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:
Third-Quarter GPD Revised Higher
The Commerce Department revised its third-quarter GDP estimate higher yesterday. It raised its estimate to 3.9%, up from the 3.5% rate reported last month. This trounced economists’ estimate for 3.3% GDP growth. The strength of economic growth in the quarter was attributed to upward revisions in business and consumer spending, restocking and spending on residential construction. The increases here helped offset downward revisions in export growth and government spending.
This was a great report and shows that the U.S. economic recovery is sustainable. The third-quarter marks the fourth quarter out of the last five quarters that the U.S. economy has grown more than 3.5%.
Conference Board Survey: Consumer Confidence Fell In October
In November, consumer confidence slipped to 88.7, down from October’s revised 94.1 reading. This is the lowest reading since June and missed expectations for a reading of 96. Contributing to the dip in consumer confidence was a decline in consumers’ optimism about current business conditions and the job market.
While it is disappointing that consumer confidence slipped in October, low gas prices should help boost holiday sales and, in turn, consumer sentiment. Also, the University of Michigan’s Consumer Sentiment Index paints a brighter picture of consumer sentiment.
Initial Claims Unexpectedly Rise
For the week ending November 22, initial claims for unemployment surged to a seasonally adjusted rate of 313,000, 21,000 higher than the prior week. Economists forecasted that claims would fall to 285,000 annual rate, so this was a surprisingly high number. Meanwhile, the four-week moving average rose 6,250 to 294,000.
For the past 11 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.
October Durable Goods Orders Rebound
In October, orders for durable goods increased by 0.4%, following a revised 0.9% dip in the month of September. This surpassed economists’ expectations of a 0.6% decline. Business investment spending fell 1.3% in October, which is a key category that has contributed recent declines. Transportation products were an area of strength, increasing 3.4% after falling 3.3% in September. Unfortunately, excluding transportation, orders fell 0.9%.
While October’s core durable goods orders weren’t impressive, overall, durable goods orders are steadily rising over the long run. In the past 12 months, durable goods orders have climbed 7.5%, and nondefense capital goods orders have rebounded 5.4%.
Personal Income Continues to Climb In October
In October, personal income grew at a 0.2% annual pace, below economists’ expectations of a 0.4% increase. Meanwhile, personal spending also rose 0.2%, below economists’ expectations of a 0.3% increase. As a bit of good news, September consumer spending was revised from the previously stated 0.2% decrease to 0.0%. Because personal income moved in lockstep with spending, the personal savings rate remained unchanged at 5.0%.
Despite the fact that personal income and consumption underperformed expectations, this was a largely positive report. Thanks to low gasoline prices, consumers have a little more money left in their pockets after paying at the pump. So we’re seeing moderate consumer spending, but not so much that it’s affecting inflation. The core personal consumption expenditures (PCE) index has risen just 1.6% in the past 12 months, comfortably below the Fed’s 2% inflation target.
University of Michigan Survey: Consumer Confidence Rebounds
The University of Michigan’s Consumer Sentiment Index finished the month at a reading of 88.8. Economists were expecting a 90.0 reading for the month of November. Even so, this is an improvement from the 89.6 reading at the end of October. The consumer expectations sub-index rose to 79.9, up from 79.6 in October but below economists’ expectations of an 80.8 reading. The current conditions sub-index read at 102.7, higher than last month’s 98.3 reading but slightly lower than the consensus forecast of 103.0.
While these results underperformed economists’ expectations, by this measure U.S. consumer sentiment is now at its highest level in seven years. It appears that the improving jobs picture, lower gasoline prices and low inflation are helping to bolster consumer confidence. My expectation is that consumer confidence will continue to carry though the holiday season.
New Home Sales Surge in the Midwest
New home sales continued to climb in October, rising 0.7% to a seasonally adjusted annual rate of 458,000. This missed economists’ estimates of a 470,000 annual pace. At the same time, September new home sales were revised lower to 455,000, down from 467,000 earlier. Breaking down October’s results by region, new home sales surged 15.8% in the Midwest. However, they fell 7.1% in the Northeast, 2.7% in the West and 1.9% in the South.
New home sales have risen for three straight months and are at the fastest pace since May. In the past 12 months, new home sales have rebounded 1.8%, indicating a modest recovery for the housing market.
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,