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Week In Review – July 20, 2018

Week In Review

Volume 24, Number 25

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

Economic Highlights for Week Ending July 20, 2018


MONDAY, July 16th

With tax cuts and growing wages supporting budgets, retail sales posted their fourth consecutive month of solid growth in June.  Sales rose 0.5% following growth of 1.3% in May, upwardly revised from 0.8%.  Autos were among the growth leaders.  Excluding autos, sales grew 0.4%, led by drugstores, restaurants, non-store retailers and gasoline stations.  Several segments posted large declines, including apparel, sporting goods and hobby, and department stores. In June, sales were 6.6% above their year-ago level.

TUESDAY, July 17th

Homebuilder sentiment about the new home market remains decidedly optimistic. The NAHB housing market index was unchanged at a high level of 68 in July.  Builder assessments of current sales were unchanged at a very strong 74, future sales projects dropped 2 points to 73 while foot traffic through model home scored 52, above the neutral 50-point threshold.  Regional data show the West out in front at a 3-month average of 75 with the South at 70.  The Midwest is at 65 and the Northeast at 57.  These data indicate a solid performance in new home sales will likely continues over the next few months.

In his semi-annual testimony to Congress today Federal Reserve Chairman Jerome Powell said in prepared comments that it is “difficult to predict” the economic effects of the administration’s trade and fiscal policies.  He also said, however, that fiscal policy, specifically tax cuts and higher government spending, is likely to support economic growth.  On inflation, Powell commented that it is likely to stay near the Fed’s 2-percent target for the next several years.  The Fed Chief noted that wage inflation is showing a little more growth than in recent years.  He believes that interest rates are low enough to support growth, that business investment is growing at a healthy rate, and that the economy is solid with growth “considerably stronger” in the second quarter than in the first.  He also indicated that gradual rate hikes are the best policy for the economy.

UFSC Week In Review

WEDNESDAY, July 18th

The MBA mortgage applications index fell 2.5% for the week ending July 13.  The purchase index fell 5.0% on the week as the refinance index gained 2.0%. Contract mortgage interest rates were a bit higher this week with the 30-year fixed rate for conforming mortgages up 1bps to 4.77%.  Though still an improvement from the negative readings seen in June, the week’s slim year-on-year gain in purchase applications does not indicate robust housing market strength.

Housing starts turned unexpectedly lower last month to their lowest level since September of last year.  Housing starts dropped 12.3% in June to an annualized rate of 1.173 million, well below consensus estimates for an annual pace of 1.320 million.  Starts for both single family and multifamily units plummeted sharply with single family housing starts down 9.1% on the month to an annual rate of 858k and multifamily starts down 19.8% to 315k.  Weakness was most pronounced in the Midwest though all regions show declines.  Building permit issuance fell 2.2% in June to an annual rate of 1.273 million.  Permits remain 3.0% below their level in June of last year.  Single family permits were up 0.8% on the month to 850k while multifamily permits sank 8.7% to 387k.  Total permits remain higher than the current pace of starts which bodes well for modest gains in new home construction going forward.

The Federal Reserve’s July Beige Book, spanning economic activity from mid-May through June, suggests that economic activity expanded moderately or modestly in 10 of the 12 districts.  The two exceptions were the Dallas district, where the strengthening energy sector spurred exceptional growth, and the St. Louis district, where economic activity increased slightly.  Factories are becoming increasingly concerned about shifting trade policies, which are leading to higher prices and supply disruptions.  Nevertheless, all districts are reporting that labor markets are tight, and difficulties finding qualified workers are limiting growth.  Home sales are rising slowly, but contacts are not concerned about rising interest rates.

THURSDAY, July 19th

Jobless claims fell 8k to 207k for the week ending July 14th.  This is the lowest level of jobless claims since December 1969.  Timing and related adjustments in the statistics for summer retooling shutdowns in the auto sector are always wildcards at this time of year, yet the signal from this report is nevertheless very clear: demand for labor is unusually strong.

FRIDAY, July 20th


Stock Market Close for the Week



A Week Ago


+38.71 or +0.15%

-5.78 or -0.07%


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


6 Mos Ago

1 Yr Ago

Prime Rate

Fed Discount

Fed Funds

11th District COF

10-Year Note

30-Year Treasury Bond

30 -Yr Fixed (FHLMC)

15 -Yr Fixed (FHLMC)

6-Mo Libor (FNMA)


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