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Week In Review – July 13, 2018

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Week In Review

Volume 24, Number 24

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

Economic Highlights for Week Ending July 13, 2018

 

MONDAY, July 9th

Consumers ran up their credit cards in May while non-revolving credit balances increased sharply as well.  Total consumer credit outstanding rose by $24.6 billion in May.  Revolving credit, which is mostly credit card debt, where prior gains have been subdued, rose $9.8 billion for the biggest increase since November last year. Nonrevolving credit, which tracks both vehicle financing as well as student loans, rose $14.8 billion in the month.  The rise in revolving credit may not be a plus for household wealth but it is a plus for consumer spending which has been moderate so far this year.

 

TUESDAY, July 10th

U.S. small business confidence slipped in June but remains the sixth highest on record.  The NFIB small business optimism index fell from 107.8 in May to 107.2 in June.  The share of respondents saying now is a good time to expand fell from 34 to 29, but it remains higher than that in the second half of 2017.  Among the most important reasons to expand were economic conditions.  The net percent of small businesses planning to raise prices fell in June.  Hiring plans improved, but the net percent of respondents raising compensation declined in June.  Capital expenditure plans fell, and there is still no evidence of a post-tax legislation bump.

UFSC Week In Review

WEDNESDAY, July 11th

The MBA mortgage applications index rose 2.5% for the week ending July 6.  The purchase index increased 6.5% on the week as the refinance index declined 3.8%.  The refinancing share of mortgage activity fell 2.4% to 34.8%, its lowest level since August 2008. Contract mortgage interest rates were down last week; the 30-year fixed rate for conforming mortgages ($453,100 or less) fell 3bps to 4.76%.

Inflation is rising at the wholesale level. The producer price index rose 0.3% in June and is now up 3.4% on the year.  Excluding volatile food and energy costs from the index, the core PPI was also up 0.3% on the month but 2.8% on the year.  The monetary policy implications are not significant, as the Fed has enough to justify raising rates in September, but if inflation pressures continue to build, it would strengthen the forecast for another rate hike in December.

 

THURSDAY, July 12th

After edging higher in the prior two weeks, initial jobless claims fell an outsized 18k to 214k for the week ending July 7.  The 4-week average was down 1,750 to 223k and is right in line with the month-ago comparison.  These are very healthy results that offer the first hint of strength for the July employment report.  Note that all the readings in this report are at or near historic lows and are consistent with strong demand for labor.

The consumer price index rose 0.1% in June, missing expectations for 0.2% gain.  Food prices increased 0.2% while energy prices slipped 0.3%, but the weakness was isolated to energy services, including electricity and utility gas.  Excluding food and energy, the core CPI rose 0.2% last month, matching consensus expectations.  On a year-ago basis, the headline CPI was up 2.8%, compared with 2.7% in May.  The core CPI rose 2.2% on a year-ago basis, identical to that in May.

 

FRIDAY, July 13th

U.S. import prices fell in June, but it does not alter projections that domestic inflation pressures are gradually building.  Import prices fell 0.4%, compared with the consensus for a 0.2% increase.  Growth in import prices in May was revised higher and they now are shown to have risen 0.9% (previously 0.6%).  Imported crude oil prices were down 2.5% in June; gas prices dropped 6%. Nonfuel import prices, which matter for consumer prices, fell 0.3% led by a drop in food prices.  This decline for imported consumer goods, coming at a time when U.S. trading partners are beginning to apply tariffs, could become a signpost to look back on should a trade war begin to inflate prices.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
25,019.41
24,456.48
+562.93 or +2.30%


NASDAQ
7,825.98
7,688.39
+137.59 or +1.79%


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
5.00%
4.50%
4.25%


Fed Discount
2.50%
2.00%
1.75%


Fed Funds
1.90%
1.42%
1.16%


11th District COF
0.885%
0.746%
0.648%


10-Year Note
2.83%
2.54%
2.35%


30-Year Treasury Bond
2.93%
2.87%
2.91%


30 -Yr Fixed (FHLMC)
4.53%
3.99%
4.03%


15 -Yr Fixed (FHLMC)
4.02%
3.44%
3.29%

6-Mo Libor (FNMA)
2.50123%
1.83707%
1.44767%

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

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