Retail sales came in below expectations with a decrease of 0.3% for the month of June. Sales of automobiles, furniture, apparel, and building materials were the main contributors to the low overall sales numbers, as they all displayed losses higher than 1.0% last month. There were some positives in the report, however, including the 0.8% increase in gas station sales due to the swift rebound of gas prices.
Initial jobless claims for the week of July 11 fell 15,000 to 281,000. Despite this drop, the 4-week average actually rose 3,250 to a 282,500 level and is more than 5,000 higher than the month-ago comparison, which may not bode well for the July employment report.
Housing starts data for June brought some positives, as the strong demand for apartment units greatly increased the number of housing starts and permits for the month. Starts had a 9.8% increase in June at a 1.174 million rate, reflecting the 29.4% swell in the multi-family component, and in spite of the 0.9% decrease in the single-family component. Permits rose 7.4% in June to a higher-than-expected 1.343 million rate, with multi-family permits up 15.3% and single-family permits up 0.9%.
The Beige Book is not pointing to a liftoff for the Fed’s rate hike. Ten of 12 Fed districts are reporting only moderate to modest growth with two others, Cleveland and Boston, reporting no more than steady or improving growth. Lending activity and real estate were generally on the climb through most districts as are auto sales and tourism. Here are some notable excerpts from the report: “Several Districts reported that residential real estate activity had increased during the reporting period”; “Home sales were reported as generally increasing across most markets in Boston, Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, and Kansas City. Richmond cited improvement, and San Francisco reported continued growth in home sales”; and “Real estate lending was up in half of the Districts.”
Consumer inflation for the month of June displayed a 0.3% increase, as was expected. Year-over-year, total inflation is up 0.1%, which is minute, but is the first positive consumer inflation reading of the year. Contributing to the increase was a 1.7% rise for energy, with gasoline rising 3.4%, and a 2.0% increase in airfares.
Consumer sentiment for mid-July shows less strength than in previous months, decreasing to 93.3 in the mid-month reading, and coming in below the expected 94.5 level. The current conditions component is down nearly 3 points to 106.0, which likely indicates weakness in consumer activity over the next month. The expectations component fell to 85.2, but is still considered to be at a respectable level, and points to further confidence in the jobs outlook.
The coming week will bring multiple updates for the housing market, including house prices, and new and existing home sales.
Over the past week, mortgage rates for almost all loan programs increased, many of them returning to levels last seen in the week of June 30. The 30-year fixed conventional rate rose 1/8 percentage points to 4.125% (4.165% APR), and is right around the same level as this time last year. The largest rate increases were displayed by the FHA 203k and VA programs, both rising more than 2/8 percentage points in the course of the past week. The only loan program that remained unchanged was the FHA manufactured.
Freddie Mac’s Primary Mortgage Market Survey also reported a slight increase to rates as of late. Sean Becketti, chief economist for Freddie Mac, commented on the rate movement:
“The crisis in Greece continues to generate volatility in U.S. Treasury yields. The tentative agreement hammered out last weekend gave investors the confidence to pull back a bit from Treasuries. Rates rose about 16 basis points on the 10-year Treasury from last week. As a result, the average rate on a 30-year fixed-rate mortgage rose 5 basis points this week to 4.09 percent, the highest level since October of last year.”
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