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Week In Review – April 13, 2018

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Week In Review

Volume 24, Number 14

Reginald J. Smith, Community Development Manager – Bank of Kansas CityReginald J. Smith

Economic Highlights for Week Ending April 13, 2018

 

MONDAY, April 9th

The National Federation of Independent Business small business confidence index fell from 107.6 in February to 104.7 in March.  The level of the index still indicates continued, but subdued optimism among small business owners compared to previous months.  The details were mixed as expectations for the economy to improve fell while hiring plans have remained little changed over the past few months.  Plans to raise compensation fell in March, hitting their lowest since November 2017.  On a positive note, more firms were raising or planning to raise prices in the months to come.

 

TUESDAY, April 10th

Inflation at the wholesale level rose in March; the producer price index rose 0.3% on the month and are now up 3.0% on the year.  A 2.2% jump in food prices led the increase last month; energy prices slipped 2.1%.  The core producer price index which excludes food and energy costs, also rose 0.3% last month and is now up 2.7% on the year. Overall, the PPI adds to the evidence that inflation is accelerating and supports forecasts for the Fed to raise interest rates three additional times this year.

 

UFSC Week In Review

WEDNESDAY, April 11th

The MBA mortgage applications index fell 1.9% for the week ending April 6.  The purchase index fell 2.0% last week as the refinance index declined 1.7%.  The drop in mortgage application activity came despite easing contract mortgage interest rates.  The average rate on 30-year fixed rate conforming mortgages ($453,100 or less) fell 3 bps to 4.66%.

The consumer price index fell 0.1% in March weighed down mostly from soft energy prices.  Food prices remained tame, rising just 0.1% last month.  Excluding food and energy costs from the index the core CPI rose 0.2% on the month and 2.1% on the year.  These data are roughly in line with the Feds expectations for consumer inflation: modest pressure that is slowing building.

The FOMC meeting minutes from their last policy setting session in March were not surprising and showed that the central bank is sticking to its game plan of continued gradual rate hikes that will move monetary policy from accommodative to neutral.  The description of the economy at the March FOMC meeting was moderate with inflation, however, still seen as moving toward target this year to their 2 percent policy goal.  The Committee does not believe that steel and aluminum tariffs will impact the economy significantly but noted that the potential of retaliatory trade actions by other countries does pose a downside risk to the U.S. economy. Quarterly FOMC forecasts were posted at the meeting showing members expected two more 25 bps hikes this year followed by two to three more the next year.  Stocks and bonds are showing no significant reaction to today’s minutes.

 

THURSDAY, April 12th

Initial claims for unemployment insurance benefits provide further confirmation of a healthy labor market.  Jobless claims fell 9k to 233k for the week ending April 7.  The four-week moving average rose 1,750 from the previous week to 230,000. Claims remain very low and consistent with strong demand for labor.

Geopolitical concerns involving a possible military action in Syria eased today giving stocks a boost.  The Dow rebounded 1.2% to 24,483 on the day.  As tensions eased so did demand for Treasuries; the benchmark 10-year yield was up 5 bps to 2.83%.  Oil prices held onto strong gains made this week as price for West Texas Intermediate edged higher to just over $67 a barrel.

 

FRIDAY, April 13th

Consumer sentiment softened in the early weeks of April, losing 3.6 points from the previous month, and dropping to a three-month low. Consumer perceptions of current economic conditions reversed most of last months gain and consumer expectations slid for the second month in a row.  The number of consumers citing improved incomes over the past year surged last month, but so far in April the results have been more measured.  Business and consumer expectations weakened modestly for the coming year.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
24,360.14
23,932.78
+427.36 or +1.79%


NASDAQ
7,106.65
6,915.11
+191.54 or +2.77%


WEEK IN ADVANCE

After a week of mostly housing market related data, reports in the coming week wrap up the sector for the month. Watch for new home sales and pending home sales, both on next week’s calendar.


Key Interest Rates

Latest

6 Mos Ago

1 Yr Ago



Prime Rate
4.75%
4.25%
4.00%


Fed Discount
2.25%
1.75%
1.50%


Fed Funds
1.68%
1.16%
0.91%


11th District COF
0.816%
0.732%
0.591%


10-Year Note
2.83%
2.33%
2.30%


30-Year Treasury Bond
3.03%
2.86%
2.93%


30 -Yr Fixed (FHLMC)
4.42%
3.91%
4.08%


15 -Yr Fixed (FHLMC)
3.87%
3.21%
3.34%

6-Mo Libor (FNMA)
2.45240%
1.50600%
1.42322%

Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

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