Monday, September 29, 2014

Personal Consumption Rebounded in August

Personal consumption rose 0.5% in August. Personal income rose 0.3%. Both values improved the pace from the month prior, however personal income growth is the second slowest pace all year.

Wage growth grew 0.4% and disposable income improved slightly to 0.3%. Due to no growth of the PCE deflator, real consumption and income growth were the same as nominal growth.

The savings rate declined to 5.4 months, as consumption grew faster than income.

Inflation remained tame; the PCE deflator rose 1.5% above year-ago levels. This was below the 2.0% target of the Federal Reserve.

Read the BEA release.

Friday, September 26, 2014

Consumer Sentiment Improved in August

According to the University of Michigan Consumer Sentiment index, consumer sentiment rose in September to 84.6, the highest value since July 2013.

Current expectations declined slightly to 98.9, but still remain at the second highest level all year. Future expectations jumped to 75.4, the highest reading since July 2013. While consumers are less optimistic about the future in comparison to the present, the gap between current and future expectations shrank.

The report indicated that inflationary expectations subsided slightly from the month prior, calling for 3.0% inflation over the next year and 2.8% over the next 5 years.

Second Quarter GPD Revised Up to 4.6%

Real GDP growth for the second quarter was revised up to 4.6% in the BEA’s final estimate. The upward revision was driven by improvements across the board. Growth in the second quarter jumped following the decline in the first quarter. Second quarter GDP more than compensated for the decline in the first quarter.

Consumption remained the strongest component of growth, contributing 1.8% to second quarter growth, a slight uptick from the previous estimate. Fixed investment jumped from its first quarter reading of 0.0% to 1.5%. Inventories contributed 1.4% in the second quarter, following a 1.2% decline in the first quarter. Inventories tend to be highly volatile. The government went from dragging growth by 0.2% in the first quarter to contributing 0.3% growth in the second.

The healthy growth of the economy in the second quarter is due to several factors. First, the harsh winter is over and the second quarter rebounded as a result. Moreover, the government’s austerity measures are no longer weighing on GDP growth. Finally, customers are spearheading growth with higher consumption levels.

Read the BEA release.

Thursday, September 25, 2014

Durable Manufactured Goods Fell 18.2% in August

New orders for durable manufactured goods fell 18.2% in August, following two consecutive monthly increases. The decline in August was due to a fall in new orders for transportation goods—which experienced a large increase in the previous month. Excluding transportation goods, new orders on durables increased 0.7% in August, which is above the post-recession average.

Transportation goods decreased 42% in August, attributing to most of the month’s decline. New orders for capital goods, including defense and nondefense goods, decreased 34%, led by a 36% decrease in nondefense goods. New orders for computers and electronic products increased 1.7% and new orders for electronic equipment, appliances and components increased 3.1%—both suggest stronger activity among the business sectors. Of some concern, orders for vehicles and parts declined 6.4%.

Read the U.S. Census Bureau release.

Wednesday, September 24, 2014

New Home Sales Jumped in August

New home sales jumped in August to an annual pace of 504,000 units, driven largely by gains in the West region. August’s report, on net, revised previous months by 18,000 units. August’s pace was an 18.0% improvement from July’s and a 33% gain from year ago levels.

Three of the four regions saw their annual pace improve. Only the Midwest saw no growth at 0.0%, but it had the strongest growth the month prior. The West, Northeast and South respectively grew 50.0%, 29.2% and 7.8%.

The surge in sales caused a tightening of new-home inventory. The months supply declined from 5.6 to 4.8. The median prices of a new home in August was $275,000, a decrease of 1.6% from the month prior. However, median home prices are still 7.9% above year ago levels.

Read the Census report.

Monday, September 22, 2014

Existing Home Sales Decline in August as Investors Leave Market

Existing home sales declined for the first time in 5 months in August. Sales settled at an annual pace of 5.05 million, a 1.8% decline from July. Sales are 5.3% below year ago levels. However, the decline in sales is largely attributed to investors leaving the market, a healthy sign for home buyers. Individual investors, who account for the majority of cash sales, purchased 12% of the homes in August, a decline from 16% in July and 17% in August 2013.

Two of the four regions improved. The Northeast and Midwest increased in August by 4.7% and 2.5% respectively. The South and West declined by 4.2% and 5.1% respectively. All four regions saw their year-over-year levels decline.

The market supply remained the same at 5.5 months. The median house price declined to $219,800, a 4.8% increase over year ago prices. The decline in the median home price points to a slightly looser housing market.

Read the NAR release.

Friday, September 19, 2014

Fed Holds Interchange Fee Cap Steady

Based on data released in the Federal Reserve’s biennial survey of debit card issuers’ costs, the Fed said that it will not change its interchange fee cap and fraud-prevention adjustment. The survey showed that the median issuer’s cost of authorizing, clearing and settling debit card transactions was 14.9 cents. Issuers at the 75th percentile had costs of 42.2 cents per transaction. The overall average cost declined slightly from 2011.

Debit card fraud losses rose slightly, with the median issuer’s average fraud loss as a share of transaction value amounting to 0.05% — up from 0.047% in 2011. The Fed estimated that all parties — merchants, issuers and card networks — saw $1.57 billion in debit card fraud losses in 2013.

The survey also showed that 53.7 billion debit and prepaid card transactions amounting to $2.07 trillion were processed in the U.S. in 2013. Transactions grew 8.4% from 2012 to 2013 at banks not subject to the rule, compared to 5.9% for covered issuers. The growth of prepaid cards — averaging more than 36% from 2009 to 2012 — slowed dramatically in 2013.

Read the Federal Reserve survey.