What You Need To Know (Before You Go)

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:

Housing Market Stumbles on New Home Sales

In July, sales of new single-family and multi-family homes fell 2.4% to an annual pace of 412,000. Economists had forecast an annual pace of $422,000, so this underperformed expectations. Three of the four country’s major regions reported sales declines, including the Northeast (-30.8%), the West (-15.2%) and the Midwest (-8.8%). The sole exception was the South, which saw a 33.2% jump in new home sales. Compared with a year ago, the national median sales price has risen 2.9%. The bad news is that this was the slowest sales pace in four months. The good news is that June new home sales were revised up to 422,000, up from the previously reported pace of 406,000. Better yet, the inventory of new homes on the market is near a four-year high, which is helping to reign in housing prices.

Transportation Goods Orders Surge in July

In July, orders for durable goods surged 22.6% to a record high. This far surpassed economists’ expectations of a 7% rise. Transportation orders accounted for the bulk of the gains. Excluding transportation orders, durable goods actually fell 0.8%. The drop in July ex-transportation orders followed a revised 3% gain in June. This marked the largest one-month gain in the 22-year history of the index! Economists also aren’t worried about the drop in ex-transportation orders due to June’s revised gain. Overall, durable goods orders are steadily rising over the long run, but we’re seeing some near-term bumps along the way.

For Consumers, There’s No Time Like the Present

In August, the consumer confidence index rose to a reading of 92.4. This came as a big surprise to economists, who had expected the index to fall to 88.5. This was also higher than the revised reading of 90.3 in July. Breaking it down, the present situation index rose from 87.9 to 94.6 and the expectations index fell from 91.9 to 90.9. This is the fourth month in a row that the Conference Board’s consumer confidence index has risen. The present situation index is also at its highest level since February 2008. All-in-all, this marks a positive long-term trend for consumers.

Jobless Claims Continues Sub-300K Winning Streak

For the week ending August 23, initial claims for unemployment declined somewhat to a 298,000 annual rate, 1,000 lower than the prior week. Economists were calling for a 302,000 annual rate, so this was a slightly better rate than expected. Meanwhile, the four-week moving average declined by 1,250 to 299,750. For four of the past six weeks, weekly jobless claims have remained below 300,000. This is great news for the jobs market and hopefully some of this will be reflected in next week’s Unemployment Rate report.

U.S. Economy Gets Unexpected Second Wind in Q2

During the second quarter, U.S. Gross Domestic Product (GDP) grew at a revised 4.2% annual pace. The earlier estimate had called for a 4% annual rate so this was above expectations. Consumer spending remained unchanged at a 2.5% annual growth rate, while higher investment in buildings and equipment helped drive the upward revision. Additionally, the trade deficit was less of a drag on overall GDP growth, as exports were revised up to 10.1% growth (from 9.7%), while imports were revised down to an 11% increase (down from 11.7%). This was a strong report, and good news for the U.S. Excluding inventory growth, real GDP growth ran at a 2.6% annual pace in the second quarter, so I expect that the third quarter will bring 2.5% to 3% economic growth.

Consumer Spending Dries Up in July

In July, personal income grew at a 0.2% annual pace, in line with economists’ expectations. Meanwhile, June personal income was revised higher from 0.4% gains to 0.5% growth. The most surprising detail of this report was that personal spending fell 0.1%, below economists’ expectations of a 0.1% increase. However, some of this came naturally after the 0.4% increase in spending seen in June. This wasn’t the strongest report to end the week on, but overall the economy appears to be recovering at a decent clip. My expectation is that personal spending will rebound in September with the onset of back-to-school shopping, and then continue strong through the late holiday months.

Have a nice Labor Day weekend! Due to the market holiday on Monday, I’ll be in touch on Tuesday morning with your next Stock of the Day.

Louis Navellier

Louis Navellier

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