Economic Update 09/30/13

HOUSEHOLDS BOOST THEIR SPENDING

August saw a 0.3% gain in personal spending, and the Commerce Department also noted a 0.4% rise in personal income – the largest monthly increase since February. Consumer spending accounts for about 70% of GDP, and analysts widely expect about 2% growth in Q3; Q2 growth was pegged at 2.5% last week in the federal government’s final estimate. In other economic news out of Washington, durable goods orders rose 0.1% in August, a nice change from the 8.1% dive in July.

NEW HOME SALES UP, PENDING HOME SALES DOWN

July was the worst month for new home buying since October 2012, so the 7.9% sales gain in August was welcome. New home inventory rose 3.6% in August to the highest level since March 2011, the Commerce Department noted. The National Association of Realtors reported a 1.6% decline in pending home sales in August. July’s S&P/Case-Shiller Home Price Index showed a 12.4% yearly rise in home values across 20 cities – the best 12-month increase since February 2006.

ASSESSMENTS OF CONSUMER SENTIMENT DIFFER

September’s Conference Board consumer confidence index came in at 79.7, down notably from the August reading of 81.8. The University of Michigan’s final consumer sentiment index for the month offered a 77.5 reading, the lowest mark for the index in almost five months; even so, it beat the final August mark of 76.8 and the Briefing.com consensus forecast of 77.0.

STOCKS DIP DURING ANXIOUS WEEK

With a last-minute showdown over the federal budget looming in Congress and consumers and business owners trying to learn more about the healthcare exchanges slated to open October 1, there was a lot to concern Wall Street and Main Street last week. The Dow (-1.25 to 15,258.24) and S&P 500 (-1.06% to 1,691.75) made weekly retreats, but the NASDAQ rose 0.18% in five days to settle at 3,781.59 Friday.

THIS WEEK: No major economic releases are scheduled for Monday; Wall Street’s eyes will be on Congress. Tuesday, ISM presents its September manufacturing index, August auto sales numbers are out from the Commerce Department, and Walgreens and Global Payments present earnings. Wednesday brings ADP’s employment change report for September and earnings from Monsanto; Ben Bernanke speaks (briefly) at the St. Louis Fed. Thursday offers ISM’s September non-manufacturing index, the September Challenger job-cut report, the latest initial jobless claims figures, a report on August factory orders and earnings from Constellation Brands. Friday sees the release of the Labor Department’s September employment report.