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Week In Review – December 1, 2017

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Week In Review

Volume 23, Number 42

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

UFSC Week In Review

Economic Highlights for the Week Ending December 1, 2017

 

MONDAY, November 27th

New home sales jumped again in October, rising 6.2% to an annualized pace of 685k which is a new expansion high.  This follows a 14.2% gain in September and an annual rate of 645k.  New home sales are trending higher and are now 18.7% above their October 2016 rate of 577k.  Regionally, new home sales were up in all areas of the country with outsized gains in the Northeast and Midwest and more moderate gains in the South and West.  Inventories of new homes available for sale were up 1.4% on the month to 282k dropping the months supply to 4.9 months at the current sales pace, from 5.2 months previously.  Inventories remain quite lean.  Both strong demand and tight supply led house price appreciation moderately higher over the last year.  The median price for a new home was up 3.3% to $312,800 from October 2016.  Boosted by the strong labor and stock markets, new home sales look to be a significant contributor to fourth quarter economic growth.

 

TUESDAY, November 28th

The S&P CoreLogic Case-Shiller home price index showed that home prices continued their rise across the country over the last 12 months.  In September, the 20-city index was up 6.2% on a year-over-year basis, up from a 5.8% annual gain in the previous month.  All 20 metro areas tracked by this index posted annual gains led by Seattle, Las Vegas, and San Diego.  In September, Seattle led the way with a 12.9% year-over-year price increase, followed by Las Vegas with a 9.0% increase, and San Diego with an 8.2% increase.

The Conference Board’s consumer confidence index rose to 129.5 in November from 126.2 in October.  This is the highest confidence has been since December 2000. Consumers are definitely optimistic.  This month saw improvement in consumers’ evaluation of the present situation and economic expectations.  Confidence in the labor market continued to rise with more people expecting jobs in the coming six months.

 

WEDNESDAY, November 29th

The pending home sales index increased 3.5% to 109.3 in October, its highest level since June.  The increase in the headline index was driven by gains in the South, Midwest, and Northeast Census regions, while the West recorded a slight decline.  The South’s sharp 7.4% increase likely reflects replacement housing demand bouncing upward because of the damage inflicted by the recent hurricanes.  The gain and the level of the index points to continued gains for final sales of existing homes.  After a mostly flat year, housing is pivoting higher at year end.

The Federal Reserve’s Beige Book, covering economic activity in October through mid-November, indicates that economic activity expanded at a modest to moderate pace in all 12 districts.  Pre-holiday retail reports were mixed on net, but expectations for holiday sales are high.  Many districts noted growth in the transportation sector, though wildfires in San Francisco temporarily reduced shipping volumes.  Manufacturing expanded at a moderate pace across most districts.  Residential real estate was generally constrained, as sales and homebuilding were restrained.  The outlook remained positive in most districts.  The Fed will likely raise the target for the fed funds rate when they meet mid-month.

 

THURSDAY, November 30th

Jobless claims fell 2k to 238k for the week ending November 25.  Claims in Puerto Rico fell back suggesting that the worst of the hurricane impact from Maria may have passed.  The low level of claims provides further confirmation of a healthy labor market and another strong showing for job growth for November.

Inflation is showing a bit of life, which is probably more than enough to assure a rate hike at this month’s FOMC meeting.  The core PCE price index, which closely watched by the Fed, rose 0.2% in October, and was revised 1 tenth higher in September.  The core rate was up 1.4 percent over the past year, not exactly overheated but the forward direction, however glacial, is favorable for policy makers.

 

FRIDAY, December 1st

Motor vehicle sales retreated in November to an annual pace of 17.5 million units from a record high pace of 18.1 million in October.  Hurricane-related replacement sales cooled off, but incentive spending remained close to a record.  Retail sales performed better than fleet sales. Also, light-truck sales continue to outperform their car counterparts.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
24,231.59
23,526.18
+705.41 or +3.00%


NASDAQ
6,847.59
6,867.36
-19.77 or -0.29%


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
4.25%
4.00%
3.50%


Fed Discount
1.75%
1.50%
1.00%


Fed Funds
1.07%
0.90%
0.40%


11th District COF
0.737%
0.645%
0.598%


10-Year Note
2.36%
2.20%
2.37%


30-Year Treasury Bond
2.76%
2.86%
3.03%


30 -Yr Fixed (FHLMC)
3.90%
3.94%
4.08%


15 -Yr Fixed (FHLMC)
3.30%
3.19%
3.34%

6-Mo Libor (FNMA)
1.66800%
1.41878%
1.28878%

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