Economic Highlights for the Week Ending August 7, 2009
MONDAY, August 3rd
The ISM manufacturing index increased to 48.9% in July from a level of 44.8% in June. The July index reading is just below the key 50% level which indicates mild contraction in total factory activity, nationwide. Stronger new orders bode well for future production while higher employment and inventories suggest improvement in current activity. Manufacturing activity remains weak and will likely float around the breakeven line this year and into next.
Motor vehicle sales received a boost from the cash-for-clunkers program, rising 15.8% in July to an annualized pace of 10.2 million units. Nevertheless, the lift from the government program was less than expected, given the cost. August vehicle sales will also receive a boost and auto dealers and manufacturers will have significantly reduced their inventories. Vehicle sales will likely slump again, after the government cash runs out.
TUESDAY, August 4th
The pending home sales index, which tracks the number of signed contracts, rose for the fifth straight month, gaining 3.6% in June to a level of 94.6. The monthly gain and the level of the index indicate stronger existing home sales in the July to August timeframe. Because they are rising from a very weak level, the pace of existing home sales, while improved will likely remain subdued.
Personal income fell 1.3% in June led by a sharp drawback in transfer payments related to the stimulus package, though wages and salaries were also weak because of soft labor market conditions. Consumer spending jumped 0.4% in June which was largely due to higher gas prices. A closely watched inflation gauge contained in this data series, the PCE price index shot 0.5% higher in June also related to higher energy costs.
WEDNESDAY, August 5th
The MBA mortgage applications index increased 4.4% to 517.3% for the week ending July 31. The purchase index edged 0.9% higher for the week as the refinance index jumped 7.2%. Application activity has been slow but steady on the purchase side while refinance activity seems to bounce around in response to movement in long-term fixed mortgage rates.
The ISM non-manufacturing index fell to 46.4% in July from 47.0% in June. The level of the index suggests sluggish activity in the services, construction and government sectors of the economy. Service sector activity remains weak but the steep declines have abated for now.
THURSDAY, August 6th
Jobless claims fell 38k to 550k for the week ending August 1. The Labor Department reported no special factors that may have distorted the data this week so the drop in jobless claims clearly points to some fundamental improvement in labor market conditions. We hope to see fewer declines in July payrolls, due out tomorrow.
Mortgage rates eased this week despite better economic data readings and higher yields in the bond market. 30-year fixed rate mortgages averaged 5.22% this week compared to 5.25% last week according to Freddie Mac's mortgage market survey.
FRIDAY, August 7th
Payroll employment declined by 247,000 in July compared to market expectations for a 328,000 drop. Job losses were broad based across most industries with only various services and the government reporting small job gains. Nevertheless, this was the smallest payroll decline since August of last year. Since the recession began in December 2007, 6.664 million jobs have been lost. The unemployment rate unexpectedly fell to 9.4% of the workforce, down from 9.5% in the previous month.
Stock Market Close for the Week
Index
Latest
A Week Ago
Change
DJIA
9370.07
9171.61
+198.46 or +2.16%
NASDAQ
2000.25
1978.50
+21.75 or +1.10%
WEEK IN ADVANCE
Data releases in the week ahead focus on consumer spending and inflation. We will hear from the Fed mid-week when the post-FOMC meeting policy statement comes out. No rate change is expected but the statement could provide some insights on how the Fed sees the recovery shaping up. Also, the Treasury is set to sell another $75 billion in notes and bonds in three separate auctions.
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The ISM manufacturing index increased to 48.9% in July from a level of 44.8% in June. The July index reading is just below the key 50% level which indicates mild contraction in total factory activity, nationwide. Stronger new orders bode well for future production while higher employment and inventories suggest improvement in current activity. Manufacturing activity remains weak and will likely float around the breakeven line this year and into next.
Personal income fell 1.3% in June led by a sharp drawback in transfer payments related to the stimulus package, though wages and salaries were also weak because of soft labor market conditions. Consumer spending jumped 0.4% in June which was largely due to higher gas prices. A closely watched inflation gauge contained in this data series, the PCE price index shot 0.5% higher in June also related to higher energy costs.
The MBA mortgage applications index increased 4.4% to 517.3% for the week ending July 31. The purchase index edged 0.9% higher for the week as the refinance index jumped 7.2%. Application activity has been slow but steady on the purchase side while refinance activity seems to bounce around in response to movement in long-term fixed mortgage rates.