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Week In Review – November 3, 2017

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Week In Review

UFSC Week In ReviewVolume 23, Number 40

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

 

Economic Highlights for the Week

Ending November 3, 2017

 

MONDAY, October 30th

Personal income growth accelerated in September, rising 0.4% following a 0.2% gain in August.  The gain was led by a 0.4% gain in wages and salaries.  Consumer spending jumped 1.0 percent driven by a 2.1 percent surge in durable goods that was tied to vehicle replacement following Hurricanes Harvey and Irma.  The rise in income and spending did not lift a closely watched inflation gauge in this data series.  The core CPE price index rose just 0.1% on the month and is up just 1.3% on the year, short of the Federal Reserves 2% goal.

 

TUESDAY, October 31st

The consumer confidence index jumped to 125.9 in October from a revised score of 120.6 in September.  The present situation and the expectations indexes both rose, with consumers evaluating their present economic conditions more favorably than at any time since 2001.  Expectations rose to a seven-month high.  Ratings of the labor market roared back after a slight drop last month and businesses remain quite confident in their market conditions. Strong consumer confidence levels bode well for the holiday shopping season.

The employment cost index continues to gradually accelerate, signaling a labor market that is healing but has room to improve. Private wage growth came in at 2.6% year to year, an uptick from last quarter’s 2.4%.  The quarterly growth in private wages was 0.7%, up from 0.5%.  Total compensation growth ticked up as well, from 0.5% to 0.8%.  Overall, the third quarter was stronger than the second and the general trend for wages remains one of gradual acceleration.  The S&P CoreLogic Case-Shiller 20-city home price index rose 0.4% in August and is now 5.9% higher on the year. Seattle, Las Vegas and San Diego reported the highest year-over-year gains among the 20 cities. In August, Seattle led the way with a 13.2% year-over-year price increase, followed by Las Vegas with an 8.6% increase and San Diego with a 7.8% increase.  Currently, low mortgage rates combined with an improving economy are supporting home prices.

 

WEDNESDAY, November 1st

Motor vehicle sales slipped 2.6% in October, from a 12-year high in September to a still very robust annual pace of 18.1 million units.  Replacement vehicles and postponed purchases in the wake of Hurricane Irma helped propel sales, but vehicle damage costs were not as high as from Hurricane Harvey.  Light-truck sales captured a larger share of the market while incentives remained elevated to help automakers clear existing inventories.

As widely expected, the FOMC left interest rates unchanged at their meeting today.  There were few changes to the statement as well. Economic activity was described as rising at a solid rate, a slight upgrade from rising moderately in the previous statement.  Aside from September’s decrease in payrolls, the statement said the labor market continued to strengthen noting the dip in the unemployment rate to 4.2%.  Household spending was moderate while business investment strengthened. Inflation, outside a post-hurricane jump for gasoline, was soft.  The statement downplayed the effects of hurricanes, which are unlikely to affect the course of the economy; near term risks to the economy remain roughly balanced.  Expectations remain firmly centered on a rate hike at the next meeting in December.

 

THURSDAY, November 2nd

Median house prices showed strong gains in the third quarter, increasing 5.3% from Q3 2016 according to the NAR.  Price gains were widespread with 162 out of 177 metro areas tracked recording year-over-year gains.  House prices are still getting upward pressure from the small number of listings relative to demand, so the existing-home market is still for the moment a seller’s market.

 

FRIDAY, November 3rd

Job creation rebounded in October as the economy added 261,000 new payrolls to the roster. Moreover, upward revisions in the prior two months resulted in a net gain of 90,000 more new jobs.  Hurricane effects were the likely cause of the monthly volatility as leisure and hospitality, manufacturing and construction jobs came back on line last month.  After spiking 0.5% in both July and September, average hourly earnings were unchanged in October with the annual rate falling sharply to 2.4%.  Hopes are for a strong labor market to result in higher wage gains.  The average workweek was unchanged at 34.4 hours.  Separately, the unemployment rate edged 0.1% lower to 4.1%, a new 17-year low, because of a large decline in the labor force.  Accordingly, the labor participation rate fell 0.4 percentage point to 62.7%.

 

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
23,539.22
23,434.19
+105.03 or +0.45%


NASDAQ
6,761.78
6,701.26
+60.52 or +0.90%


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
4.25%
4.00%
3.50%


Fed Discount
1.75%
1.50%
1.00%


Fed Funds
1.16%
0.88%
0.40%


11th District COF
0.729%
0.583%
0.601%


10-Year Note
2.33%
2.33%
1.82%


30-Year Treasury Bond
2.81%
2.99%
2.58%


30 -Yr Fixed (FHLMC)
3.94%
4.02%
3.54%


15 -Yr Fixed (FHLMC)
3.27%
3.27%
2.84%

6-Mo Libor (FNMA)
1.57511%
1.42628%
1.25600%

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