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Week In Review – June 15, 2018

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Week In Review

Volume 24, Number 20

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

Economic Highlights for Week Ending June 15, 2018

 

MONDAY, June 11th

The National Federation of Independent Business small business optimism index rose from 104.8 in April to 107.8 in May, putting it at a record high for the series since its inception in January 1986.  Details showed increased optimism across the board as the percentage of firms expecting the economy to improve in the next six months rose from 30% to 37%.  There was a small drop in the percent of small businesses with at least one job hard to fill.  Compensation plans slipped suggesting that labor supply issues are not an enormous issue yet.  Overall, strong small business optimism bodes well for increased economic activity over the next six to none months.

 

TUESDAY, June 12th

Inflation pressures are gradually developing, not surprising given the rise in global commodity prices, the tightening in the domestic labor market, and above-trend GDP growth.  The headline consumer price index increased 0.2% in May, matching the gain in April.  Food prices were unchanged, while energy rose 0.9%.  Excluding food and energy, the CPI was up a trend-like 0.2%.  On a year-ago basis, the headline and core CPIs increased 2.7% and 2.2%, respectively. It’s a slam dunk that the Fed will raise interest rates at the conclusion of its meeting Wednesday, and odds favor that it signals a total of four rate hikes, rather than three, this year.
UFSC Week In Review
 

WEDNESDAY, June 13th

The MBA mortgage applications index fell 1.5% for the week ending June 8.  Both the refinance index and the purchase index fell by 1.5% last week as well.  Contract mortgage interest rates rose across the board with the average interest rate for 30-year fixed rate conforming mortgages ($453,100 or less) increasing by 8 basis points to 4.83 percent.

As widely expected, the FOMC hiked the target for the fed funds rate by one-quarter point today placing it in a range of 1-3/4 to 2 percent.  The Fed also confirmed in the post meeting statement today that there will be 2 more rate hikes this year to put the total at 4 or 1 full point for 2018.  The FOMC cited a labor market that continues to strengthen and a pick-up in household spending for hiking this time around.  On prices, policy makers expect inflation to run near its target of 2 percent which also supports gradual rate hikes this year.

 

THURSDAY, June 14th

The U.S. labor market is very good shape, as initial claims remain very low.  Initial claims for unemployment insurance benefits fell from 222,000 to 218,000 in the week ended July 9, coming in better than expected.  The four-week moving average slipped by 1,250 to 225,250.

Continuing claims for unemployment insurance benefits dropped from 1.746 million to 1.697 million in the week ended June 2.  The insured unemployment rate remained at 1.2%. Though initial claims are not a perfect measure of layoffs, they are consistent with strong job growth.  Job growth will remain more than sufficient to push the unemployment rate lower.

Retail sales posted their third month of solid growth in May, exceeding expectations, as consumer spending benefits from tax cuts. Sales rose 0.8%.  This follows gains of 0.4% and 0.7% in the prior two months.  Gains were broad-based, led by miscellaneous store retailers, building supply stores, and gasoline stations, each posting growth of 2% or better.  Sales fell at furniture and sporting goods stores.  In May, sales were 5.9% above their year-ago level, the strongest since November.

 

FRIDAY, June 15th

 

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
25,090.48
25,316.53
-226.05 or -0.89%


NASDAQ
7,746.38
7,645.51
+100.87 or +1.32%


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%
4.25%
4.00%


Fed Discount
2.50%
1.75%
1.50%


Fed Funds
1.89%
1.16%
0.91%


11th District COF
0.895%
0.737%
0.645%


10-Year Note
2.92%
2.37%
2.18%


30-Year Treasury Bond
3.05%
2.74%
2.82%


30 -Yr Fixed (FHLMC)
4.62%
3.93%
3.91%


15 -Yr Fixed (FHLMC)
4.07%
3.36%
3.18%

6-Mo Libor (FNMA)
2.24375%
1.66800%
1.41878%

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

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