Economic Indicators: Weekly Update for July 1, 2011

Every week the Research staff analyzes key data releases and explain what they mean for you and your business. In this update, we give the highlights of the most important data releases for the week of June 27-July 1, 2011, along with graphs that show the latest movement and overall trends.

At a glance, this table shows the forecast for some of the most pertinent weekly data for REALTORS® to keep in mind. This changes from week to week as new data becomes available. The directional shift notes the trend from last week’s numbers. For the full forecast from the latest Pending Home Sales release, click here (PDF).

Highlights for Monday, June 27, 2011:

• Personal income grew slightly in May to $13.06 trillion on an annualized basis, or to about $54,000 on average for each adult.  Compared to one year ago, the aggregate national income is higher by 4.2 percent.  The gain in rental income was particularly strong.
• The bulk of income is from wages, which were higher by 2.8 percent.
• With mortgage availability exceptionally tight, rising savings will help with down payments for future home buyers.

Highlights for Tuesday, June 28, 2011:

• After 8 months of consecutive month-to-month declines, the non-seasonally adjusted Case-Shiller index ticked upward in April.  This is good news for the housing market, but not much of a surprise as prices tend to rise every spring and summer with an increase in demand from colder months.
• However, of greater importance to the market is the fact that the seasonally adjusted rate of price growth continued to approach a turning point.    This month’s Case-Shiller index incorporated data over the 3 months of February, March and April, so it does not yet reflect the strength in prices that showed up in NAR’s release of May price data earlier this month.  Consequently, the year-over-year price deficit in the Case-Shilller index will likely follow suit, shrinking in the coming months.
• The Case-Shiller home price index is in line with NAR’s figures, which show a sharp decline in prices relative to last year, but a trend that has moved toward stabilization.

Highlights for Wednesday, June 29, 2011:

• The Purchase index decreased 3.0 percent from the previous week, indicating continued weakness in the housing markets.  The index does not account for cash purchases, which made up 30.2 percent in May of this year.  Morgage application data only measures applications, not approvals, and at times have shown a widely diverging trend compared to actual home sales.
• Refinancing activity declined 2.6 percent from the prior week.  Mortgage rates on a 30-year fixed mortgage decreased from 4.57 percent to 4.46 percent during the week.
• The Pending Home Sales Index, a forward-looking indicator, increased 8.2 percent to 88.8, based on contracts signed in May, from 82.1 in April. The index is 13.4 percent above 78.3 recorded in May 2010. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Highlights for Thursday, June 30, 2011:

• New jobless claims continue stubbornly trending above the level needed for improvement in the job market.
• The comparison of the four-week average for June over May’s numbers does show an improvement of 14,000 claims . Continuing claims have also been improving, albeit at a slow rate, and are down 12,000 for the week of June 18 to 3.702 million. There had been 1.31 million net new job additions in the past 12 months to April.
• Assuming that jobless claims continue to trend down, NAR expects about 1.5 to 2 million net new jobs in the next 12 months.  If claims remain stubbornly above 400,000 for much longer, then only 1 to 1.5 million jobs will be created on net.

Friday, July 1, 2011:

• Looking at the components of the University of Michigan Index of Consumer Sentiment shows that consumers actually rated the economic situation in June as slightly better than that in May.  However, the barrage of weak news throughout the month of June affected consumers.  The headline figure from the survey declined in June. The expectations subindex which declined from 69.5 to 64.8 pulled the overall index down.  This expectations subindex is above its three-year average of 63.5, but the decline indicates apprehension among consumers perhaps because jobless claims are persistently high.
• The Institute for Supply Management’s Manufacturing Index confirms what consumers felt about economic conditions in June.  The index increased from 53.5 to 55.3.  While these readings are below the 60+ readings of the first months of the year, readings above 50 indicate continued expansion in the manufacturing sector.
• All of the subindexes, including the employment index, were up in June compared to May, but most remain below the level they reached in the early part of the year.  Anecdotal comments from the survey indicate continued worries about inflation even though the price index showed that inflation slowed substantially in June; they also indicated concern about consumer willingness to spend.
• Construction spending data in May was mediocre according to today’s Census report.  While total spending was down, private nonresidential spending increased 1.2 percent from April to May.  It remains 5.1 percent below May 2010.
• However, public nonresidential construction spending declines almost completely offset the gains in private spending so total nonresidential construction spending grew only 0.1 percent and remains 7.2 percent below year ago spending.
• Over the year, the biggest gainers in nonresidential construction spending have been private and public power, private transportation, and public health, commercial, and conservation and development construction.