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Week In Review – January 12, 2018

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Week In Review

Volume 24, Number 2

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

UFSC Week In Review

Economic Highlights for the Week Ending January 12, 2018

 

MONDAY, January 8th

Outstanding consumer credit surged by $28 billion in November, a 17-year high. Consumers broke out their credit cards during the month and used them racking up $11.2 billion in revolving credit balances. Nonrevolving credit, where auto financing and student loans are tracked, rose $16.8 billion which is also a sharp rise. The rise in revolving credit is the second largest of the ongoing expansion and perhaps indicates less reluctance among the nation’s consumers to run up their credit cards. And though it hints at momentum going into December’s shopping, it may also reflect slackening credit standards.

 

TUESDAY, January 9th

The National Federation of Independent Business small business optimism index fell from 107.5 in November to 104.9 in December. Though the index was weaker than expected, it remains elevated and consistent with solid GDP growth in the fourth quarter. The NFIB index averaged 105.4 in the fourth quarter, consistent with GDP growth in excess of 4%. The net percent of small firms planning to increase worker compensation hit a cyclical high in December. Capital expenditure plans inched higher but show little impact from the tax legislation.

 

WEDNESDAY, January 10th

The MBA mortgage applications index jumped 8.3% for the week ending January 5. The purchase index shot 5.0% higher on the week as the refinance index increased 11.4%. Contract mortgage interest rates were up marginally last week with the average interest rate on the 30-year fixed rate mortgage for conforming loans (the conforming amount rose to $453,100 or less from $424,100 or less) rose 1 bps to 4.23%.

 

THURSDAY, January 11th

Jobless claims rose 11k to 261k for the week ending January 6. The gain was broad based across the country and not centered in hurricane impacted areas. The 4-week moving average rose sharply as well gaining 9k to 250,750 last week. Initial claims were remarkably steady and low throughout 2017 which makes this gain in the first week of this year stand out. However, one week of data does not establish a trend so next week’s initial claims data will be closely watched and will track the sample week of the January employment report.

The producer price index which tracks inflation at the wholesale level, fell 0.1% in December after rising 0.4% in the previous two months. For all of 2017, producer prices rose 2.7%, compared with a 1.7% increase in 2016. Excluding the volatile food and energy components, core producer prices fell 0.1% on the month but remain up 2.6% on the year. Given the annual rates of wholesale inflation, this report does not have huge implications for FOMC monetary policy.

 

FRIDAY, January 12th

Retail sales ended the year on a high note with holiday sales exceeding expectations for many retail segments. Sales rose 0.4% in December, a particularly positive result coming off Novembers 0.9% gain, which was revised higher. Core sales, excluding auto dealers and gasoline stations, also rose 0.4%, after gaining 1.2% in November and testifying to the strength of holiday shopping. Sales at gasoline stations were unchanged as prices were soft. The gain in sales at vehicle dealers was smaller than unit sales suggested at 0.2%. Growth was led by non-store retailers and building supply stores. Sales fell at department stores, sporting goods and hobby stores, apparel stores, and electronics and appliance stores. In December sales were 5.4% above their year-ago level. Core sales were up 6%.

Consumer inflation appears to be firming. The consumer price index rose 0.1% on the month and is now up 2.1% for the year, right in the Fed’s target zone for inflation. Core consumer prices, which exclude both food and energy costs rose 0.3% on the month and are now up 1.8% on the year. The gain in core consumer prices bodes well for the Fed’s favored measure of inflation, the core PCE price index which will be released later this month.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
25,803.19
25,295.87
+507.32 or +2.01%


NASDAQ
7,261.06
7,136.56
+124.50 or +1.74%


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
4.50%
4.25%
3.75%


Fed Discount
2.00%
1.75%
1.25%


Fed Funds
1.41%
1.16%
0.66%


11th District COF
0.746%
0.648%
0.603%


10-Year Note
2.55%
2.35%
2.38%


30-Year Treasury Bond
2.85%
2.91%
2.98%


30 -Yr Fixed (FHLMC)
3.99%
4.03%
4.12%


15 -Yr Fixed (FHLMC)
3.44%
3.29%
3.37%

6-Mo Libor (FNMA)
1.83707%
1.44767%
1.31767%

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