Archives for February 2018

The National Federation of Independent Businesses (NFIB) reports that the underlying strength in the economy can be seen in the critical small business sector. The Small Business Optimism Index rose two points to 106.9 in January and set a record with the number of small business owners saying now is a good time to expand. “Main Street is roaring,” said NFIB President and CEO Juanita Duggan. “Small business owners are not only reporting better profits, but they’re also ready to grow and expand. The record level of enthusiasm for expansion follows a year of record-breaking optimism among small businesses.”

There are no economic reports due for release today. Tomorrow’s Consumer Price Index will be closely watched by the Fed for any signs of inflation due to the recent focus on rising prices and wages. The incoming economic reports are now very important to follow … especially inflation. In the latest Jobs Report, wages grew at the fastest pace since 2009, which could pressure inflation higher.

The recent plunge in the U.S. Stock markets doesn’t have members at the Federal Reserve scurrying to alleviate the situation. Cleveland Fed President Loretta Mester believes that the economy is safe and sound, and that it will work through recent fluctuations, which are far away from having an influence on the economic outlook. Ms. Mester went on to say that inflation should rise this year but not to a point that requires a quicker Fed reaction as it gradually begins to rise to the Fed’s target range.

Global Bond yields continue to rise due to several factors as the U.S. 10-year yield at the highs seen in January 2014. The Bank of England said it sees interest rates rising sooner and higher as the U.K. is boosted by global growth. Dallas Fed President Kaplan said the central bank will likely continue removing policy accommodation gradually and could hike rates three times this year. In addition, with Friday’s uptick in wage growth, inflation talk is now picking up steam

At present, the annualized Core PCE, the Fed’s favorite inflation gauge, is still at a low 1.5%, below the central bank’s target range of 2%. Chicago Fed President Evans feels rate hikes should be put on hold until midyear with just a hint of inflation in the economy. Low inflation and waiting to see the tax reform impact could put a few rate hikes on hold.

Mortgage rates edged higher in the latest week though they still remain just above all-time lows. Freddie Mac reports that the 30-year fixed-rate mortgage jumped 10 basis points to 4.32% with an average 0.5 in points and fees, up 33 basis points since the start of the year. Mortgage rates are now at the highs seen in April 2014. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.

CoreLogic reports that home prices nationwide, including distressed sales, rose 6.6% year over year in the month ended in December. On a month-over-month basis, prices increased 0.5% from November to December. CoreLogic reports that rising incomes and consumer confidence have increased the number of prospective buyers. The increase in potential buyers coupled with limited inventories of homes for sale on the market continues to drive prices higher. Looking ahead, prices are expected to cool a bit with a 4.3% gain from December 2017 to December 2018.

Foreclosure starts and completions have fallen to a 17-year low in 2017 as the economy and the housing markets continue to grow. Black Knight Financial reports that there were 649,000 foreclosure starts in 2017, which were the fewest since 2000. First-time foreclosure starts were 15% below 2016 levels and about half the annual average seen from 2000-2005. In addition, 2017 saw the lowest single-year total for foreclosure completions since the turn of the century.

U.S. Stock markets plunged yesterday with the Dow Jones Industrial Average shedding 1,175 points, its largest one day point loss in its 122-year history. The Dow had been up 40% since the presidential election in November 2016 so a correction was overdue. The fundamentals are still in pace for the U.S. economy. Economic growth continues while the job market continues to expand and consumer confidence is at multi-year highs.

The Bureau of Labor Statistics reported on Friday that U.S. employers added 200,000 new workers in January while November and December were revised lower by a total of 24,000. The big news within the report was a rise in annual wage growth, which surged 2.9% from January 2017 to January 2018, the biggest increase since June 2009. Wages have been stagnant but the unexpected rise is a key metric for the economy. The Unemployment Rate remained at 4.1%, the Labor Force Participation Rate was unchanged at 62.7%, while the U6 number (or total unemployed) edged higher to 8.2% from 8.1%. Overall, it was a solid report.

Consumer Sentiment beat expectations in January for the final monthly reading coming in at 95.7 versus the 95 expected and up from 94.4 in the early monthly reading. A booming Stock market and solid job growth were a few measures that kept the index above average historically. Conditions for purchasing homes fell to the lowest level in seven years due in part to low inventories. A spokesperson from the index said the tax cuts will increase discretionary spending.

With the Super Bowl airing on Sunday, here are a few facts: According to the Department of Agriculture, Super Bowl Sunday is America’s second largest food consumption day behind Thanksgiving. On the Monday after the game, it is expected that 1.5 million workers will call in sick. Americans may drink 325.5 million gallons of beer during the game. It’s estimated that the NFL collects around $620 million of revenue from this event, which is the highest in history for a one-day sporting event. Enjoy the game!