The News that is Moving the Market

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:

Q2 Gross Domestic Product

In the second quarter, the U.S. economy grew at a revised 1.1% annual rate, according to the Commerce Department. This represents a slight cut to the earlier estimate of 1.2% growth. The revised estimate matched economists’ forecasts. The main growth driver was consumer spending, while state and local government spending weighed on growth. After-tax corporate profits also fell 2.4%, a reversal from the first quarter’s 8.1% growth. While the U.S. economy remains in the green for now, growth is tepid. This makes it more difficult for the Fed to justify interest rate increases.

New and Existing Home Sales

There was mixed news on the housing front this week. In July, new home sales rose by 12.4% to a seasonally adjusted rate of 654,000. This was well above economists’ consensus forecast of 581,000. In the past 12 months, new home sales have surged 31.3% higher; they’re now at the highest level in almost 8 years. Interestingly, due to a higher ratio of multi-family to single-family home sales, median home prices have actually declined 0.5% in the past 12 months. Meanwhile, the supply of new homes declined; there’s now a 4.3-month supply at the current annual sales pace.

In July, existing home sales actually declined 3.2% to a seasonally adjusted annual rate of 5.39 million. This was below economists’ consensus estimate of 5.48 million. In the past 12 months, existing home sales have declined 1.6% and median home prices have risen 5.3%. Experts are attributing the decline in existing home sales to tight inventory and higher prices. Even with rates as low as they are, higher home prices and a lack of wage growth may be stalling existing home sales.

What we’re seeing here is a boom in new home sales, particularly in multi-family units. These are often more reasonably priced than single family homes. So while there is some progress on the housing front, it appears that Americans remain very price sensitive.

Durable Goods Orders

In July, durable goods orders surged 4.4%. This was largely due to a 90% rise in commercial plane orders. Excluding the transportation sector, durable goods rose 1.5%; this matched its largest increase this year. Meanwhile, business inventories rose for the first time in seven months, and core capital goods orders rose the most since January. Interestingly, the shipment of core capital goods declined 0.4% in July, which represents the third straight monthly decline. Overall, this was an encouraging durable goods report, since it was fueled by higher business investment and inventory rebuilding.

That’s all I have for you this week; I’ll be back online on Monday with your weekly ratings changes.

Have a great weekend,

Louis Navellier

Louis Navellier

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