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…
The Fed’s Policy Moves
The Federal Reserve took over financial news headlines this week following the two-day Federal Open Market Committee (FOMC) meeting. On Wednesday, the FOMC announced its intent to keep interest rates at their current range of 1.00 to 1.25%. The updates that stirred up conversations among the investing community included the Fed’s anticipated rate hikes for 2018 and plans to begin unwinding their balance sheet.
The Fed estimated that three quarter-point, or 0.25%, rate hikes would be appropriate to put in place throughout next year. In addition, starting this October, the Fed will begin shrinking the Treasury bond and mortgage-backed securities on their $4.5 trillion balance sheet. At a gradual pace of $10 billion a month, the Fed will slowly decrease the assets that they accumulated to support the economy following the 2008 financial crisis.
Housing Starts and Building Permits
On Tuesday, the Commerce Department reported that housing starts in August fell to an annual pace of 1.18 million, 0.8% less than the revised July estimate of 1.19 million. While lower than the month prior, August’s pace was in line with economists’ estimates and 1.4% higher than the August 2016 pace of 1.16 million. Building permits surged 5.7% in August compared with July. Single family home starts rose 1.6% in August from July.
For regions in Texas and Florida that did not report September data and cannot be reached due to damaged communications systems from the storms, the data assumed that no permits for new residential units were issued. So, the data is slightly skewed but homes that are being completely rebuilt post-hurricane will be considered new construction and should support improved results down the line.
For the week ending on September 16, initial jobless claims declined 23,000 to an annual rate of 259,000. Economists had forecasted rates surging to 300,000, so this drop was a somewhat unexpected but pleasant surprise. However, it’s too soon to interpret this as a sign of better days for jobless claims.
The after-effects of Hurricanes Harvey and Irma have distorted the data to an extent, and will continue to do so in the near-term. The four-week moving average, which attempts to eliminate much of the volatility associated with the week-to-week data and provide a more accurate picture, increased by 6,500 to 1,953,000. Jobless claims will be worth watching closely over the next several weeks.
That’s all I have for you this week. I’ll be in touch again next week with the latest ratings out of Portfolio Grader.
Have a great weekend,