Call UFSC Today! (202) 434-8970 | UFSC@ufscnet.org

Week In Review – December 15, 2017

0 COMMENTS
Week In Review

Volume 23, Number 44

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

UFSC Week In Review

Economic Highlights for the Week Ending December 15, 2017

 

MONDAY, December 11th

The National Federation of Independent Business’ small business optimism index rose from 103.8 in October to 107.5 in November, a new high for the index that began in 1986.  Through November, the NFIB small business index is averaging 105.7 this quarter which would be consistent with GDP growth in excess of 4% at an annualized rate.  The increasing odds of U.S. tax legislation being passed likely boosted small business confidence last month.  The net percent of small firms planning to expand employment increased in November while expectations for the economy to improve jumped from 32% to 48%, matching the highest this year.

 

TUESDAY, December 12th

Wholesale inflation rose strongly last month; the producer price index increased 0.4% in November to bring the year-over-year rate to 3.1%, a level not seen in nearly six years.  This followed 0.4% monthly gains in October and September.  Novembers gain was led by a 4.6% gain in energy prices; food prices rose 0.3%.  Excluding food and energy cost from the index, the core PPI rose 0.3% on the month and was up 2.4% on the year, a rate more in line with the Feds target for inflation.

 

WEDNESDAY, December 13th

The MBA mortgage applications index fell 2.3% for the week ending December 8.  The purchase index was down 1.1% last week however it remains up nearly 10% on the year which suggests solid home buying activity during the fourth quarter.  The refinance index fell 2.5% on the week as contract mortgage rates moved slightly higher.  The average interest rate on 30-year fixed-rate for conforming mortgages ($424,100 or less) was up 1 bps to 4.20%.

Stripping out the volatile energy and food prices, the consumer price index was tepid last month, but it wont stop the Federal Reserve from raising interest rates later today.  The core CPI rose 0.1% in November and was up 1.7% on the year. However, the headline CPI got a boost from higher energy prices.  The CPI increased 0.4% on a monthly basis and was up 2.2% annually.  Inflationary pressures are expected to build next year, as the economy will grow above trend.

As widely expected, the Federal Open Market Committee raised the target range for the fed funds rate by 25 bps to 1.25% to 1.5%.  There were two dovish dissents.  The key change to the statement was in policymakers’ assessment of inflation, noting that it had declined this year.  However, the Fed relies on economic performance to decide on rates, therefore the falling unemployment rate will continue to support the FOMCs plan to gradually raise interest rates.  The near-term risks to the economic outlook were described as roughly balanced again.  The Fed still has three rate hikes penciled in for 2018. The long-run equilibrium fed funds rate was left at 2.75%.

 

THURSDAY, December 14th

Jobless claims fell 11k to 225k for the week ending December 9.  Initial claims can be very volatile this time of year because of the holidays, however the four-week moving average dropped from 242k last week to 235k which confirms the trend.  The labor market continues to tighten, and the unemployment rate is expected to trend lower in coming months.

Retail sales growth surprised on the upside in November as consumer spending remained a support to the economy.  Sales rose 0.8%, well above expectations, and growth was revised up in the prior two months.  Sales at gasoline stations jumped 2.8% as prices rose, contributing 0.2 percentage point to growth.  The decline in sales at vehicle dealers was a smaller than expected 0.2%.  Growth was strong in a broad set of segments, with no major segments except vehicle dealers posting monthly declines.  Non-store retailers were another growth leader as e-commerce continued to grow strongly.  Sales at electronics and appliance stores grew more than 2%.  In November, sales were 5.8% above their year-ago level, the fastest growth since 2012.

 

FRIDAY, December 15th

Stock Market Close for the Week

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
24,651.74
24,329.16
+322.58 or +1.33%


NASDAQ
6,936.58
6,840.08
+96.50 or +1.41%


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
1.16%
0.91%
0.41%


11th District COF
0.737%
0.645%
0.598%


10-Year Note
2.35%
2.18%
2.54%


30-Year Treasury Bond
2.69%
2.82%
3.16%


30 -Yr Fixed (FHLMC)
3.93%
3.91%
4.16%


15 -Yr Fixed (FHLMC)
3.36%
3.18%
3.37%

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

0