The Housing Chronicles Blog: 2017

Tuesday, August 22, 2017

Richmond Fed: Regional manufacturing activity unchanged in August

Reports on Fifth District manufacturing activity were largely unchanged in August, according to the latest survey by the Federal Reserve Bank of Richmond. The composite index remained at 14 in August, with an increase in the employment index offsetting a decrease in the shipments index and a very slight decline in the new orders metric. Although the employment index rose from 10 to 17 in August, other measures of labor market activity — wages and average workweek — were largely unchanged.

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FHFA: House prices up 1.6 percent in 2Q 2017 and 6.6 percent year-on-year

U.S. house prices rose 1.6 percent in the second quarter of 2017 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). House prices rose 6.6 percent from the second quarter of 2016 to the second quarter of 2017.

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Monday, August 21, 2017

Chicago Fed National Activity Index declined in July, but growth still within historical trend

The Chicago Fed National Activity Index (CFNAI) moved down to -0.01 in July from +0.16 in June. The index's three-month moving average moved down to -0.05 in July from +0.09 in June.

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Friday, August 18, 2017

2Q 2017 service sector revenue up 3.2 percent from 1Q and 6.2 percent year-on-year

The estimate of U.S. selected services total revenue for the second calendar quarter of 2017 was $3,685.1 billion, an increase of 3.2 percent from the first quarter of 2017 and up 6.2 percent from the second quarter of 2016.

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Consumer confidence rises in first half of August

Consumer confidence rose in the first half of August to its highest level since January due to a more positive outlook for the overall economy as well as more favorable personal financial prospects. Too few interviews were conducted following Charlottesville to assess how much it will weaken consumers' economic assessments.

The fallout is likely to reverse the improvement in economic expectations recorded across all political affiliations in early August. Moreover, the Charlottesville aftermath is more likely to weaken the economic expectations of Republicans, since prospects for Trump's economic policy agenda have diminished. Nonetheless, the partisan difference between the optimism of Republicans and the pessimism of Democrats is still likely to persist, with Independents remaining as the bellwether group.

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Thursday, August 17, 2017

Initial unemployment claims fall by 12,000 in latest report

In the week ending August 12, initial unemployment claims were 232,000, a decrease of 12,000 from the previous week's unrevised level of 244,000. The 4-week moving average was 240,500, a decrease of 500 from the previous week's unrevised average of 241,000.

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Mortgage applications rise 0.1 percent in weekly survey, rates dip

The Market Composite Index increased 0.1 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 2 percent and refinances rising 2 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to its lowest level since November 2016, 4.12 percent.

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Industrial production up 0.2 percent in July and 2.2 percent year-on-year

Industrial production rose 0.2 percent in July following an increase of 0.4 percent in June. At 105.5 percent of its 2012 average, total industrial production was 2.2 percent above its year-earlier level. Capacity utilization for the industrial sector was unchanged in July at 76.7 percent, a rate that is 3.2 percentage points below its long-run (1972-2016) average.

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E-commerce retail sales rose 4.8 percent in 2Q 2017, with market share rising to 8.9 percent

Accounting for 8.9 percent of the total, U.S. retail e-commerce sales for the second quarter of 2017 were $111.5 billion, an increase of 4.8 percent from the first quarter of 2017. Total retail sales for the second quarter of 2017 were estimated at $1,256.2 billion, an increase of 0.5 percent from the first quarter of 2017.

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Fed meeting minutes reveal concern about weak inflation and possible halt to interest rate hikes

Federal Reserve policymakers appeared increasingly wary about recent weak inflation and some called for halting interest rate hikes until it was clear the trend was transitory.  The minutes also indicated the Fed was poised to begin reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities.

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July Leading Economic Indicators rose another 0.3 percent

The U.S. LEI improved in July, suggesting the U.S. economy may experience further improvements in economic activity in the second half of the year. The decline in building permits, a reversal from June, was more than offset by gains in the financial indicators, new orders and sentiment.

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Wednesday, August 16, 2017

Year-ahead business inflation expectations rose to 1.9 percent in August

Inflation expectations: Firms' inflation expectations increased to 1.9 percent over the year ahead.

Current economic environment: Sales levels were virtually unchanged, and profit margins declined somewhat over the month.

Quarterly question: Overall, firms expect margin adjustments to exert more upward pressure on prices over the next 12 months. The year-ahead influence of labor and non-labor costs on prices remained roughly unchanged, as did the influence of sales levels and productivity.

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July building permits dipped 4.1 percent from June but still up 4.1 percent year-on-year

Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,223,000. This is 4.1 percent below the revised June rate of 1,275,000, but is 4.1 percent above the July 2016 rate of 1,175,000.

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July housing starts down 4.8 percent from June and 5.6 percent year-on-year

Privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,155,000. This is 4.8 percent below the revised June estimate of 1,213,000 and is 5.6 percent below the July 2016 rate of 1,223,000.

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Tuesday, August 15, 2017

CoreLogic: Delinquent mortgages fell to 4.5 percent in May

Nationally, 4.5 percent of mortgages were in some stage of delinquency (30 days or more past due including those in foreclosure) in May 2017. This represents a 0.8 percentage point decline in the overall delinquency rate compared with May 2016 when it was 5.3 percent.


As of May 2017, the foreclosure inventory rate, which measures the share of mortgages in some stage of the foreclosure process, was 0.7 percent compared with 1 percent in May 2016. The serious delinquency rate, defined as 90 days or more past due including loans in foreclosure, was 2 percent, unchanged from April 2017 and down from 2.6 percent in May 2016. The 2 percent serious delinquency rate in April and May this year was the lowest since November 2007 when it was also 2 percent.

June business inventories rose by largest amount in seven months

U.S. businesses increased their stockpiles in June by the largest amount in seven months – rising by 0.5 percent -- while sales also rose by 0.3 percent.  It was the best showing since inventories had risen 0.9% in November.

August Empire State Manufacturing Survey jumps to highest level in 15 years

Business activity grew strongly in New York State, according to firms responding to the August 2017 Empire State Manufacturing Survey. The headline general business conditions index climbed fifteen points to 25.2, its highest level in nearly three years. Indexes assessing the six-month outlook suggested that firms were very optimistic about future conditions.

July retail sales post largest increase in seven months

U.S. retail sales recorded their biggest increase in seven months in July – rising by 0.65 percent -- as consumers boosted purchases of motor vehicles as well as discretionary spending. The data suggested the economy continued to gain momentum early in the third quarter.

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Builder confidence rebounds four points in August to 68

Builder confidence in the market for newly built single-family homes rose four points in August to 68 on the NAHB/Wells Fargo Housing Market Index (HMI).

All three HMI components posted gains in August. The component gauging current sales conditions rose four points to 74 while the index charting sales expectations in the next six months jumped five points to 78. Meanwhile, the component measuring buyer traffic increased a single point to 49.


Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 48. The West, South and Midwest all remained unchanged at 75, 67 and 66, respectively.

Monday, August 14, 2017

Non-Employment Index edged down slightly to 7.9 percent of all workers in July

The Hornstein-Kudlyak-Lange Non-Employment Index (NEI) was 7.9 percent in July 2017, edging down from 8 percent in June. It has declined by 0.4 percentage points since July 2016. The NEI including workers who are part time for economic reasons (PTER) was 9 percent in July 2017, edging down from 9.1 percent the previous month. That index has declined by 0.5 percentage points since July 2016.

