Weekly Economic Update

During the holiday-shortened week, we received a small dose of economic data.  For the most part, the news was positive: consumer confidence rebounded while shopping for the holiday season, a stronger than expected number of durable goods orders in November, seasonally adjusted jobless claims continuing to edge downward, etc.

(-/0) Personal Income in November grew 0.2% from October, below a consensus expected increase of 0.5%.  Consumer spending measured by personal consumption expenditures (PCE) outpaced personal income growth.  The PCE was up 0.5%, in line with the market expectation.  Shoppers boosted their spending on durable goods at a monthly rate of 2.2% heading to the holiday season.  In particular, over half of the increase in November consumer spending was contributed from motor vehicles and parts purchases.  Personal savings as a percentage of disposable personal income dipped slightly to 4.2% in November from 4.5% in the prior month.         

(+/0) The headline price index for PCE was flat month-over-month in November.  Excluding food and energy, core PCE price index increased 0.1% as the market expected.  Over the last 12 months, headline PCE prices grew 0.9% and the core price index was up 1.1%.  Both measurements are well below the Fed’s 2% target.  Inflation continues muted.

(0) The final University of Michigan Consumer Sentiment index for December came in at 82.5, unchanged from the preliminary estimate, but slightly below the market consensus of 83.  Consumer confidence rebounded as the index was up 9.9% from November’s low reading of 75.1.  Most of the improvements were due to more confidence in current economic conditions, such as more purchasing plans due to renewed discounting activities. Compared to December 2012, the index has gained 13.2% from 72.9.

(+) New orders for manufactured durable goods in November grew 3.5% to $241.6 billion, exceeding the bullish consensus growth rate of 2.2%.  The upside surprise was mainly due to a 21.8% surge in new orders of nondefense aircraft and parts.  Excluding the volatile transportation component, the new orders increased 1.2%.  Without seasonal adjustment, the year-to-date new orders sales have risen 5.3% to $2.5 trillion on a year-over-year basis.  It continues to point to a positive longer-term trend.

(+/0) As the market consensus expected, the Federal Housing Finance Agency (FHFA) House Price Index (HPI) rose 0.5% in October.  States in the Pacific and Mountain census divisions saw the largest gains of 1.1% and 1.2% respectively.  Nationally, U.S. house prices appreciated 8.2% from a year ago.  The HPI index is roughly at the same level as of April 2005, still 8.8% below its April 2007 peak price level.

(+/0) According to the National Association of Home Builders, single-family new home sales in November declined 2.1% to a seasonally adjusted annual rate of 464k units; however, this was better the consensus estimate of 440k units.  Both the West and Northeast posted strong numbers, up 31.1% and 15.2% respectively.  New home sales in the Midwest and the South decreased 26.2% and 9.1%.  The inventory of new homes for sales is tight, a 4.3-month supply at the current sales pace.

(+/0) Initial jobless claims for the week ending Dec. 21 came in at 338k after seasonal adjustment.  The reading improved more than the consensus forecasted figure of 350k.  The four-week moving average was 348k.  During the comparable week in the prior year, the initial claims figure was 366k, 8.3% higher than 338k for the week of Dec. 21.

Continuing claims for the week ending Dec. 14 came in at 2,923k, which was higher than the 2,850k expected.  The total number of people claiming benefits in all programs for the week ending Dec. 7 shows there were 4.28 million people depending on government support, which was roughly 1.2 million lower than the 5.47 million in the comparable week in 2012.

Period ending 12/27/2013

1 Week (%)

YTD (%)

DJIA

1.59

28.89

S&P 500

1.31

31.87

Russell 2000

1.33

38.50

MSCI-EAFE

2.34

22.29

MSCI-EM

0.94

-5.46

BarCap U.S. Aggregate

-0.40

-2.11

 

U.S. Treasury Yields

3 Mo.

2 Yr.

5 Yr.

10 Yr.

30 Yr.

12/31/2012

0.05

0.25

0.72

1.78

2.95

12/20/2013

0.07

0.37

1.66

2.89

3.82

12/27/2013

0.07

0.40

1.74

3.02

3.94

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