What's Going On With The U.S. Economy?

It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:

#1—(Existing) Home Improvement

In July, existing home sales surged 6.5% to an annual rate of 5.39 million. Not only did existing home sales top economists’ expectations (the consensus called for a rate of 5.00 million units), this represents the highest annual rate since November 2009. Meanwhile, inventory for existing homes remains tight—a 5.1 month supply at the current sales pace. We have seen sustained improvement over the past twelve months. Compared with July 2012, existing home sales have advanced 17.2%. And while inventories remained unchanged compared with last month, the supply of existing homes is still down 5% from a year ago. I must also mention that the average price of an existing home has risen 14% over the past year.

#2—Layoff Activity At a Six Year Low

Last week, jobless claims climbed 13,000 to an annual rate of 336,000. Economists had expected the measure to rise to 345,000, so these results were better than expected. At the same time, the four-week moving average inched fell 2,250 to 330,500. Despite last week’s modest gain, we’re still seeing gradual improvement overall. And this is great news—it indicates that there are fewer layoffs. And with these latest results, the four-week moving average is now at its lowest level since November 2007—a six year low.

#3—Survey Says: Things Are Looking Up for the Second Half

In July, the Leading Economic Indicators (LEI) rose by 0.6%. This came above economists’ consensus estimate of a 0.5% gain. Eight of the 10 LEI components rose, including building permits, higher stock prices and building permits. The two components that dragged the index down were nondefense capital goods orders as well as average weekly manufacturing hours. Meanwhile, the index for the first six months of 2013 advanced 2%—nearly double the 1.1% growth we saw in the second half of 2012.This is the fourth straight month that the LEI has either risen or remained unchanged; it rose 0.2% in May and was unchanged in June. This is a good sign of continued broad-based economic improvement and it bodes well for economic and job growth in the second half of this year.

#4—New Home Sales Plunge, But It’s Not As Bad As You Think

In July, sales of new homes fell 13.4% to an annual rate of 394,000 units. This came in well below economists’ expectations; the consensus called for a rate of 475,000 units. Meanwhile, the inventory of new homes remained tight at a 5 month supply at the current sales pace. The median sales price for new homes advanced to $257,200.While this plunge was unexpected, new homes are still selling at a rate that’s 6.8% faster than twelve months ago. Then again, there’s still room for improvement—keep in mind that back in the 1990’s we saw new home sales range around 600,000 to a million units per year. So I’d like to see both existing home sales and new home sales continue to accelerate over the next year.

Have a nice weekend,

Signed Louis Navellier

Louis Navellier

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