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Friday, August 11, 2017

July CPI up 0.1 percent from June and 1.7 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in July on a seasonally adjusted basis. Over the last 12 months, the all items index rose 1.7 percent.

The index for all items less food and energy rose 0.1 percent, the fourth month in a row it increased by that amount and up 1.7 percent over the previous 12 months.



Thursday, August 10, 2017

Initial unemployment claims rise by 3,000 in latest report

In the week ending August 5, initial unemployment claims were 244,000, an increase of 3,000 from the previous week's revised level. The 4-week moving average was 241,000, a decrease of 1,000 from the previous week's revised average.

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Mortgage applications rise three percent in latest survey as rates dip

The Market Composite Index increased 3.0 percent on a seasonally adjusted basis from one week earlier, with purchase loans up one percent and refinances rising five percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.14 percent from 4.17 percent.

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July applications for new home mortgages rose 5.1 percent year-on-year

The Mortgage Bankers Association (MBA) Builder Applications Survey (BAS) data for July 2017 shows mortgage applications for new home purchases increased 5.1 percent compared to July 2016. Compared to June 2017, applications decreased by 12 percent. This change does not include any adjustment for typical seasonal patterns.

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Producer Price Index fell 0.1 percent in July, for the largest fall in 11 months

The Producer Price Index for final demand declined 0.1 percent in July. On an unadjusted basis, the final demand index increased 1.9 percent for the 12 months ended in July.

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Wednesday, August 9, 2017

Labor productivity up 0.9 percent during 2Q 2017 and 1.2 percent year-on-year

Nonfarm business sector labor productivity increased 0.9 percent during the second quarter of 2017, as output increased 3.4 percent and hours worked increased 2.5 percent. From the second quarter of 2016 to the second quarter of 2017, productivity increased 1.2 percent, reflecting a 2.7-percent increase in output and a 1.5-percent increase in hours worked.

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Job openings rose 8.1 percent in June as both hires and separations slipped

The number of job openings increased 8.1 percent to 6.2 million on the last business day of June. Over the month, hires and separations slipped 1.9 and 0.4 percent to 5.4 million and 5.2 million, respectively.

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Small Business Optimism Index rose 1.6 points in July

The Index of Small Business Optimism rose 1.6 points to 105.2 in July, preserving the surge in optimism that started the day after the election. Seven of the 10 Index components posted a gain, two declined, and one was unchanged.


Tuesday, August 8, 2017

Consumer debt rose in June at a slower pace to record level

American consumers increased their borrowing at a slower pace in June, as the category that includes auto and student loans posted the smallest gain in a year.

Still, the June increase brought overall consumer credit -- not including mortgages or other debt secured by real estate, including home-equity loans -- to a fresh record of $3.86 trillion.

In addition, the total for the category of "revolving debt," primarily credit card balances also hit a new record high of $1.027 trillion.

Small Business Optimism Index rose 1.6 points in July

The Index of Small Business Optimism rose 1.6 points to 105.2 in July, preserving the surge in optimism that started the day after the election. Seven of the 10 Index components posted a gain, two declined, and one was unchanged.

Job openings rose 8.1 percent in June as both hires and separations slipped

The number of job openings increased 8.1 percent to 6.2 million on the last business day of June. Over the month, hires and separations slipped 1.9 and 0.4 percent to 5.4 million and 5.2 million, respectively.

Friday, August 4, 2017

IHS Markit: July services sector index grew at fastest pace since January

The seasonally adjusted IHS Markit U.S. Services Business Activity Index registered 54.7 in July, up from 54.2 in June. The latest reading signalled the largest expansion of business activity since January and the fourth consecutive month of accelerated growth.

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Durable goods orders jumped 3.0 percent in July, largest gain in 8 months

Factory goods orders jumped 3.0 percent in July.  This was the largest gain since October 2016 and followed two straight monthly declines.

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July jobs grew by 209,000 as unemployment ticked down to 4.3 percent

Total nonfarm payroll employment increased by 209,000 in July, and the unemployment rate was little changed at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in food services and drinking places, professional and business services, and health care. 

The labor force participation rate, at 62.9 percent, changed little in July and has shown little movement on net over the past year. The employment-population ratio (60.2 percent) was also little changed in July but is up by 0.4 percentage point over the year.

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Thursday, August 3, 2017

Initial unemployment claims fall 5,000 in most recent report

In the week ending July 29, initial unemployment claims were 240,000, a decrease of 5,000 from the previous week's revised level. The 4-week moving average was 241,750, a decrease of 2,500 from the previous week's revised average.

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Service sector index dipped 3.5 points in July to 53.9

The NMI® registered 53.9 percent, which is 3.5 percentage points lower than the June reading of 57.4 percent. The majority of respondents’ comments were mostly positive about business conditions and the state of the economy.

Manufacturing sector index dipped 1.5 points in July to 56.3

The July PMI® registered 56.3 percent, a decrease of 1.5 percentage points from the June reading of 57.8 percent. Comments from the panel generally reflect expanding business conditions, with new orders, production, employment, backlog and exports all growing in July compared to June.

Gallup: July Good Jobs rate rose to 47.0 percent, tie for highest point since 2010

The Gallup Good Jobs (GGJ) rate rose nearly a percentage point to 47.0% in July, from 46.3% in June. The GGJ rate now ties the highest point for the measure since 2010, 47.1% in July of last year.

Mortgage loan applications fall 2.8 percent in latest survey

The Market Composite Index decreased 2.8 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 2.0 percent and refinances falling 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.17 percent.

July planned job cuts dropped to lowest level since last November; hiring announcements surged

U.S.-based employers announced plans to cut payrolls by 28,307 jobs in July, the lowest monthly total since November 2016. Meanwhile, over 88,000 hiring announcements were recorded last month, the third-highest hiring month of the year and highest July total on record.

The July job-cut total is 9 percent lower than the 31,105 cuts recorded in June, and 37.6 percent lower than the same month last year, when 45,346 cuts were recorded. Last month’s job cuts were the lowest monthly total since November 2016, when 26,936 cuts were announced.


So far this year, employers announced 255,307 planned job cuts, down 28.9 percent from the 359,100 cuts announced through the first seven months of 2016.

Wednesday, August 2, 2017

Conference Board: Online Job Vacancies fell 3.3 percent in July

Online advertised vacancies decreased 157,700 (3.3 percent) to 4,605,700 in July, according to The Conference Board Help Wanted OnLine® (HWOL) Data Series,released today. The June Supply/Demand rate stands at 1.46 unemployed for each advertised vacancy, with a total of 2.2 million more unemployed workers than the number of advertised vacancies. The number of unemployed was approximately 7.0 million in June.

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Gallup: Economic Confidence Index steady in July at +4, in positive territory for nine straight months

Americans' confidence in the economy was steady last month, with Gallup's U.S. Economic Confidence Index averaging +4 in July. This score is nearly identical to the 2017 low of +3 registered in May and June. Still, July marked the ninth consecutive month that Americans rated the economy more positively than negatively -- the longest such streak since Gallup began tracking economic confidence in 2008.

