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Week In Review – March 16, 2018

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Week In Review

Volume 24, Number 10

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

Economic Highlights for Week Ending March 16, 2018

 

MONDAY, March 12th

Small business optimism remains near record highs. The National Federation of Independent Business small business confidence index increased from 106.9 in January to 107.6 in February. The increase was a bit better than expected and puts the index at its highest since the early 1980s. Gains in six of the ten components drove the increase last month as more firms expected higher sales and for the economy to improve. Capital expenditure plans were unchanged while hiring and plans to raise worker compensation slipped. Amid the heightened optimism among small business owners, concerns have shifted from taxes and regulations as the main problem to finding and hiring qualified workers.

 

TUESDAY, March 13th

After heating up in January, consumer inflation moderated in February. The consumer price index rose 0.2% last month following a 0.5% increase in January. The gain was in line with expectations and gives the Fed what they need to raise rates later this month. Food prices were unchanged in February while energy inched higher. Excluding food and energy, the core CPI also increased 0.2%, a touch less than the 0.3% gain in January. On a year-ago basis, the headline CPI was up 2.3% while the core index advanced 1.9%.

UFSC Week In Review

WEDNESDAY, March 14th

The MBA mortgage applications index rose 0.9% for the week ending March 9. The purchase index was up 3.4% on the week as the refinance index tumbled 2.2%. Higher rates are taking their toll on refinancing activity. The average interest rate on 30-year fixed rate conforming mortgages ($453,100 or less) rose 4 bps last week to 4.69%

Retail sales slipped 0.1% in February which was weaker than expected. Revised January retail sales also showed a 0.1% decline, a bit better than a 0.3% drop originally reported. The downshift appears to be related to auto sales which retreated from record highs in previous months. Excluding auto sales from the total, retail sales actually rose 0.2% in February and 0.1% in January. Sales at gasoline stations were down 1.2%, but the drop is price-related. Favorable weather boosted spending at building material stores, but this failed to offset weakness elsewhere. Decliners included apparel stores, furniture, and appliance stores while sales remained unchanged at non-store retails (ecommerce) and restaurants. After today’s report, the consumer sector gets a one-notch downgrade from strong to solid.

 

THURSDAY, March 15th

The labor market continues to tighten. Jobless claims fell 4k to 226k for the week ending March 10. The four-week moving average at 221,500, is down for the seventh time in the last nine weeks and is nearly 7,000 lower than it was a month ago. This is a favorable early indication for job creation in the March employment report.

The NAHB housing market index decreased one point in March to a level of 70. The index remains quite high indicating strong homebuilder optimism. Two of the three index components slipped this month and one was unchanged; assessments of future sales slipped 2 points to 78, present sales were steady at 77 while the volume of foot traffic through model homes fell 3 points to 51, which remains above the break-even level of 50. Today’s data point to continued strength for the new home market, for both new construction and sales.

 

FRIDAY, March 16th

New residential construction starts dropped 7.0% in February to an annual rate of 1.236 million.
This follows an upwardly revised pace of 1.329 million in January. Housing starts are now 4.0% below their February 2017 level. The decline stemmed entirely from an outsized 28.0% drop in multifamily housing starts which fell to 317k. Single family starts gained 2.9% to 902k and are also 2.9% higher than one year ago. Housing permits issuance, often used as a proxy for future building activity, fell 5.7% last month to 1.298 million but remain 6.5% higher than in February 2017. Single family permit issuance edged 0.6% higher last month while multifamily permits declined 14.6%. Total housing permits are down from the current pace of new starts so construction activity is likely to be slower over the next several months.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
24,946.51
25,335.74
-389.23 or -1.54%


NASDAQ
7,481.99
7,560.81
-78.82 or -1.04%


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
1.42%
1.16%
0.66%


11th District COF
0.777%
0.707%
0.616%


10-Year Note
2.84%
2.18%
2.55%


30-Year Treasury Bond
3.08%
2.77%
3.15%


30 -Yr Fixed (FHLMC)
4.44%
3.78%
4.30%


15 -Yr Fixed (FHLMC)
3.90%
3.08%
3.50%

6-Mo Libor (FNMA)
2.22375%
1.45389%
1.37489%

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