Economic Update

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:

Get Ready for Fewer New Homes

In September, a sharp rise in multifamily housing construction drove a 6.5% increase in housing starts. Last month, housing starts rose to a 1.21 million annual pace, above economists’ estimates of 1.15 million. At the same time, building permits fell 5 million to a 1.1 million pace, in line with expectations. This slump in permits suggests that homebuilders will slow the pace of new construction over the next few months. This will constrain already tight inventories; at the current sales pace, it’ll take just 5.2 months to sell all houses on the market.

Lowest Jobless Claims in 42 Years

For the week ending October 17, jobless claims ticked up 3,000 to a 259,000 annual rate. This came below economists’ expectations of 265,000. Meanwhile, the four-week moving average fell 2,000 to 263,250. The four-week moving average for jobless claims is now at the lowest level in 42 years. While the job market is currently plagued with a low workforce participation rate, this is one bright spot.

Existing Home Sales Are Up

In September, existing home sales rose 4.7% to a seasonally adjusted annual rate of 5.55 million. This surpassed economists’ forecasts of 5.25 million. At the same time, August’s pace was revised lower from 5.31 million to 5.30 million. Existing home sales are now at their second-highest level since the housing bust. Interestingly, in September the medium home price fell to $221,900, while the inventory of existing homes tightened to a 4.8 month supply.

Leading Indicators Take a Dip

In September, the index of leading economic indicators declined 0.2%, the most in seven months. This was a steeper drop than expected; economists were forecasting a 0.1% decline. Four of the 10 indicators fell, with stock prices and building permits weighing the most on the index. Meanwhile the August index was revised lower to reflect no change, down from the previously stated 0.1% increase. While I don’t see any major red flags for the U.S. economy, the recovery is clearly progressing in starts and fits. We’ll see how this impacts Q3 GDP.

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,

Louis Navellier

Louis Navellier

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