Gallup: Job Creation Index rebounded to record high in July

Gallup's U.S. Job Creation Index returned to its all-time high of +37 in July, a sign that the job market remains strong relative to the past decade. This is one point higher than the index score in June and the third time it has been at +37 in 2017.

ADP: Private sector jobs grew 178,000 in July

Private sector employment increased by 178,000 jobs from June to July according to the July ADP National Employment Report.  This compares to 191,000 jobs the previous month and 229,000 jobs a year ago.

Tuesday, August 1, 2017

CoreLogic: June home prices up 6.7 percent year-on-year, some markets becoming over-valued

According to CoreLogic, June home prices nationally increased year over year by 6.7 percent and by 1.1 percent from May.   Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 5.2 percent on a year-over-year basis from June 2017 to June 2018.

As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years.

Of the nation’s 10 largest metropolitan areas measured by population, four were overvalued in June according to CoreLogic Market Conditions Indicators (MCI) data. These four metros include Denver-Aurora-Lakewood, CO, Houston-The Woodlands-Sugar Land, TX, Miami-Miami Beach-Kendall, FL and Washington-Arlington-Alexandria, DC-VA-MD-WV.

Personal income, spending and price index all remained fairly flat in June

Personal income fell less than -0.1 percent in June while personal consumption expenditures (PCE) increased by 0.1 percent.  The PCE price index increased less than 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

June construction spending dipped slightly from May, but YTD is up 4.8 percent over 2016

Construction spending during June 2017 was estimated at a seasonally adjusted annual rate of $1,205.8 billion, 1.3 percent below the revised May estimate of $1,221.6 billion. The June figure is 1.6 percent above the June 2016 estimate of $1,186.4 billion. During the first 6 months of this year, construction spending amounted to $577.0 billion, 4.8 percent above the $550.5 billion for the same period in 2016.

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Gearing Up for the 2020 Census: Lack of Funding and Leadership Vacancies Imperil Crucial Update

It’s hard to over-state the importance of the decennial census, which has been undertaken every decade since 1790.

Indeed, this key accounting of the American population was deemed important enough to be listed in Article 1 of the U.S. Constitution.

Today, however, with the departure of the Census Bureau’s director in June and a refusal by Congress to adequately fund important tests of the first Internet-based count in advance of 2020, alarm bells are going off at The Census Project, which counts among its 200 members the NAHB, the NAR and the U.S. Chamber of Commerce.

They certainly have reason to be worried. Several months before the departure of former director John Thompson, the Government Accountability Office had added the Census Bureau to its ‘high-risk list’ of imperiled agencies and programs.  If there is any economic sector which would be negatively impacted by the Bureau being under-funded and rudderless, it would be the building industry.

That’s because, besides the decennial census, the Bureau also collects monthly data critical for homebuilders such as building permits, starts, completions and new single-family home sales at various geographical levels.

Each quarter, the Bureau releases data on homeownership and residential vacancy rates by state and many MSAs.  The Bureau’s data can even move the stock market in either direction because it’s regularly tracking the health of retail stores, wholesale trade, manufacturing, domestic and international trade and even construction spending by sector.

Because a country as large and vibrant as the U.S. can change a lot between decades, the Bureau also conducts the American Community Survey (ACS), which provides annual information to better determine how over $400 billion in federal and state funds are spent based on local jobs, education levels and homeownership levels.

For demographers and market researchers looking at development opportunities, the Bureau’s data allows them to cobble together datasets to compare the risk profile of one city or town versus another.  If a small city is seeing a boom in new jobs that isn’t being met with new population or housing growth, that’s an opportunity the Bureau can help unearth. The Census Bureau may be one of the most important federal government agencies we have.

Although various state agencies also gather their own data on population, employment and housing trends – and have served as official State Census Data Centers since 1978 – they still must ‘benchmark’ their estimates against the latest decennial census data when it is released.  Sometimes this process can unveil a large discrepancy, which can deprive a large state of its share of numerous federal programs and even cost it a Congressional seat.  In some cases, the loss of a seat could potentially swing an election.

The private sector is also impacted, because when you order a demographic report from a company such as ESRI or Claritas, their analysts are basing their current-year estimates and projections on the most recent decennial census.  Consequently, if the 2020 update is under-funded, that could lead to another decade of bad guesses based on incomplete data.  Given the impact that under-building housing is having on home prices in many areas of the country, ensuring an accurate update in 2020 should be a rallying cry for our industry.

There are two reasons for this Census Bureau under-funding: (1) Because the budget is set at the same level as the 2010 Census, it is not accounting for either a decades’ worth of inflation or another estimated 25 million people to count by 2020; and (2) Because the Bureau is attempting to harness the Internet and new technology for the first time to reduce the need for door-to-door counting, it needs additional funds for tests originally scheduled to start in 2018.

According to The Census Project, the Bureau needs an additional $300 million in 2018 to extensively test this new technology for an accurate count, but the White House and Congress have approved just over 10 percent of that amount.  This puts the 2020 Census in danger of a botched count, which could lead to undercounts of rural and minority populations while over-counting whites, especially those with multiple homes.

There are fears that the 2020 Census could be the victim of politics, and be used as a means to shift federal spending from blue to red states – or vice versa if such a myopic precedent is set.  At a time when just agreeing on facts is a challenge, there’s a reason the Founding Fathers inscribed the decennial census into the Constitution.

Let’s at least honor their wishes by fully funding it.

Monday, July 31, 2017

Loan Officer Survey: Weaker demand for commercial loans, stronger demand for mortgages

On balance, demand for commercial and industrial loans weakened over the second quarter of 2017 while banks left their standards on C&I loans basically unchanged. Survey respondents also reported that standards on commercial real estate (CRE) loans tightened while demand weakened on net.

For loans to households, banks reported that lending standards on all categories of residential real estate (RRE) loans eased or remained unchanged, although the net share of banks reporting easing was, at most, moderate in each category.

Banks also reported, on net, that demand for most categories of RRE loans strengthened over the second quarter, although, again, the net share was never more than moderate.

In addition, modest net fractions of banks reported tightening standards and weaker demand for auto and credit card loans.

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Chicago Business Barometer fell sharply in July but still well into positive territory

The MNI Chicago Business Barometer fell to 58.9 in July from 65.7 in June, the lowest level in three months.  Each of the five Barometer components receded from last month but remained above their respective 12-month averages.


July consumer confidence index down 5.1 points from January

Consumer confidence remained largely unchanged at the same favorable level recorded at mid-month. The overall Sentiment Index has declined by 5.1 Index-points since the January peak, which was the highest figure in a dozen years.


2Q 2017 employment cost index rose 0.5 percent, up 2.4 percent year-on-year

Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month period ending in June 2017. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.5 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.6 percent.  These same total costs increased 2.4 percent for the 12-month period ending in June 2017.


2Q 2017 GDP grew by 2.6 percent in advance estimate

Real gross domestic product increased at an annual rate of 2.6 percent in the second quarter of 2017 according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.2 percent.


