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:
Second-Quarter GDP (Advanced Estimate) Disappoints
On Thursday, the Commerce Department announced that its preliminary estimate for second-quarter GDP growth was a disappointing 2.3% annual pace, which was below economists’ consensus estimate of 2.5%. First-quarter GDP growth was revised to a 0.6% annual rise, versus its previously reported 0.2% annual decline. Consumer spending grew at a 2.9% annual pace in the second quarter and accounted for the bulk of the GDP growth. Overall, the second-quarter GDP report was a bit disappointing and made it crystal clear that the consumer is now driving overall economic growth.
Durable Goods Orders Rise in June
On Monday, the Commerce Department announced that durable goods orders rose 3.4% in June, due largely to a 66% rise in commercial aircraft orders. Excluding transportation orders, overall durable goods still rose by a healthy 0.8% in June. This is the first increase in new orders for durable goods since March and surpassed economists’ forecasts for a 3% increase. Also encouraging, orders for core capital goods, which is indicative of business spending, rose by 0.9% in June after declining in the previous two months. Economists remain concerned that a strong U.S. dollar will continue to curtail exports and adversely impact durable goods orders, but June was definitely encouraging compared to previous months.
Jobless Claims Remain Below 300,000 Mark
According to the Labor Department, initial claims for unemployment increased by 12,000 to 267,000 for the week ended July 24. This was slightly better than economists’ forecast for 270,000 new claims. Unemployment claims from the previous week remained unchanged at 255,000, while the four-week moving average slipped again this week to 274,750. While unemployment claims can be volatile from week to week, initial claims remain at historically low levels. Jobless claims remain below the 300,000 mark for 21st consecutive week, which is a good sign for continuing job growth.
Consumer Confidence Takes a Hit
On Tuesday, the Conference Board announced that its consumer confidence index plunged to 90.9 in July, down from 99.8 in June. This was a massive surprise, since economists were expecting the July consumer confidence index to slip slightly to 99.1. The Conference Board pointed out that its present situation component, a measure of current conditions, slipped to 107.4 in July, from 110.3 in June, while its future expectations component plunged to 79.9 in July, down from 92.8 in June. Future expectations are now at their lowest level in almost 18 months. Clearly, the strongest part of the U.S. economy, the consumer, is not on the firmest footing. So I don’t expect the Fed to raise key interest rates in September.
University of Michigan’s Consumer Sentiment Index (Final)
The University of Michigan’s Consumer Sentiment Index showed a final July reading of 93.1. This fell below economists’ estimates of 94 and is well below June’s final reading of 96.1. A slowdown in the U.S.’s economic growth pace can be attributed to the recent decline in consumer confidence. Despite pullback in confidence, overall sentiment remains positive. The index has averaged 94.5 since December 2014, the highest level in 11 years. While there are still factors like Greece and China weighing on consumers’ minds, positive news coming from the labor department have kept spirits up.
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,