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…
Durable Goods Orders
This morning’s Durable Goods report brought positive news for investors. This is particularly good news following the unexpected decline in last week’s manufacturing production, and it supports the advance regional reports’ strengths.
The biggest boon to GDP in today’s report was the pickup in shipment of core capital goods, which were up 1.0% in July and revised upwards for June to 0.6%. Total shipments and inventories also rose 0.4% and 0.3% respectively. In addition, ex-transportation and core capital goods (nondefense ex-aircraft) were also up 0.5% and 0.4% respectively.
On the negative side, there was a steep aircraft related decline of -6.8%. Although, aircraft have picked up for the year, there was a sharp -82% decline from June to July. However, this is on the heels of an enormous 227% June jump.
Also, vehicle orders were down for the second month in a row, and machinery orders were down as well. All in all, however, the -5.8% decline in July durable goods won’t reverse June’s aircraft boosted gains of 6.5%. Additional solid strength is expected going forward in ex-transportation orders (up 0.4%) and core capital goods (nondefense ex-aircraft), which is predicted to see a 0.5% gain.
Even with some negative headlines, today’s report indicates the economy could still get a second-half boost from an improving factory sector.
New Home Sales
July’s New Home Sales brought weak numbers with a supply increase of only 4,000 new homes, bringing that total up to just 276,000. In addition, supply moved from 5.2 months to 5.8 months, which puts us almost at the balanced mark of 6 months for new homes. Prices are also trending upwards. The median price is up 0.7% to $313,700. Year-on-year, this is up 6.3%.
Now, this pricing strength might be good news for residential investment, but it could price new home owners out of the market. This could be one reason why new home sales fell to a lower-than-expected annualized rate of 571,000 in July. With low sample sizes, this indicator has been extremely volatile. The prior two months have been revised upwards by a total of 33,000 homes, however, to 630,000 and 618,000, leaving the three month average at 600,000.
Existing Home Sales
Thursday’s Existing Home Sales weren’t much better than Wednesday’s New Home Sales. Existing Home Sales were down -1.3% to 5.4 million. This edges us slightly lower for the year. Even though we’re still near expansion highs.
Single-family home sales were down -0.8%. While condo sales fell -4.8%. However, even with these weak numbers, single-family homes are still up 1.7% year-on-year, and condos are up an impressive 5.3% during that same time.
The median price for existing homes fell 1.9% last month to $258,300. This is up 6.2% year-on-year, which is in line with other home price readings and could be one reason why condo sales are up so high year-on-year.
This weakness in sales didn’t manage to help July’s supply, however, which fell -1.0% with 1.9 million resales on the market. For the 3rd straight report, supply relative to sales remains unchanged at 4.2 months.
All in all, even though housing prices are firm, it doesn’t look like they’ll be a strong contributor to economic growth in the second half of 2017.
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,