Pending Home Sales Index rebounded 1.5 percent in June after three months of declines

The Pending Home Sales Index climbed 1.5 percent on June. The index also increased year-on-year for the first time since March, rising 0.5 percent.

Wednesday, July 26, 2017

Federal Reserve opts to keep interest rates at current levels until inflation is higher

The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term...

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation...

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Mortgage loan applications rise 0.4 percent in latest survey as rates drop slightly

The Market Composite Index increased 0.4 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 2.0 percent and refinances rising 3.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.17 percent.

June new home sales rise for second straight month, up 9.1 percent year-on-year

Sales of new single-family houses in June 2017 were at a seasonally adjusted annual rate of 610,000. This is 0.8 percent above the revised May rate of 605,000 and is 9.1 percent above the June 2016 estimate of 559,000.

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Tuesday, July 25, 2017

Gallup: U.S. Economic Confidence Index slightly more positive than negative

Americans continue to evaluate the economy slightly more positively than negatively, with Gallup's U.S. Economic Confidence Index averaging +4 last week. Since late March, Americans' assessments of the economy have been largely stable, with weekly averages of Gallup's U.S. Economic Confidence Index typically ranging between +3 and +5. Though Americans remain optimistic about the state of the economy, this sentiment is not as strong as it was in the weeks just before and after Donald Trump's presidential inauguration, when the index hit +10 or higher several times.

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Richmond Fed's Manufacturing Index rises 3 points in July

The Richmond Federal Reserve Bank's manufacturing composite index rose from 11 in June to 14 in July — the result of a slight increase in the measures of new orders and employment. Manufacturing executives remained generally optimistic about activity six months ahead. 

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State Street Investor Confidence Index rises 7.9 points in July

The Global Investor Confidence Index increased to 108.9, up 7.9 points from June’s revised reading of 101.  Strong earnings growth expectations and optimism grounded in the improving economic outlook have taken precedence over the rising anticipation of reduced central bank balance sheets and a more a hawkish tone.

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Consumer confidence bounces back in July

Consumer confidence increased in July following a marginal decline in June. Consumers’ assessment of current conditions remained at a 16-year high and their expectations for the short-term outlook improved somewhat after cooling last month.

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FHFA: May house prices up 0.4 percent from April and 6.9 percent year-on-year

U.S. house prices rose in May, up 0.4 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI). From May 2016 to May 2017, house prices were up 6.9 percent.

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May Case-Shiller Index up another 0.2 percent from April, 5.6 percent year-on-year

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.6% annual gain in May, the same as the prior month. After seasonal adjustment, the National Index recorded a 0.2% month-over-month increase.

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Monday, July 24, 2017

IMF forecast bullish on global growth but downgrades U.S. estimates

The recovery in global growth that we projected in April is on a firmer footing; there is now no question mark over the world economy’s gain in momentum….

The distribution of this growth around the world has changed, however: compared with last April’s projection, some economies are up but others are down, offsetting those improvements.

Notable compared with the not-too-distant past is the performance of the euro area, where we have raised our forecast. But we are also raising our projections for Japan, for China, and for emerging and developing Asia more generally. We also see notable improvements in emerging and developing Europe and Mexico.

Where are the offsets to this positive news on growth? From a global growth perspective, the most important downgrade is the United States. Over the next two years, U.S. growth should remain above its longer-run potential growth rate. But we have reduced our forecasts for both 2017 and 2018 to 2.1 percent because near-term U.S. fiscal policy looks less likely to be expansionary than we believed in April.

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July IHS Output Index strongest expansion since January

July data revealed a further acceleration in business activity growth across the U.S. private sector. At 54.2, up from 53.9 in June, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index signaled the strongest rate of expansion since January.

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June existing home sales drop 1.8 percent, largely due to lack of supply

Total existing-home sales decreased 1.8 percent to a seasonally adjusted annual rate of 5.52 million in June from 5.62 million in May. Despite last month's decline, June's sales pace is 0.7 percent above a year ago, but is the second lowest of 2017.

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Friday, July 21, 2017

Initial unemployment claims fall by 15,000 in latest report

In the week ending July 15, initial unemployment claims were 233,000, a decrease of 15,000 from the previous week's revised level. The 4-week moving average was 243,750, a decrease of 2,250 from the previous week's revised average.

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New York Fed: Manufacturing firms still positive in July, but less so than in June

Business activity grew modestly in New York State, according to firms responding to the July 2017 Empire State Manufacturing Survey. Firms remained positive about future conditions, though they were less optimistic than in June.

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Philadelphia Fed: Manufacturing firms optimistic about future growth

Manufacturing activity in the region continues to grow but at a slower pace, according to results from the July Manufacturing Business Outlook Survey. Firms remained generally optimistic about future growth. More than one-third of the manufacturers expect to add to their payrolls over the next six months.

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June Achitectural Billings Index rose one point to 54.2, indicating strong business conditions

Architecture firms continued to report strong business conditions to start the summer, with AIA's Architecture Billings Index (ABI) climbing by more than a point from May to a score of 54.2 in June (any score over 50 indicates billings growth).



Leading Economic Index rose sharply in June, largely due to more building permits

The U.S. LEI rose 0.6 percent in June, pointing to continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year. The broad-based gain in the U.S. LEI was led by a large contribution from housing permits, which improved after several months of weakness.


Thursday, July 20, 2017

Mortgage applications rise 6.3 percent in latest survey

The Market Composite Index increased 6.3 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 1 percent and refinances up 13 percent. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 4.22 percent.

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Wednesday, July 19, 2017

June building permits rebounded 7.4 percent from May, up 5.1 percent year-on-year

Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,254,000. This is 7.4 percent above the revised May rate of 1,168,000 and is 5.1 percent above the June 2016 rate of 1,193,000.

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June housing starts rebounded 8.3 percent from May, up 2.1 percent year-on-year

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,215,000. This is 8.3 percent above the revised May estimate of 1,122,000 and is 2.1 percent above the June 2016 rate of 1,190,000.

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Tuesday, July 18, 2017

Builder confidence dips two points to 64 as lumber prices take a toll

Builder confidence in the market for newly-built single-family homes slipped two points in July to a level of 64 from a downwardly revised June reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). It is the lowest reading since November 2016. 

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Second Quarter 2017 Economic Update: Slow, Steady Growth as Expansion Continues

Whether due to an actual “Trump bump” or other factors, so far the data is showing the second quarter of 2017 to be stronger than the first on multiple fronts.  Despite its relative age – which in another two years would be the longest recovery on record – the current expansion is still showing signs of life ahead.

According to the Federal Reserve’s Beige Book, the pace of recent growth has ranged from slight to modest, although there has been a mixed message on consumer spending, especially for auto sales, which were down three percent between the first and second quarters of 2017.

Still, this dip was reportedly partly due to automakers holding back on fleet sales to rental car companies and government agencies in order to help prop up brand values.

GDP growth, which averaged just 1.6 percent in 2016, did dip to 1.4 percent in the final estimate for the first quarter of 2017.  However, as of mid-July, analysts were projecting second quarter 2017 growth to rise to 2.4 percent due to improvements in construction spending, a rebounding manufacturing sector and continuing pent-up demand for housing.

