This week, two pitchers that used to take the mound for Detroit’s baseball team are competing for the championship in the final series of the year. It does make you wonder what could have been.
Boeing and Johnson & Johnson (and another Johnson from the UK) are probably questioning a few things themselves this morning around what could have gone differently. We’ll have more on that later, but let’s get to some fundamental economic data first.
Headline News
MBA Mortgage Applications
Mortgage rates were up two basis points last week to 3.92% according to the Mortgage Bankers Association. Still, low rates are propping applications up.
Overall mortgage applications rose 0.5% for the week as refinance applications were up 4%, offsetting a 4% decline in those looking to purchase. Even with the slight drop, purchase applications are up 12% compared to the same time a year ago.
Retail Sales
Retail sales were down 0.3% in September, missing expectations for a 0.3% increase. However, retail sales have been trending in the right direction over the past several months, so one report isn’t enough to raise too many eyebrows, but it’s still something to keep an eye on.
Digging deeper, auto sales were down 0.9% following a 1.9% uptick in August. When cars and trucks were taken out, overall numbers were only down 0.1%. Auto sales are still up 5.6% on the year, which shows that consumers still have strong spending power. Meanwhile, gas prices have been falling, which has held down sales numbers at gas stations. Gas sales were down 0.7%. When both automobiles and gas were taken out, retail sales were flat in September. This matched the unchanged number for a control group. Finally, in revisions for August, sales were up an additional 0.2% to 0.6% overall. Sales are also up 4.1% on the year.
Taking a look at other key categories, sales at nonstore retailers (think e-commerce and catalogs) were down 0.3% on the month, despite being up 12.9% on the year and outpacing all other categories. Building materials were also down 1% as were general merchandise sales falling 0.3%.
It wasn’t all negative, though. Sales of clothing were up 1.3%, while furniture stores saw a 0.6% uptick in September. Finally, restaurant sales were up 0.2% on the month and 4.9% on the year.
Housing Market Index
The National Association of Home Builders has shown more confidence in the housing market in October, with their index coming in up three points at 71.
A key to the strength was that traffic of prospective buyers was actually up for the first time in a while, coming in at 54. This shows that low mortgage rates are having a real effect. Present sales were also up three points to come in at 78, while expected sales over the next 6 months were up six points to 76.
On a regional basis, the West is out front posting a confidence level of 83 for October. The South follows at 76. The Northeast and Midwest are trailing at 60 and 57, respectively. The numbers still indicate growth in these markets.
Housing Starts
Overall housing starts were down almost 10.4% to 1.256 million on a seasonally-adjusted basis in September. However, there was actually a small pickup to 918,000 for single-family housing. Since most housing is of the single-family variety in the U.S., a 28.2% decrease in multifamily starts to 338,000 doesn’t have nearly as much impact on overall economic growth.
There was also a drop of about 2.7% in total permits to 1.387 million. Units for multifamily homes were also the culprit for the downturn here as well. There were 882,000 single-family home construction permits issued.
Single-family starts are 4.3% on the year, while permits are up 2.8%. On the multifamily side, starts are down 5.1% on the year, although permits are up 17.4% in comparison to last year.
Jobless Claims
Initial jobless claims were up 4,000 last week to come in at 214,000. Meanwhile, the 4-week average of initial claims was up 1,000 at 214,750.
On the continuing claims side of the ledger, these were down 10,000 to 1.679 million. Finally, the 4-week average of continuing claims was up 3,500 to about 1.67 million.
Industrial Production
Overall industrial production was down 0.4% in September, missing expectations for a 0.2% decrease. Manufacturing was down 0.5% as well. Finally, capacity utilization in factories was down 0.4% to 77.5%.
On the manufacturing side, there was a 4.2% dip in the number of motor vehicles manufactured. The GM strike likely has a significant effect on this. However, vehicle manufacturing is down 5.4% on the year and the strike doesn’t explain it all. There was also a 0.7% drop in business equipment manufacturing, which is now down 0.8% on the year.
Utility production was up 1.4%, but this is at least partially offset by a 1.3% downtick in mining production. These categories are up 1.2% and 2.6% respectively since the same time a year ago.
Mortgage Rates
Rates for fixed mortgages were up quite a bit last week, but they’re still very low compared to this time a year ago. There may have been a couple of reasons for last week’s pickup, including strong employment numbers and increasing home-builder confidence in the economy. However, continued trade uncertainty with China and weak manufacturing numbers have kept things from jumping too much. Still, if you’re in the market for a mortgage, it’s a good time to lock your rate now in case rates start to rise.
The average rate on a 30-year fixed mortgage with 0.6 points paid in fees was up 12 basis points to 3.69%. This is still down from 4.85% at this time a year ago.
Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.5 points paid was up 10 basis points to 3.15%. This is down from 4.26% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) with 0.4 points paid was unchanged for the week at 3.35%. This is down from 4.1% last year.
Stock Market
The stock market fell on Friday with the Dow Jones Industrial Average taking a big hit. Boeing is now under further investigation because instant messages of company employees showed that the aviation giant may have been less than truthful with regulators about the safety systems in its now grounded 737 Max plane. Johnson & Johnson was also down as it dealt with the ramifications of traces of asbestos being found in recalled baby powder products. The Nasdaq also fell, led lower by Netflix, which was down despite beating company forecasts.
Meanwhile, there had been some optimism the rest of the week because negotiations with China are still ongoing and there looked to finally be a deal on Brexit. However, Parliament has twice denied Prime Minister Boris Johnson’s attempts to get a vote on the floor prior to legislation from Parliament that would cover how the deal would be implemented. Johnson has been directed to ask the European Union for an extension until January 31.
The Dow Jones Industrial Average was down 0.17% on the week after falling 255.68 points Friday to close at 26,770.2. Meanwhile, the S&P 500 was down 11.75 points on the day to close at 2,986.2, still up 0.54% on the week. Finally, the Nasdaq finished the week at 8,089.54, up 0.4% for the week, but down 67.31 points on the day.
The Week Ahead
Tuesday, October 22
Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops that were sold during the month. Existing homes (also known as “home resales”) account for a larger share of the market than new homes and indicate housing market trends.
Wednesday, October 23
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
FHFA House Price Index (9:00 a.m. ET) – The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing using data provided by Fannie Mae and Freddie Mac. The HPI is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.
Thursday, October 24
Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory goods.
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The 4-week moving average of new claims smooths out weekly volatility.
New Home Sales (10:00 a.m. ET) – This report measures the number of newly constructed homes with a committed sale during the month.
Friday, October 25
Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.
We get home sales and house price data as well as durable goods orders among other things. We’ll have it all covered in next week’s Market Update!
I do my best, but this report can be a bit of a snooze fest on a Monday afternoon. I get it. The good thing is if you subscribe to the Zing Blog by Quicken Loans below, we’ve got plenty of home, money and lifestyle content to share with you. Lots of people are trying to get some last-minute work done in the yard before it gets too cold. Do you need a tree removed? Anna Baluch has an article on the average cost of taking down a tree. Have a great week!
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