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Week In Review – November 1, 2019

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Black Economic Outlook
Reginald J. Smith

REGGIE SMITH

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UFSC Week In Review

Volume 25, Number 39

Economic Highlights for the Week Ending November 1, 2019

MONDAY, October 28th

The S&P CoreLogic Case-Shiller 20-city home price index posted a 2.0% year-over-year gain in August, no change from the previous month. Phoenix, Charlotte and Tampa reported the highest year-over-year gains in August. Tampa replaced Las Vegas as one of the top gainers. Phoenix house prices rose 6.3% over the last year, as Charlotte prices rose 4.5% and Tampa followed with a 4.3% increase. The U.S. National Home Price Index trend remained intact, says Phillip Murphy Managing Director at S&P Dow Jones Indices. However, a shift in regional leadership may be underway beneath the headline national index.

TUESDAY, October 29th

The Conference Boards consumer confidence index fell to 125.9 in October from an upwardly revised reading of 126.3 in September. Consumers assessments of current conditions improved on the month but expectations dropped almost two points. Consumers labor market assessments improved from September which helped the overall index maintain a still solid level. Fundamentals remain favorable for consumers, and their attitudes and spending are central to maintaining a healthy economy through this year and into next.
The NARs pending home sales index rose 1.5% to 108.7 in September; this is the highest index reading since the start of 2019. Pending home sales were mixed across census regions last month with the Midwest and South registering solid gains as the Northeast and West posted losses. All regions as well as the overall index were up over the last year. The national pending home sales index was up 3.9% from its year ago level. Strong pending home sales portend of solid gains in existing home sales in the months to come.

WEDNESDAY, October 30th

The economy grew at a 1.9% annual rate in the third quarter according the advance estimate for GDP. Growth was down slightly from a 2.0% annual rate in Q2. Strength was centered in the consumer sector as real consumer spending rose at a 2.9% pace even after Q2s exceptionally strong 4.6% showing. Residential investment was another important contributor to third quarter growth; it rose at a 5.1% rate in Q3, its first positive quarter since the fourth quarter of 2017. Fixed investment was the biggest detractor to GDP and net exports proved to be a small negative. It was consumer spending that carried third quarter GDP and fundamentally underpins current, positive economic growth which ultimately reflects the strength of the U.S. labor market.
As widely expected, the FOMC cut the federal funds rate for a third consecutive meeting reducing the target by another quarter-point to a range of 1.50% to 1.75%. The statement was less dovish than in previous meetings with the Fed noting that it will monitor incoming information as it assesses the appropriate path of rates. This gives the Fed more flexibility, as past communications tipped its hand that more rate cuts were likely.

THURSDAY, October 31st

Personal income increased 0.3% in September after an upwardly revised 0.5% gain in August. Consumer spending rose 0.2% on the month after the same increase in the previous month. Gains in spending growth so far this quarter contributed to third quarter GDP. A closely watched inflation gauge contained in this data series, the core PCE price index, was unchanged on the month and is now up 1.7% on the year. Inflation remains on the weak side of the Federal Reserves outlook for the economy. The Fed will likely be tracking strength in consumer spending in October and beyond to determine if another rate cut is in the best interests of the economy.

FRIDAY, November 1st

The remarkably resilient labor market outperformed expectations once again in October despite the impact from the GM strike last month. Employers added 128k new payrolls to the economy in October; moreover, upward revisions in the previous two months resulted in a net gain of 95k more new jobs. Wage gains continue to be somewhat slow up just 0.2% on the month and 3.0% on the year. Slow wage gains do point to available capacity in the labor market which could continue to extend job growth in coming months. Other indications of strength in the labor market are increases of one-tenth in both the unemployment rate to 3.6% and the participation rate to 63.3%. The Fed cut rates on Wednesday but stepped back from a commitment to further rate cuts which looks to be a good call given the current strength in the October employment report.


Stock Market Close for the Week

Index Latest A Week Ago Change
DJIA 27,681.24 27,347.36 +333.88 or +1.22%
NASDAQ 8,475.31 8,386.40 +88.91 or +1.06%

WEEK IN ADVANCE

The economic calendar lightens up considerably in the coming week with fewer and mostly second tier economic indicators. Of interest will be motor vehicle sales, service sector activity and a couple of home price indexes.

Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate4.755.50 5.25
Fed Discount 2.253.002.75
Fed Funds1.572.402.20
11th District COF 1.127 0.958 1.018
10-Year Note 1.94 2.47 3.21
30-Year Treasury Bond 2.42 2.883.42
30-Yr Fixed (FHLMC) 3.69 4.104.94
15-Yr Fixed (FHLMC) 3.13 3.574.33
6-Mo Libor (FNMA) 1.91625 2.62200 2.80013

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

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