Job growth averaged nearly 194,000 new positions per month in the second quarter, up substantially from under 170,000 in both the previous quarter as well as the same quarter of 2016, resulting in a June unemployment rate of 4.4 percent.  Labor markets continued to tighten across a wide spectrum of both low- and high-skilled positions, especially in construction and information technology.

However, as has been reported in the past, a wider range of industries are also reporting difficulty in finding qualified workers even as the expansion reaches into the furthest corners of the economy, including teenagers.  This shortage has certainly had some benefits for employees, with rising wage pressures for both low- and high-skilled positions prompting annual increases averaging about 2.5 percent.

Due in part to this relatively minor wage pressure, overall inflation remains low, with the Consumer Price Index (less food and energy) rising by 1.7 percent for the year ending in June 2017, or below the 2.0 percent target rate preferred by the Federal Reserve.  The Producer Price Index was slightly higher for the same period, rising by 2.0 percent for final demand minus more volatile indices for food, energy and trade services.

Looking next at consumer confidence, although the University of Michigan’s Consumer Sentiment Survey had been on a high plateau since last November, preliminary results for July were showing a split between future expectations – which have fallen sharply since their January 2017 peak – and current economic conditions, which have since rebounded to their March 2017 peak.  Moreover, given the small June dip in the Small Business Optimism Index, it’s possible that expectations for prolonged GDP growth rates of three percent in the future have softened, and what we’re likely to see is an annual growth rate of just above two percent for 2017.

Builder confidence remained bullish at a reading of 67 in June, and while the average for total construction spending in April and May of 2017 was down slightly from the first quarter of 2017, residential spending was up by one percent.  Even better, when compared against the second quarter of 2016, average residential construction spending in April and May was up by ten percent.

Although this extra spending did not show up meaningfully in the field during April or May, it certainly did in June, with both starts and permits rebounding sharply from May. In addition, year-on-year housing starts and permits for June were up by 2.1 percent and 5.1 percent, respectively.

New home sales, however, were up by over 11 percent during the same time periods to an annual rate of 610,000 units, while median new home prices rose to nearly $346,000.  At May’s sales rate, existing inventory would take 5.3 months to sell, up slightly from 5.2 months a year earlier.

For existing homes, the biggest challenge remains available inventory, with the pending home sales index dipping in both April and May from earlier in the year as the median sale price rose to $247,600.  This level marks a new peak, and is up 5.8 percent year-on-year.

Closed sales averaged 5.59 million in April and May of 2017, down 0.53 percent from the first quarter but up over four percent from the second quarter of 2016.  At current sales rates, inventory at the end of May would take 4.2 months to sell, down from 4.7 months a year earlier.

Monday, July 17, 2017

Business inventories rebounded sharply in May as sales recorded biggest drop in 10 months

U.S. business inventories rebounded 0.3 percent in May as sales recorded their biggest drop in 10 months, falling by 0.2 percent.

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Consumer sentiment mixed in early July reading

Confidence in future economic prospects continued to slide in early July, with the Expectations Index now 10.1 index points below its January 2017 peak. In contrast, consumers' assessments of current economic conditions regained the March 2017 peak, the highest level since the July 2005 survey. Overall, the recent data follow the same pattern repeatedly recorded around past cyclical peaks: expectations start to post significant declines while assessments of current economic conditions continue to reach new peaks.

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Friday, July 14, 2017

June retail sales fell 0.2 percent

June retail sales fell 0.2 percent, weighed down by declines in receipts at service stations, clothing stores and supermarkets. Americans also cut back on spending at restaurants and bars, as well as on hobbies. This decline, the second in two months, could temper expectations of strong acceleration in economic growth in the second quarter.

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CPI flat in June, up 1.6 percent over past 12 months

The Consumer Price Index for All Urban Consumers was unchanged in June, but has risen 1.6 percent over the past 12 months. The index for all items less food and energy rose 0.1 percent in June, its third straight such increase, and is up 1.7 percent year-on-year.

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Tuesday, July 11, 2017

Job openings fell 5.0 percent in May, but hires rose 8.5 percent

The number of job openings decreased 5.0 percent to 5.7 million on the last business day of May. Over the month, hires increased 8.5 percent to 5.5 million and separations increased 5.0 percent to 5.3 million.

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June Small Business Optimism Index fell 0.9 points, little euphoria for rest of 2017

The Index of Small Business Optimism fell 0.9 points to 103.6, but sustained the surge in optimism that started the day after the election. The Index peaked at 105.9 in January and has dropped 2.3 points to date, no doubt in part due to the mess in Washington, D.C.

Progress is being made, but poorly communicated, and the biggest issues, healthcare and tax reform remain stuck in the bowels of Washington politics. Economic growth in the first half of this year will be about the same as we have experienced for the past three or four years, no real progress. There isn’t much euphoria in the outlook for the second half of the year.

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Monday, July 10, 2017

Consumer credit use expanded in May at fastest rate in seven months

Consumer credit expanded in May at 5.8 percent, or the fastest rate in seven months.  This could be a sign that strong levels of confidence will lead to growth in consumption.The monthly growth of consumer credit often seesaws, but the first quarter’s 4.8% growth was the slowest quarterly expansion in more than six years.

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Labor Market Conditions Index rose 1.5 in June, up for 13th straight month

The US Labor Market Conditions Index (LMCI) registered an increase of 1.5 for June following a revised increase of 3.3 for the previous month. The index has increased for the last 13 months.

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Friday, July 7, 2017

Job growth rebounded strongly to 222,000 in June, unemployment rate ticks up slightly to 4.4 percent

Total nonfarm payroll employment increased by 222,000 in June, and the unemployment rate rose slightly to 4.4 percent. Employment increased in health care, social assistance, financial activities, and mining.  This rate of job growth compares to 152,000 in May and 297,000 in June of 2016.

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Thursday, July 6, 2017

ISM: Service sector economy index rose slightly in June

The NMI registered 57.4 percent in June, which is 0.5 percentage point higher than the May reading of 56.9 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. The majority of respondents’ comments are positive about business conditions and the overall economy.

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IHS Markit: Services Business Activity Index rose for third straight month in June

The seasonally adjusted IHS Markit U.S. Services Business Activity Index registered 54.2 in June, up from 53.6 in May. This signalled a third month of accelerated growth in business activity among US service providers. Panellists linked growth to increased new orders and strong client demand. Overall, activity during the second quarter expanded at a solid pace that was only fractionally softer than that seen in the first quarter.

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Bloomberg: Consumer Comfort Index dips in latest survey; first half of 2017 strongest since 2011

Consumer optimism is showing signs of pulling back from its post-election surge, with the comfort index easing after three months of robust readings just below an almost 16-year high. Still, the gauge closed out the best half-year since the final six months of 2011 as households embraced solid opportunities in the labor market.

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Gallup: June Good Jobs rate highest so far in 2017

The U.S. Gallup Good Jobs (GGJ) rate, which measures the percentage of the U.S. adult population with full-time jobs, rose to 46.3% in June, up from 45.4% in May. This is the highest level so far in 2017. The current level is roughly equal to the rate in June 2016, when the GGJ stood at 46.0%.

