Volume 25, Number 26 Economic Highlights for the Week Ending July 19, 2019

MONDAY, July 15th
The National Association of Home Builders' housing market index, which tracks home builder sentiment rose to 65 in July from a reading of 64 in June. Builders remain fairly optimistic reporting solid demand but continuing labor shortages. All three subcomponents of the index edged higher in July. Current sales and sales six months from now both rose a point to strong readings of 72 and 71 respectively. The 50 mark indicates a roughly neutral reading. Foot traffic through model homes also increased a point to 48, which shows improvement but the level still indicates weakness in that component. Based on the level of the overall index, the outlook for new home sales and construction remains positive.
TUESDAY, July 16th
Retail sales growth impressed in June, following three months of healthy to strong growth. Total retail sales increased 0.4% in June despite being weighed down by a large price-driven decline in sales at gasoline stations. Outside of gasoline sales, strength was broad based led by a 0.7% gain in motor vehicle sales. Excluding vehicle and gas sales, core retail sales rose 0.7% on the month driven by sales gains at non-store retailers (e-commerce), restaurants, furniture and building supply stores. Other sales gainers included clothing and personal care stores. Other than gas stations, department stores sales declined on the month. Strength in the June retail sales report, because consumer spending accounts for over two-thirds of total GDP growth, could give the Fed pause when deciding whether or not to cut rates at the end of this month.
WEDNESDAY, July 17th
The MBA mortgage applications index slipped 1.1% for the week ending July 12. The purchase index fell 3.8% on the week as the refinance index rose 1.5%. Mortgage market activity remains volatile, though trending slightly lower overall and of course is highly contingent on interest rate movements. Contract mortgage interest rates, after falling to almost 4.0% in the previous week, ticked higher last week with the 30-year fixed rate for conventional mortgages up 8 bps to 4.12%.
New residential construction starts fell 0.9% in June to an annual rate of 1.253 million following the revised May pace of 1.265 million. Despite the decline, housing starts are trending higher at 6.2% above June 2018 levels. Single family starts increased 3.5% on the month to an annual rate of 847k while multifamily starts (5 units or more) sank 9.4% to 396k. Regionally starts were mixed with large gains in the Northeast and Midwest and moderate declines in the South and the West. Building permit issuance dropped 6.1% in June to an annualized pace of 1.220 million. Single family permits edged 0.4% higher to 813k as multifamily permits decreased 20.7% to 360k. Permit issuance is now below the current pace of starts suggesting that new construction activity, for both single and multifamily units will moderate somewhat in the months to come.
The Fed's round up of conditions in the twelve Federal Reserve Banking Districts known as the beige book showed that economic activity grew at a modest pace from mid-May and June. Employment expanded across the country, even though the pace of job growth slowed. The report once again cited labor shortages which has boosted wage growth, especially for entry level workers. Manufacturing activity and residential construction were described as flat during the period, retail sales and home sales were said to be modest while agricultural and oil and gas output were down. Concerns over tariffs and trade were reported as widespread and inflation was described as stable to down which supports policy makers who are leaning toward a rate cut at the next FOMC meeting, July 31.
THURSDAY, July 18th
Jobless claims rose 8k to 216k for the week ending July 13. Also, the four-week moving average, which smoothes out weekly volatility slipped by 250 to 218.750. July 13 is the sample week for the July employment report and comparisons with the sample week for June are favorable indicating another strong gain in payrolls after June’s 224k increase. Labor market conditions are strong, but probably won’t deter the Fed from cutting rates.
FRIDAY, July 19th

Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 27154.20 27332.03 -177.83 or -0.65%
NASDAQ 8146.49 8161.79 -15.30 or -0.19%

The economic calendar is light in the coming week with the main points of interest being new and existing home sales. Market reactions to geopolitical events will likely rule interest rate movements in the week ahead.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 5.50 5.50 5.00
Fed Discount 3.00 3.00 2.50
Fed Funds 2.39 2.40 1.91
11th District COF 1.144 1.060 0.885
10-Year Note 2.06 2.74 2.86
30-Year Treasury Bond 2.58 3.07 2.98
30-Yr Fixed (FHLMC) 3.81 4.45 4.52
15-Yr Fixed (FHLMC) 3.23 3.88 4.00
6-Mo Libor (FNMA) 2.31988 2.80763 2.33575

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

Upward pressure on interest rates
Downward pressure on interest rates
No pressure to change interest rates
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