Last Week in Review…

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Last Week’s Economic News in Review

August 4th, 2016

New home sales once again turned in a solid monthly performance, while initial jobless claims were on the rise, and durable goods orders fell.

New Home Sales

Sales of new, single-family homes in June grew to an annual rate of 592,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. This marked a 3.5 percent increase over May’s revised rate of 572,000, and when compared annually was 25.4 percent higher than June 2015’s pace of 472,000.

In terms of prices, the median sales price for a new home in June was $306,700, and the average sales price was $358,200. In terms of inventory, the number of new homes for sale at the end of June totaled 244,000, which constituted a 4.9-month supply at June’s sales pace.

All told, new home sales have enjoyed solid performance for the first half of this year and the trend looks like it will continue.

”We expect housing to continue to firm, on average, over the medium term, with a buoyant household sector supporting both prices and volumes,” Barclays Economist Rob Martin told the Wall Street Journal.

Initial Jobless Claims

While first-time claims for unemployment benefits filed by the newly unemployed were at a three-month low, the week before last saw them on an upswing, according to last week’s report from the Employment and Training Administration. Initial jobless claims placed during the week ending July 23 hit 266,000, an increase of 14,000 from the preceding week’s total of 252,000.

The four-week moving average — considered a more reliable gauge of lay-offs — actually fell to 256,500, a decline of 1,000 claims from the previous week’s total of 257,500.

While the gain was sizable, economists generally did not raise an alarm given how low claims are when compared to the 300,000-claim mark that generally indicates a growing job market.

“Claims at this point are telling you that you’re really near full employment,” Deutsche Bank Securities Inc. Economist Brett Ryan told Bloomberg. “… The labor market’s chugging along.”

Durable Goods Orders

Orders for manufactured durable goods placed in June dropped by 4 percent ($9.3 billion) to $219.8 billion, the Census Bureau reported last week. This marked the second straight monthly decline, after May’s 2.8 percent decline, and marked the largest monthly decrease for durable goods orders in the past two years.

Transportation equipment — also down two months in a row — was the main driver for June’s woes, falling 10.5 percent ($8.5 billion) to $72.2 billion. Excluding transportation, durable goods orders only fell 0.5 percent.

Durable goods orders are considered a good indicator of business investment, and given the lackluster report, companies will mostly likely avoid new equipment purchases until the end of the year, according to Michael Montgomery, U.S. economist at IHS Global Insight.

“Everything conspiring against the durables sector in 2015 will remain working against it for at least the balance of 2016,” Montgomery wrote in a note to clients. “The hope for 2017 is that the adjustment processes start to wind down and produce less drag and token recovery.”

This week we can expect:

  • Monday — Construction spending for June from the Census Bureau.
  • Tuesday — Personal incomes and spending for June from the Bureau of Economic Analysis; car and truck sales for July from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; June factory orders from the Census Bureau.
  • Friday — July payrolls, unemployment rate, hourly earnings and average workweek from the Bureau of Labor Statistics; June balance of trade from the Census Bureau; and consumer credit for June from the Federal Reserve.