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Initial unemployment claims rise 4,000 in latest report

In the week ending July 1, initial unemployment claims were 248,000, an increase of 4,000 from the previous week's unrevised level of 244,000. The 4-week moving average was 243,000, an increase of 750 from the previous week's unrevised average of 242,250.

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Mortgage loan applications rise 1.4 percent in latest survey

The Market Composite Index increased 1.4 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 3 percent and refinances falling 0.4 percent.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to its highest level since May 2017, 4.20 percent.

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Planned job cuts dipped six percent in June from May; also down 28 percent for first half of year

Employers announced plans to cut payrolls by 31,105 jobs in June, the lowest monthly total of the year as well as being 6 percent lower than in May and 19.3 percent lower year-on-year.  Through the first six months of 2017, employers announced 227,000 planned job cuts, down 28 the same period of 2016.

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ADP: Private Sector Employment Increased by 158,000 Jobs in June

Private-sector employment increased by 158,000 from May to June, which compares to 230,000 the previous month and 258,000 during the same period of 2016.

Employers announced plans to cut payrolls by 31,105 jobs in June, the lowest monthly total of the year as well as being 6 percent lower than in May and 19.3 percent lower year-on-year.

Through the first six months of 2017, employers announced 227,000 planned job cuts, down 28 the same period of 2016.

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Wednesday, July 5, 2017

June Federal Reserve meeting minutes shows split on inflation outlook and asset sales

Federal Reserve policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises.

The details of the meeting, at which the U.S. central bank voted to raise interest rates, also showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year.

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Online advertised job vacancies dropped in June after May increase

Online advertised vacancies decreased 45,800 to 4,763,400 in June, according to The Conference Board Help Wanted OnLine® (HWOL) Data Series. The May Supply/Demand rate stands at 1.43 unemployed for each advertised vacancy, with a total of 2.1 million more unemployed workers than the number of advertised vacancies. The number of unemployed was approximately 6.9 million in May.

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CoreLogic: May home prices up 1.2 percent from April and 6.6 percent year-on-year

Home prices nationally increased year over year by 6.6 percent from May 2016 to May 2017, and on a month-over-month basis, home prices increased by 1.2 percent in May 2017 compared with April 2017.

Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 5.3 percent on a year-over-year basis from May 2017 to May 2018, and on a month-over-month basis home prices are expected to increase by 0.9 percent from May 2017 to June 2017.

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Factory orders fell 0.8 percent in May, but capital equipment stronger than expected

New orders for U.S.-made goods fell 0.8 percent in May, but orders for capital equipment were a bit stronger than previously reported, suggesting the manufacturing sector remained on a moderate growth path.

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Gallup: June Job Creation Index drops one point from record high

Gallup's Job Creation Index was virtually unchanged at +36 in June, down one point from last month's record high. For 16 straight months, the Job Creation Index has been at or over +30, signifying a greatly improved and steady job market compared with the years during and immediately after the Great Recession.

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Monday, July 3, 2017

Gallup: June consumer spending highest in that month since 2008

Americans' daily self-reports of spending averaged $103 in June, similar to their average of $104 in May. Last month represents the highest level of reported June spending since 2008, when spending averaged $104. It falls just short of the nine-year high of $114, from May 2008.

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PMI manufacturing index up nearly 3 points in June due to expanding business conditions

The June PMI registered 57.8 percent, an increase of 2.9 percentage points from the May reading of 54.9 percent. Comments from the panel generally reflect expanding business conditions; with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace.

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Construction spending flat in May, residential fell 0.6 percent

Private residential construction fell 0.6% in May, the first decline in that category since April 2016 and its biggest decline since a 0.6% drop in July 2014. Non-residential construction declined 0.7%, the fifth straight monthly decline for the category.

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Friday, June 30, 2017

Personal income rose more than spending in May; price index shows lower inflation

Personal income increased 0.4 percent in May, disposable personal income (DPI) increased 0.5 percent and personal consumption expenditures (PCE) rose 0.1 percent. The PCE price index decreased 0.1 percent from April but rose 1.4 percent year-on-year.  Excluding food and energy, the PCE price index increased 0.1 percent from April and rose 1.4 percent year-on-year.

June Chicago Business Barometer highest in over three years

The MNI Chicago Business Barometer rose to 65.7 in June from 59.4 in May, the highest level in over three years. Optimism among firms about business conditions rose for the fifth consecutive month. Four of the five Barometer components led June’s increase, with only Employment falling, albeit slightly. Successive rises in the barometer left the Q2 calendar quarter average at 61.1, significantly above Q1’s 55.1, and the highest level since Q2 2014.

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Consumer sentiment slipped back in June, partisan gap at 39 points

Consumer confidence slipped to its lowest level since Trump was elected, although the overall level still remains quite favorable. The average level of the Sentiment Index during the first half of 2017 was 96.8, the best half-year average since the second half of 2000, and the partisan gap between Democrats and Republicans stood at 39 Index-points in June, nearly identical to the 38 point gap in February.

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Thursday, June 29, 2017

Initial unemployment claims rise 2,000 in latest report

In the week ending June 24, initial unemployment claims were 244,000, an increase of 2,000 from the previous week's revised level. The 4-week moving average was 242,250, a decrease of 2,750 from the previous week's revised average.



Mortgage applications fall 6.2 percent in latest survey, rates remain unchanged

The Market Composite Index decreased 6.2 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 4 percent and refinances falling 9 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.13 percent.

Corporate profits fell $48.4 billion in 1Q 2017 vs. $11.2 billion rise in 4Q 2016

Profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) decreased $48.4 billion in the first quarter, in contrast to an increase of $11.2 billion in the fourth quarter.


First quarter GDP growth rose to 1.4 percent in final estimate

Real gross domestic product (GDP) increased at an annual rate of 1.4 percent in the first quarter of 2017 according to the "third" estimate released by the Bureau of Economic Analysis. In the second estimate, the increase in real GDP was 1.2 percent. With the third estimate for the first quarter, personal consumption expenditures (PCE) and exports increased more than previously estimated.


Wednesday, June 28, 2017

Pending Home Sales Index dipped 0.8 percent in May, due mostly to supply shortages

The Pending Home Sales Index decreased 0.8 percent to 108.5 in May from a downwardly revised 109.4 in April. The index is now 1.7 percent below a year ago, which marks the second straight annual decline and the most recent since November and December of last year.

Tuesday, June 27, 2017

Richmond Fed: Manufacturing survey improves sharply in June

Reports from Fifth District manufacturers improved in June, according to the latest survey by the Federal Reserve Bank of Richmond. The composite manufacturing index rose from 1 in May to 7 in June, as the indexes for shipments and new orders increased. The employment index was relatively flat. Most firms continued to report steady or higher wages; although the index for wages did fall in June, it remained above 0. Meanwhile, more firms reported a decline in the average workweek than reported an increase.

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State Street's Investor Confidence Index slips slightly in June

The Global Investor Confidence Index declined slightly in June. The Index now stands at 101.0, down from May’s revised reading of 102.6.  Confidence among both Asian and North American investors declined.

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Consumer confidence rebounds moderately in June

Consumer confidence increased moderately in June following a small decline in May. Consumers’ assessment of current conditions improved to a nearly 16-year high (July 2001, 151.3). Expectations for the short-term have eased somewhat, but are still upbeat. Overall, consumers anticipate the economy will continue expanding in the months ahead, but they do not foresee the pace of growth accelerating.

