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…
On Friday, the University of Michigan’s Consumer Sentiment Index showed that consumer confidence slipped 2.6% to 95.9 in December, down from a 98.5 reading in November. Results missed economists’ estimates for 97.1, and marked the second month of a move away from October’s record high of 100.7. It is worth noting that the December figure is still close to the average for 2017, which is 96.8.
The decrease is mostly attributable to a slight uptick in uncertainty about future economic prospects. Interestingly, tax reform was spontaneously mentioned by 29% of respondents, with roughly an equal split between positive and negative impacts on economic conditions. Overall, the result is largely unchanged from the strong numbers we’ve seen over the past few months. So it appears that consumers remain optimistic about current economic conditions.
Third-Quarter Gross Domestic Product
In its third estimate for third-quarter GDP, the Commerce Department reported on Thursday that the U.S. economy grew at an annual rate of 3.2%, a hair below the previous estimate of 3.3%. Though the estimate is slightly lower, the third quarter ranks as the economy’s strongest quarter since 2015, when we saw 3.2% growth.
Of the many revisions made in the third estimate, after-tax corporate profits—a measure watched closely by market observers—climbed 4.7% higher instead of the earlier estimate of 4.9%. However, profits increased 9.8% compared with a year earlier. On the whole, this report points to what is still significant momentum in the economy. And with the $1.5 trillion tax cut passed by the House and Senate this week, economic growth is poised to strengthen as we move into the New Year.
Existing Home Sales
Wednesday’s report from the National Association of Realtors (NAR) revealed that existing home sales in November soared to their strongest pace in nearly 11 years. Total sales rose 5.6% last month to a seasonally adjusted annual rate of 5.81 million, following the upwardly revised 5.50 million in October. Median prices rose 5.8% year-over-year to $248,000, up from $234,000 in November 2016. Economists were expecting a more modest 0.7% rise to 5.52 million.
Existing home sales saw a notable boost in the Midwest and the South, where November sales jumped 8.4% and 8.3% from October, respectively. Excluding the West, existing home sales increased in each region last month.
Home resales continue to face a shortage of supply in houses at the lower end of the price spectrum. The number of existing homes for sale is 9.7% lower than a year ago and fell for the 30th consecutive month.
Housing Starts and Building Permits
On Tuesday, the Commerce Department reported that housing starts in November surged to an annual pace of 1.297 million units, 3.3% higher than the revised October estimate of 1.19 million units. November’s pace exceeded economists’ forecasts, which looked for housing starts to fall to a pace of 1.250 million units. November’s pace is the highest pace seen since October 2016. Building permits slipped 1.4% from October’s revised rate of 1.316 million units down to 1.298 million units, but is 3.4% higher than the year ago figure of 1.255 million units.
This is a solid report and signals that residential construction spending is shaping up to produce strong results for the third quarter. November’s jump in housing starts is particularly exciting because these numbers are fueled by single-family home building, which tends to generate increased activity and jobs in a more substantial way than apartment construction does.
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.
P.S. Our offices will be closed for the holidays until Wednesday, December 27, so the next blog post will be available online on December 27. I hope you have a safe and wonderful holiday with family and friends!