Friday, May 27, 2016

Consumer Sentiment Rose in April

Consumer Sentiment rose to 94.7 in May, up 5.7 points from the previous month, according to the University of Michigan Consumer Sentiment Index.

The Current Economic Conditions Index improved 3.2 points to 109.9, while the Index of Consumer Expectations rose to 7.3 points to 84.9.

“The biggest uncertainty consumers see on the horizon is not whether the Fed will hike interest rates in the next few months, but the outlook for future government economic policies under a new president,” said Richard Curtin, Chief Economist of UM Surveys of Consumers. “This has increased their emphasis on maintaining precautionary savings, although the savings rate is not expected to increase much beyond its current level.”

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GDP Revised up to 0.8% in the First Quarter

Real GDP for the first quarter of 2016 grew at an annual rate of 0.8%, according to the Bureau of Economic Analysis’s second estimate. First quarter GDP was revised up from the advance estimate of 0.5% growth, as the decrease in private inventory investment was smaller than previously estimated. During the fourth quarter of 2015, real GDP grew at a rate of 1.4%.

Consumption was the largest contributor to GDP accounting for 1.3% of growth, compared to 1.7% during the fourth quarter. Consumption spending grew by $53.5 billion during the first quarter of 2016, compared to $68.3 billion during the fourth quarter of 2015.

Non-residential fixed investment was a significant drag on GDP, subtracting 0.8% from growth. The fall in non-residential fixed investment was partially offset by a $22.0 billion increase in residential fixed investment, which contributed 0.6% to GDP.

Inventories subtracted 0.2% from GDP, a lower figure than the 0.3% subtraction estimated previously. Both farm and nonfarm private inventories declined during the quarter. The negative impact of net exports was also revised during the quarter, falling from a 0.3% drag to a 0.2% drag.

State and local government spending grew, contributing 0.3% to GDP. This was offset by a decrease in Federal government spending, which was a 0.1% drag.

Read the BEA release.
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Thursday, May 26, 2016

Mortgages Drove Household Debt in the First Quarter

Household debt reached $12.25 trillion in the first quarter of 2016, according to the New York Fed’s Household Debt and Credit Report, up $136 billion form last quarter. The growth was driven primarily by an increase in mortgage balances which grew $120 billion, in contrast to an $11 billion decline during the fourth quarter of 2015.

Non-housing debt balances also increased as both student and auto loan debt rose during the quarter. Student loans increased $29 billion to $1.26 trillion, while auto loans increased $7 billion to $1.07 trillion.

Credit card balances declined $21 billion after increasing $19 billion in the previous quarter, as the number of credit inquiries – an indicator of consumer credit demand – fell by 8 million. The aggregate credit card limit increased for the thirteenth consecutive quarter, rising 2.0%.

Delinquencies improved as 5.0% of outstanding debt was delinquent, down from 5.4% during the fourth quarter. Mortgage delinquencies continued their improving trend, as 2.1% of mortgage balances were 90 days delinquent, compared to 2.2% in the previous quarter. Approximately 97,000 consumers had a foreclosure notation added to their credit reports, just above the lowest level seen since the data was first collected in 1999.

The 90-day delinquency rate for student loans fell 50 basis points during the quarter, but remains high at 11.0% according to the report. However, the true delinquency rate may be twice as high as nearly half of the loans are in deferment.

Read the New York Fed report.
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Durable Goods Orders Rose in April

New orders for manufactured durable goods increased 3.4% to $235.9 billion in April, following a 1.9% increase in March, according to the U.S. Census Bureau. The majority of the month’s increase was driven by an 8.9% increase in new orders for transportation equipment. Excluding transportation, new orders increased 0.4%.

New orders excluding defense increased 3.7% on the month, as orders of nondefense aircraft and parts grew by 64.9% to $16.9 billion. Nondefense capital goods also increased, rising 7.8% to $73.6 billion in April.

Shipments of manufactured durable goods rose 0.6% in April to $232.5 billion, following two consecutive monthly decreases.

Inventories of manufactured durable goods fell 0.2% to $384.4 billion, following a 0.2% decline in the previous month. Inventories have now declined for nine of the last ten months.

Read the Census release.
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Tuesday, May 24, 2016

New Home Sales Surged in April

New single-family home sales rose to a seasonally adjusted annual rate of 619,000 in April, according to the U.S. Census Bureau and the Department of Housing and Urban Development. The April rate is 16.6% above the revised March rate of 531,000 and is the highest level in eight years.

Sales were mixed across regions, rising 52.8% in the Northeast, 18.8% in the West and 15.8% in the South. Sales fell in the Midwest, dropping by 4.8% during the month.

The median price of a new home was $321,100, up 7.8% from March. The average price was $379,800, up 7.3% from the previous month.

At the end of April, there was an estimated supply of 4.7 months at the current sales rate, down from a 5.5 month supply in March.

Read the Census/HUD release.
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Friday, May 20, 2016

Existing Home Sales Rose in April

Existing home sales rose 1.7% in April to a seasonally adjusted annual rate of 5.45 million, according to the National Association of Realtors (NAR). The April reading follows March’s upwardly revised rate of 5.36 million. Annual sales of existing homes were mixed across regions, rising 12.1% in the Midwest and 2.8% in the Northeast, but falling 2.7% and 1.7% in the South and West regions respectively.

“Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home,” said NAR Chief Economist Lawrence Yun.

The median existing-home price moved up to $232,500, a 6.3% increase from April 2015.

Distressed sales slipped 1 point to 7% of sales in April. Five percent of April sales were foreclosures while 2% were short sales. On average, foreclosures and short sales sold for discounts of 17% and 10% respectively.

Read the NAR release.
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Wednesday, May 18, 2016

FOMC Minutes: June Rate Hike Still on the Table

In the minutes of their April 26 – 27 Federal Open Market Committee (FOMC) meeting, Fed officials expressed that they may be ready to raise interest rates once again in June.

“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June,” the minutes stated.

The release of the April meeting minutes follows comments from Fed Presidents Dennis Lockhart of Atlanta and John Williams of San Francisco, who suggested on Tuesday that markets should not discount the possibility of a June rate hike. Lockhart and Williams also stated that they each expect two-to-three additional movements this year.

Federal Fund futures prices have adjusted following the FOMC release, with markets now anticipating a 34% probability of a June rate hike, up from a 4% probability two days prior.

Although members agreed that labor market indicators had improved since the last meeting, other economic indicators had been mixed. Household spending moderated even as household real income had risen and consumer sentiment remained high. In addition, members noted that the housing sector had improved while business fixed investment and net exports had been soft. Due to these soft readings on spending and production, the Committee decided against raising rates during their April meeting.

Read the FOMC minutes.
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