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Case-Shiller Index sets 5th consecutive record, up 5.5 percent year-on-year

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.5% annual gain in April, down from 5.6% last month. Before seasonal adjustment, the National Index posted a month-over-month gain of 0.9% in April.

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Monday, June 26, 2017

Dallas Fed: Manufacturing activity expanded in June, but at a slower pace

Texas factory activity increased in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell 11 points to 12.3, indicating output grew but at a slower pace than in May.


Durable goods orders fell more than expected in May

Overall orders for durable goods fell 1.1 percent in May after declining 0.9 percent in April. Shipments also declined, suggesting a loss of momentum in the manufacturing sector.



Chicago Fed's National Activity Index slumped to -0.26 in May

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved down to –0.26 in May from +0.57 in April. The index’s three-month moving average declined to +0.04 in May from +0.21 in April.

Friday, June 23, 2017

Private sector output growth slows in June, but new orders rise at strongest pace for five months

U.S. private sector firms recorded a further solid expansion of business activity in June, but there was a loss of momentum since May. This was highlighted by the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index falling from 53.6 to 53.0 in June. The latest reading signalled the slowest upturn in business activity for three months.

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May new home sales rebounded strongly to 610,000 units

Sales of new single-family houses in May 2017 were at a seasonally adjusted annual rate of 610,000, for the second-highest rate this year.  This level is also 2.9 percent above the revised April rate of 593,000 and is 8.9 percent above the May 2016 estimate of 560,000.

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Thursday, June 22, 2017

Kansas City Fed: Manufacturing activity expands further in June

The Kansas City Fed's Tenth District manufacturing activity expanded further in June, and expectations for future activity remained strong. Price indexes were mixed, with some increases in raw materials prices. Firms reported faster growth in June than earlier in the second quarter, and the share of factories planning to add workers over the next six months also rose solidly.

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Initial unemployment claims rise 3,000 in latest report

In the week ending June 17, initial unemployment claims were 241,000, an increase of 3,000 from the previous week's revised level. The 4-week moving average was 244,750, an increase of 1,500 from the previous week's revised average.




Mortgage applications rise 0.6 percent in latest survey

The Market Composite Index increased 0.6 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 2 percent and refinances up 2 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained unchanged at 4.13 percent.


FHFA: May home prices up 0.7 percent from April and 6.8 percent year-on-year

U.S. house prices rose in April, up 0.7 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI).  From April 2016 to April 2017, house prices were up 6.8 percent.


Leading Economic Indicators increased 0.3 percent in May

The U.S. LEI continued on its upward trend in May, suggesting the economy is likely to remain on, or perhaps even moderately above, its long-term trend of about 2 percent growth for the remainder of the year. The improvement was widespread among the majority of the leading indicators except for housing permits, which declined again.

Wednesday, June 21, 2017

Existing home sales rebounded 1.1 percent in May while sales prices reached new high

Existing-home sales rebounded in May following a notable decline in April, and low inventory levels helped propel the median sales price to a new high while pushing down the median days a home is on the market to a new low.


Sunday, June 18, 2017

State of the Rental Market: Growth is Moderating but Long-Term Prospects Very Favorable

While it’s certainly no secret that the multi-family sector has been on a roll over the past few years, there have been some recent signs that its growth trajectory will continue to moderate this year. 

Nonetheless, with an economic expansion in its seventh year and an average of one million new renter households being formed over the past five years, these economic tailwinds should continue to support this sector over the near term. The long-term prognosis is even better, with a recent study concluding a need for 4.6 million new apartments between now and 2030.

For now, overall tenant demand remains strong, especially as more millennials continue to form new households after being delayed due to the Great Recession and paying off student loan debt. Nationally, the homeownership rate fell to a 51-year low of 63 percent last year, and is expected to remain around this level for at least the rest of the year.

Construction of new apartments is also expected to peak this year, especially as over-supply in some high-growth markets is beginning to impact both vacancy rates and rent growth. Mindful of this trend, construction lenders are also being more discreet, critically assessing the experience of developers, double-checking projected returns while acknowledging lower growth in operating income.

In addition, if government proposals for increased infrastructure spending see the light of day, this could mean increased competition for both the materials and labor required for more multi-family supply.

According to recent figures from brokerage Marcus & Millichap, most of the softening is beginning to occur for Class A buildings, both due to an increase in new product as well as historically weak absorption during the fourth quarter of 2016 being pushed into 2017. Nationally, this meant a large bump in Class A vacancy rates to over 6.5 percent. Yet instead of lowering asking rents to fill vacant units, many owners are betting that the strong spring and summer leasing season will mop up the excess supply.

For Class B properties, a slight rise in vacancies was often due to renters opting to make the leap to higher-quality apartments, especially in regions such as the South where the price difference between the two classes is the smallest.  Not surprisingly, the vacancy rate for Class C properties remains the lowest due to the strong demand for affordable housing.

Both Axiometrics and Yardi Matrix -- which regularly survey apartment communities across the country each month – have shown a similar softening in both rent growth and occupancy rates.  According to Axiometrics, although its surveyed properties had rebounded to the benchmark occupancy rate of 95 percent by May 2017, annual effective rent growth has stayed within a fairly narrow band of 2.0 to 2.2 percent over the past six months.

Yardi Matrix, however, showed an annual overall rental rate increase of 1.5 percent for the 12-month period ending in May 2017, down sharply from the 5.3 percent noted a year ago even though it reported an overall occupancy rate of 94.8 percent for April.

As Marcus & Millichap similarly found, this is largely due to a temporary over-supply in Yardi’s “Lifestyle” class, which caters to households who prefer to rent versus owning, and has resulted in flat growth. Meanwhile, low supply and strong demand for “Renter by Necessity” units helped propel their average rents by 2.6 percent over the same time period.

Due to this softening, as well as higher borrowing costs and proposed changes to fiscal policy and the tax code – including a possible end to the popular 1031 tax exchange program – investors have recently pulled back. Preliminary estimates for first quarter 2017 sales suggest a decline of 15 to 20 percent from the same period of 2016, although greater clarity on these policy changes would certainly lead to a rebound in investor interest.

In the longer term, a combination of delayed marriages, an aging population and continued legal immigration will continue to put increasing pressure on new apartment supply, but it’s not just the millennials filling these units. It’s also Baby Boomers and other empty-nesters over 45 who accounted for over half of new renter households over the last decade in search of the flexibility and convenience of apartment living.

With an annual projected demand of 325,000 new units per year through 2030 and an aging housing stock increasingly in need of renovations, there should be very favorable terms for well-financed investors, especially in high-cost and high-growth areas throughout the West and the South.

Friday, June 16, 2017

Industrial production unchanged in May following April boost

Industrial production was unchanged in May following a large increase in April and smaller increases in February and March. At 105.0 percent of its 2012 average, total industrial production in May was 2.2 percent above its year-earlier level. Capacity utilization for the industrial sector edged down 0.1 percentage point in May to 76.6 percent, a rate that is 3.3 percentage points below its long-run (1972–2016) average.

