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, starting with the market moving GDP report:
Survey Says: 4.6% Economic Growth in Q2
The third estimate of second-quarter GDP showed a 4.6% increase, up from the 4.2% second estimate and 4% advance estimate. Personal consumption grew 2.5%, while fixed business investments climbed 9.7%. With consumer spending (which accounts for two-thirds of GDP growth) staying steady at 2.5% in the second quarter, I’m expecting the final GDP estimate to remain above 4% and third-quarter GDP between 2.5% and 3%.
Existing Home Sales Cool…
In August, existing home sales slipped 1.8% to an annual pace of 5.05 million. In the past 12 months, home sales are now running about 5.3% lower than one year ago. Inventories reached 2.31 million last month, which is slightly lower than July but 4.5% higher year-over-year. This dip in existing home sales marked the first decline in five months, and if inventory levels continue to rise in the upcoming months, home price increases may moderate.
…While New Home Sales Heat Up
The Commerce Department reported that new home sales increased 18% in August to an annual rate of 504,000. The surge was driven by a 50% increase in sales in the West, a 29% increase in the Northeast and an 8% increase in the South. It’s encouraging to see new home sales surge to their biggest one-month gain since May 2008. New home sales are now up 33% year-over-year.
Layoff Activity Sticks Around Pre-Recession Levels
For the week ended September 20, initial claims for unemployment increased by 12,000, up to a seasonally adjusted 293,000. Claims for the week ended September 13 were revised higher by 1,000. Economists were expecting claims to rise to 300,000. The four-week moving average fell to 293,500. Initial claims for unemployment continue to hover around pre-recession levels, and still signal that the labor market is firming up.
Commerical Aircraft Orders Plunge
Durable goods orders dropped a record 18.2% in August, after soaring a record 22.5% in July. The slide is mainly due to volatile month-to-month orders for commercial aircraft. When you exclude the volatile transportation segment, durable goods orders actually rose 0.7%. In addition, orders for core capital goods rose 0.6%. Overall, it appears that the U.S. manufacturing sector is healthy and business investment remains very robust, which is good for continued strong GDP growth.
U.S. Consumer Gets its Groove Back
The University of Michigan’s Consumer Sentiment Index finished the month at a reading of 84.6. This is an improvement from the 82.5 reading at the end of August. Notably, the consumer expectations sub-index rose to 75.4, up from 71.3 in August and above economists’ expectations of a 75.0 reading. The current conditions sub-index read at 98.9, slightly lower than August’s 99.8 but above the consensus forecast of 98.0. By this measure, consumer sentiment is now at a 14-month high. American consumers are more optimistic due to employment growth, lower fuel prices and faster wage growth. It will be interesting to see whether the Conference Board’s consumer confidence report mirrors this trend when it is released this Tuesday.
That’s all I have for you this week. I’ll be in touch with the latest Portfolio Grader changes and Stock of the Day on Monday.
Have a great weekend,