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:
Existing Home Sales Soar to Six-Year High
In May, existing home sales surged 5.1% to an annual rate of 5.35 million. That’s the highest level since November 2009, and existing home sales are now up 9.2% year-over-year. Economists were looking for an annual rate of 5.25 million in May. Housing inventory increased 3.2% last month to 2.29 million homes, and it would take 5.1 months to sell all homes currently on the market. Many believe that the Federal Reserve is going to raise interest rates this fall, so more people rushed in to purchase homes while rates are still low. In particular, first-time homebuyers helped boost existing home sales last month, as they accounted for 32% of home purchases in May. So the U.S. housing market is continuing to improve.
Durable Goods Orders Dip
The Commerce Department reported that durable goods orders slipped 1.8% in May, slightly below economists’ forecasts for a 1.5% declines. However, excluding aircraft, core durable goods orders increased 0.4% last month after falling 0.3% in April. The strong U.S. dollar and low oil prices continue to weight on the U.S. manufacturing sector, but the increase in core orders last month is a positive sign that manufacturing is starting to stabilize.
New Home Sales Jump In May
In May, sales of new homes increased 2.2% to an annual rate of 546,000 units. This walloped the consensus estimate for a pace of 525,000 units. April’s new home sales were revised higher to a 534,000 pace, up from the previously reported 517,000. The increase last month was driven mainly by a stunning 87.5% surge in new home sales in the Northeast. Thanks to an improving labor market and low interest rates, more homebuyers are coming back to the market and that bodes well for the housing market overall.
First-Quarter GDP (Third Estimate) Better Than Expected
The Commerce Department reported this week that first-quarter GDP contracted at a 0.2% annual rate. This was in-line with economists’ estimates and better than the Commerce Department’s expectation for a 0.7% slide. While the U.S. economy struggled in the first quarter, this week’s revision showed an 2.1% increase in consumer spending, slightly higher than previous estimates for 1.8%. This is good news for the U.S. economy overall, since consumer spending accounts for more than two-thirds of GDP growth.
Jobless Claims Rise
According to the Labor Department, initial claims for unemployment increased by 3,000 to 271,000 for the week ended June 20. This was slightly better than economists’ forecast for 273,000 new claims. Unemployment claims from the previous week were revised slightly higher to 268,000, up from 267,000. The four-week moving average slipped to 273,750. While unemployment claims can be volatile from week to week, initial claims remain at historically low levels, which is a good sign for continuing job growth.
Personal Income Beats Estimates
For the month of May, personal spending increase 0.9%, above economists’ expectations for a 0.7% rise. Personal income jumped 0.5%, in line with estimates. And April’s reading was revised higher to 0.5%. The increase in personal spending is the largest since August 2009, and a good sign that consumers are finally starting to spend the money they are saving at the pump.
University of Michigan’s Consumer Sentiment Index (Final) Hits Five-Month High
The University of Michigan’s Consumer Sentiment Index showed a final June reading of 96.1,which is a five-month high. The reading also beat economists’ estimates for 94.6 and is up from May’s final reading of 90.7. The final June reading is the second-highest reading for the index since January 2007. So it is now clear that an improving labor market (including more hiring and wage growth) is boosting American consumers’ confidence, which should, in turn, boost consumer spending in the second half of the year.
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,