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New York Fed: Manufacturing activity rebounds strongly in June

Business activity rebounded strongly in New York State, according to firms responding to the June 2017 Empire State Manufacturing Survey. The headline general business conditions index shot up twenty-one points to 19.8, its highest level in more than two years.

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Philadelphia Fed: Manufacturing activity growth dips in June

Regional manufacturing continues to expand, according to results from the June Manufacturing Business Outlook Survey. The diffusion index for general activity fell from its reading in May but remained positive and continued to reflect growth. Although many of the future indicators also declined, firms continue to expect growth over the next six months. About one-third of the firms expect to add to their payrolls through the end of the year.

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Consumer sentiment dips sharply in preliminary June survey

The modest early June drop of 2.6 points in the Sentiment Index masks a much larger decline since June 8th. Prior to that date the Sentiment Index had averaged 97.7, but since June 8th, the Index fell to 86.7, a decline of 11.0 points. While this break corresponds with James Comey's testimony, only a few consumers spontaneously referred to him or his testimony when asked to explain their views.

The recent erosion of confidence was due to more negative perceptions of the proposed economic policies among Democrats and the reduced likelihood of passage of these policies among Republicans.

Fortunately, a strong job market, improved household income and wealth have provided a financial buffer against rising uncertainties. Nonetheless, consumers have become less optimistic about the future course of the domestic economy.

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May building permits dipped 4.9 percent from April and 0.8 percent year-on-year

Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,168,000. This is 4.9 percent below the revised April rate of 1,228,000 and is 0.8 percent below the May 2016 rate of 1,178,000.

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May housing starts fell for third straight month to eight-month low

U.S. homebuilding fell for a third straight month in May to the lowest level in eight months as construction activity declined broadly.  Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,092,000. This is 5.5 percent below the revised April estimate of 1,156,000 and is 2.4 percent below the May 2016 rate of 1,119,000.

Thursday, June 15, 2017

Initial unemployment claims fall by 8,000 in latest report

In the week ending June 10, initial unemployment claims were 237,000, a decrease of 8,000 from the previous week's unrevised level of 245,000. The 4-week moving average was 243,000, an increase of 1,000 from the previous week's unrevised average of 242,000.

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Mortgage applications rise 2.8 percent in latest survey

The Market Composite Index increased 2.8 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising three percent and refinances jumping nine percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 4.13 percent.

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Business inventories fell 0.2 percent in April, reversing March's gain

U.S. business inventories fell 0.2 percent in April, recording their biggest drop in six months, which could temper expectations that inventory investment would support economic growth in the second quarter.

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NAHB's Housing Market Index dips two points in June

Builder confidence in the market for newly-built single-family homes weakened slightly in June, down two points to a level of 67 from a downwardly revised May reading of 69 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). All three HMI components posted losses in June but remain at healthy levels.

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Wednesday, June 14, 2017

Federal Reserve opts to hike key interest rate another 1/4 point

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

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CPI slipped 0.1 percent in May, up 1.9 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in May - mostly due to lower energy costs -- but rose 1.9 percent over the last 12 months.  The index for all items less food and energy rose 0.1 percent in May and 1.7 percent over the past 12 months.

Producer Price Index flat in May, up 2.4 percent year-on-year

The Producer Price Index for final demand was unchanged in May but increased 2.4 percent for the 12 months ended in May. Prices for final demand less foods, energy, and trade services fell 0.1 percent in May, the first decline since a similar 0.1-percent decrease in May 2016, but was up 2.1 percent over the previous 12 months.


May Small Business Optimism Index remained at historically high level

The Index for May matched its strong performance in April of 104.5. That means the Index has been at a historically high level for six straight months. Five of the Index components posted a gain, four declined, and one remained unchanged.


May retail sales posted biggest drop since January 2016

U.S. retail sales recorded their biggest drop of 0.3 percent in more than a year in May amid declining purchases of motor vehicles and discretionary spending.


Friday, June 9, 2017

May Employment Trends Index up 6.4 percent year-on-year

While employment numbers have shown some softness in the past three months, there is no slowdown visible in the Employment Trends Index, suggesting solid job growth over the summer. Employment will likely grow fast enough to continue tightening the labor market.

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Bloomberg Consumer Comfort Index dips in latest survey

The latest reading, the first decline in four weeks, remains consistent with projections for a rebound in growth this quarter. Even with the drop in the index of the buying climate, the measure remains above this year's average.

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April wholesale sales fell 0.4 percent from March but still up 7.3 percent year-on-year

April 2017 sales of merchant wholesalers fell 0.4 percent from the revised March level, but were up 7.3 percent from the April 2016 level.


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Thursday, June 8, 2017

Initial unemployment claims fall by 10,000 in latest report

In the week ending June 3, initial unemployment claims were 245,000, a decrease of 10,000 from the previous week's revised level. The 4-week moving average was 242,000, an increase of 2,250 from the previous week's revised average.

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Mortgage loan applications rise 7.1 percent in latest survey as rates dip

The Market Composite Index increased 7.1 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 10 percent and refinances up 3 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to its lowest level since November 2016, 4.14 percent.

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Consumer credit use growth slowed sharply in April

Consumer borrowing decelerated in April to the smallest increase in almost six years, suggesting an expected rebound in spending in the second quarter may not be as robust as hoped. Total consumer credit rose $8.2 billion in April to a seasonally adjusted $3.82 trillion, posting an annual growth rate of 2.6%.

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Wednesday, June 7, 2017

U.S. Economic Confidence Index fell to six-month low in May, but still well into positive territory

Though still historically high, Americans' confidence in the economy fell to a six-month low in May, largely dragged down by Democrats' worsening economic attitudes. Gallup's U.S. Economic Confidence Index averaged a score of +3 in May, down slightly from April (+5) but eight points below January's record monthly high (+11).

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Job Creation Index rebounded to +37 in May, continuing 15-month streak of +30 or higher

Gallup's Job Creation Index was +37 in May, tied with the record high found in March. This marks 15 straight months of the index reaching +30 or higher.

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Job openings rose 4.5 percent to series high of 6.0 million in April

 The number of job openings increased 4.5 percent to a series high of 6.0 million by the last business day of April. Over the month, hires decreased to 5.1 million and separations edged down to 5.0 million.

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April CoreLogic Home Price Index up 1.6 percent from March and 6.9 percent year-on-year

Home prices nationwide, including distressed sales, increased year over year by 6.9 percent in April 2017 compared with April 2016 and increased month over month by 1.6 percent in April 2017 compared with March 2017, according to the CoreLogic HPI.

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Monday, June 5, 2017

Service sector index dipped 0.6 percent in May, but new job growth still strong

The NMI® registered 56.9 percent, which is 0.6 percentage point lower than the April reading of 57.5 percent. Although the non-manufacturing sector's growth rate dipped in May, the sector continues to reflect strength, buoyed by the strong rate of growth in the Employment Index.


Manufacturing sector index mostly flat in May; pricing pressure slowing

The May PMI® registered 54.9 percent, an increase of 0.1 percentage point from the April reading of 54.8 percent. The slowing of pricing pressure, especially in basic commodities, should have a positive impact on margins and buying policies as this moderation moves up the value chain.