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:
Homebuilding Heats Up
According to the Commerce Department, U.S. housing starts increased 0.2% in July to a seasonally adjusted rate of 1.21 million homes. The increase was led by a stunning 12.8% jump in single-family home construction last month. However, building permits in July declined 16.3% to an annual rate of 1.12 million. The increase in single-family home construction and housing starts overall is encouraging and points toward a strengthening housing market. However, the sharp decline in building permits is a red flag and may limit new home construction in the coming months.
Consumer Prices Tick Up
On Wednesday, the Labor Department reported that its Consumer Price Index increased 0.1% in July, marking the sixth-consecutive month of increases. This was just below economists’ forecast for a 0.2% increase. Core CPI, which excludes energy and food costs, also increased 0.1% last month. In the past 12 months, the CPI has risen 0.2% and core CPI has increased 1.8%. Gasoline prices and food costs only rose marginally in July, up 0.9% and 0.2%, respectively, which was down from June’s 3.4% and 0.3% increases. With CPI rising for the past six months, inflation is slowly materializing but not enough to support a key interest rate hike just yet.
Layoff Activity Remains Below 300,000
For the week ending August 15, initial claims for unemployment increased unexpectedly by 4,000 to a seasonally adjusted 277,000. Economists were expecting jobless claims to dip to 272,000 last week. The four-week moving average also rose last week, increasing by 5,500 to 271,500. While this is the fourth-straight week that jobless claims increased, the four-week moving average has stayed below the 300,000 threshold for 21-straight weeks. So the labor market continues to slowly improve.
Existing Home Sales Hit 7 1/2 Year High
The National Association of Realtors reported yesterday that the pace of existing home sales grew 2% in July to a seasonally adjusted rate of 5.59 million. That’s the highest sales pace since February 2007 and nicely higher than economists’ estimates for a 5.45 million pace. Existing home sales for June were revised to a 5.48 million pace, down from 5.49 million. Existing home sales account for more than 90% of the U.S.’s residential home market, so this report continues to point toward an improving housing market–thanks to low interest rates, improving consumer confidence and a slowly rebounding jobs market.
Leading Indicators Trend Lower
On Thursday morning, the Conference Board announced that is index of leading economic indicators declined 0.2% to 123.3 last month. This missed economists’ expectations for a 0.2% increase and is down from May and June’s 0.6% increases. After four months of gains, the dip in the Leading Economic Index in July could signal that the U.S. economy is tapping on the brakes, which will weigh on the Federal Reserve’s interest rate decision next month.
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,