Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights factory orders.
- Factory orders were up slightly in May. This data is not terribly exciting, nor all that timely due to a long lag in data gathering. It still should be viewed as a confirmation of rising business spending.
- Business spending, backed by healthy corporate profits, is the only economic game in town at this particular phase of recovery. State and local government spending will be sliding down to meet the balanced budget rules. Federal government spending is also expected to be shaved. Consumer spending is barely moving ahead because of high unemployment situation. Exports are rising, but so are imports, with no net measurable improvement in the international trade picture. Therefore, the strength of economic recovery will depend principally on how fast large businesses utilize their strong cash reserves. Small businesses, which historically has been the key to strong economic expansion, are hampered by tight lending conditions.
- In other news, the bottom in mortgage rates appears to have already occurred few weeks ago. The 10-year Treasury borrowing rate has jumped by over 20 basis points in the past week, now at 3.15 percent. That means, the 30-year fixed rate mortgage rate will average 5.8 percent in the immediate weeks ahead, rather than 5.5 percent of the past few weeks.
- Today’s data is consistent with slow economic expansion that will add 1.3 million net new jobs this year and higher upcoming mortgage rates.