Economic Update 07/01/13

CHECKING IN ON THE CONSUMER

According to the Commerce Department, consumer spending improved 0.3% in May as consumer incomes increased 0.5%. The latest household sentiment polls seemed to reflect the good news. The Conference Board’s consumer confidence gauge hit 81.4 in June, the best mark since January 2008; the University of Michigan’s final June survey came in at 84.1, up from a preliminary reading of 82.7.

Q1 GDP REVISED SIGNIFICANTLY DOWNWARD

The initial 2.4% estimate by the Bureau of Economic Analysis was scaled down to just 1.8% last week. Stocks advanced after the announcement, as less economic growth may give the Federal Reserve less incentive to taper QE3.

IMPRESSIVE GAINS IN REAL ESTATE INDICATORS

New home sales rose another 2.1% in May, taking the annualized increase to 29.0%. In addition to that news from the Census Bureau, the National Association of Realtors reported a 6.7% rise in pending home sales in May (and a 12.1% yearly improvement in the category). The Case-Shiller Home Price Index had its best month ever: a 2.5% April gain with prices rising 12.1% in 12 months. Not all the news from the housing sector was positive – Freddie Mac said that the average rate on a 30-year home loan hit 4.46% last week, the highest in almost two years.

SOLID WEEK, SOLID QUARTER, SUPERB FIRST HALF

The Dow advanced 0.74% for the week to 14,909.60, the S&P 500 rose 0.87% for the week to reach 1,606.28, and the NASDAQ wrapped up June at 3,403.25 after a 1.37% weekly gain. While the second quarter saw a 32.36% rise in the CBOE VIX, it also brought gains of 2.27% for the DJIA, 4.15% for the NASDAQ and 2.36% for the S&P, even as all three indices lost ground in June. The YTD gain below represents the DJIA’s best first half of a year since 1999.

THIS WEEK: On Monday, ISM presents its manufacturing PMI for June and the Census Bureau offers data on May construction spending. Tuesday brings federal government reports on May factory orders and June auto buying, and earnings from Constellation Brands. Wednesday, ISM puts out its June service sector PMI, and the latest initial jobless claims figures, the June ADP employment report and the June Challenger job-cut report all arrive; the NYSE wraps up trading at 1:00pm EST. Thursday is July 4th; correspondingly, America’s financial markets are closed. The Labor Department presents its June jobs report Friday, which is also when the biggest U.S. banks provide midyear stress test results to the Federal Reserve.