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:
New Home Sales Bounce Back in July
Sales of new single-family homes increased 5.4% in July to a seasonally adjusted annual rate of 507,000 units, missing economists’ expectations for new home sales to rise to 510,000 units. New home sales for June were revised lower to 481,000, down from the previously reported 482,000. Compared to July 2014, new home sales have surged 25.8% year-over-year, which is a positive sign that the U.S. housing market is starting to pick up. The shortage in supply, still less than half of what it was during the housing boom, though, will likely still constrain the housing market in the coming months.
Consumer Confidence Rebounds in August
The Conference Board reported this week consumer confidence bounced back in August, as its Consumer Confidence Index rose to 101.5. This was well above economists’ estimates for a 93.3 reading, as well as nicely higher than July’s revised 91.0 reading. After a sharp decline in July, U.S. consumers are now happy campers, which bodes well for consumer spending and retail sales.
Durable Goods Orders Up 2% in July
The Commerce Department reported on Wednesday that orders for durable goods increased 2% in July, down from a 4.1% gain in June. Orders for large defense goods surged 22.3% last month, while new vehicle orders grew 4%. Commercial aircraft demand fell 6% in July. Excluding transportation orders, orders increased 0.6%. Orders for core capital goods, which is indicative of business spending, climbed 2.2% higher last month, marking the largest gain since June 2014. In the past 12 months, business investment is still down 3.8% and has been worrying many economists. However, business investment has risen in the past two months and seems to be finally on track to help boost overall GDP growth.
Jobless Claims Drop More Than Expected
According to the Labor Department, initial claims for unemployment slipped by 6,000 to 271,000 for the week ending August 22. This was below economists’ expectations for claims to fall to 274,000. The four-week moving average increased by 1,000 to 272,500. This is the first time in five weeks that the jobless claims fell, and it also marks 22-straigh weeks that the four-week moving average was below the 300,000 threshold. So the labor market is firming up.
Second-Quarter GDP (Second Estimate)
On Thursday, the Commerce Department reported that second-quarter GDP increased at a 3.7% annual pace, well above the previously reported 2.3% increase. This also beat economists’ expectations for a 3.2% increase. Government spending grew at a 4% annual pace, while inventories expanded by $121.1 billion, which could weigh on third-quarter GDP estimates. As expected, consumer spending drove much of the second-quarter GDP revision this month, as consumer spending increased 3.1%, up from the previously reported 2.9% increase. Low gasoline prices, an improving jobs market and a recovering housing market are all supporting consumer spending and, in turn, the U.S. economy overall.
Personal Income Rises
In July, personal income increased by 0.4%, while personal spending rose 0.3%. Economists were looking for a 0.4% rise in both personal income and spending. Personal spending in June was revised to 0.3%, up from the previously reported 0.2%. Spending on automobiles drove much of the increase in personal spending last month, as automobile purchases accounted for half of the 1.1% increase on spending on long-lasting goods in July. So the U.S. consumer has grown more confident and willing to spend as of late.
Final Consumer Sentiment Index Reading Lower Than Expected
The University of Michigan’s Consumer Sentiment Index showed an August reading of 91.9. This was down from July’s final reading of 93.1 and missed economists’ estimates for a reading of 93. According to the index, consumer confidence is now at a three-month low. The sharp rise in stock market volatility at the end of August weighed on U.S. consumer confidence. However, if the stock market bounces back in September as I expect, we should see consumer sentiment also pick back up in the coming months.
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,