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:
Durable Goods Slide in April
In April, orders for durable goods slipped 0.5%, which was in line with economists’ expectations. Core orders, which excludes aircraft and military goods, increased 1% and exceeded economists’ estimates for a 0.3% rise. March’s core orders were revised higher to a 1.5% increase, up from the previously reported 0.5% decline. Milder weather, the ports reopening on the West Coast and the U.S. dollar retreating recently all contributed to the rise in core orders. This is an encouraging development and should help support economic growth in the second quarter.
New Homes Sales Surge
In April, sales of new homes jumped 6.8% to an annual rate of 517,000 units, while the median price of a new home increased 8.3% to $297,300. This beat the consensus estimate for a rate of 508,000 units. In the past year, new home sales are up 26.1%. March new home sales were revised to a rate of 484,000 units, up from the previously reported 481,000. Sales of new homes still remains below the historical average (an annual rate of 711,000 units), and inventory of new homes is still low. However, low interest rates and an improving job market are bringing buyers back into the market, so this was another encouraging report.
Consumer Confidence Rises
In May, the Conference Board’s Consumer Confidence Index increased to 95.4, falling just short of economists’ estimates for a reading of 96.1. The index’s April reading was revised lower to 94.3, down from 95.2. Breaking it down further, only 25.2% of consumers said business conditions were “good,” while those who said conditions were bad fell to 17.4%. On the job front those who said there was an abundance of jobs rose to 20.7%, up from 19%, but 27.3% said jobs were “hard to get.” While the report overall was pretty mixed, it’s encouraging that the Consumer Confidence Index increased in May. Consumers are still cautious but growing more confident in the second quarter.
Slight Uptick in Jobless Claims
According to the Labor Department, initial claims for unemployment increased 7,000 to 282,000 for the week ended May 23. This missed economists’ estimates for 270,000 claims. For the week ending May 16, claims were revised up by 1,000. The four-week moving average rose to 271,500. While jobless claims have ticked higher the past two weeks, they have remained below the 300,000 threshold for the past 12 weeks, which is a sign that the labor market is slowly improving.
First-Quarter GDP Down According to Second Estimate
The Commerce Department reported this morning that first-quarter GDP contracted, down to a -0.7% annual pace. This is down significantly from the initial estimate of 0.2% growth. This was slightly better than economists’ expectations for a -1% decline. The U.S. economy slipped in the first quarter due to the surging trade deficit and smaller-than-previously-estimated inventories. Exports contracted -7.6% in the first quarter, and are a much bigger problem than the West Coast port slowdown. Economists are now estimating second-quarter GDP to only grow at a1% annual rate. Disappointing GDP growth will likely weigh on the Fed’s ability to raise interest rates this year.
Consumer’s Less Optimistic
The University of Michigan’s Consumer Sentiment Index finished the month of May at a 90.7 reading. This is down from April’s 95.9 reading and the lowest reading since November. Mixed economic data and slowing GDP growth appear to have weighed on consumers’ minds in the past month. As a result, consumers are less optimistic about the U.S. economy right now, with only 56% stating that the economy is improving, which is down from 68% at the beginning of 2015.
That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,