortgage rates fell again this week as Treasury yields in the bond market fell to multi-year lows. Worries over the subprime fallout on credit markets and housing weakness on the overall economy had investors seeking out the relative safety of government securities in the past few weeks. Stronger Treasury prices always result in a corresponding drop in yields, and mortgage rates followed suit. 30-year fixed rate mortgages averaged 6.10% this week compared to 6.20% last week according to Freddie Mac’s mortgage market survey.
FRIDAY, November 30th
Construction spending decreased 0.8% in October compared to expectations for a more modest decline of 0.3%. Residential construction led the weakness falling by 2.0% last month in its 20th straight monthly decline. Over the past year residential construction spending has fallen 16.2% reflecting the plunge in new housing starts.
Treasury prices were mixed today but gained a record amount over the past month on credit market concerns and a flight to safety bid. Treasuries sold off or gained today as traders absorbed Bernanke's remarks from last night and weak economic data. Expectations for another rate cut solidified on the Fed Chief's guidance with outlook unwinding some safe haven flows. In late trading the 10-year note was down 3/32 to 102-15/32 to yield 3.94%.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 13371.72 12980.88 +390.34 or +3.01%
NASDAQ 2660.96 2596.60 +64.36 or +2.48%
WEEK IN ADVANCE
Recent Fed speak combined with weak economic readings have opened the door for a rate cut when the FOMC meets December 11. In the week ahead policymakers will be looking for more evidence of economic slowing in which to bolster their case. The economic data scheduled to be released will probably disappoint as manufacturing activity and November payrolls are expected to be on the weak side. Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
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