CONSUMERS ACT ON THEIR CONFIDENCE A new factoid points out just how well the economy is doing: the federal government just upgraded its estimate of third-quarter growth to 3.3%. New data on consumer spending and confidence hints at fourth-quarter strength. Personal spending improved 0.3% in October following the 0.9% leap in September, and household wages were up 0.4% in October for a second straight month. At a mark of 129.5, the Conference Board’s consumer confidence index reached a YTD peak in November, having soared 9.1 points in two months.1,2   TWO VERY POSITIVE HOUSING SIGNALS New homes are selling strongly. October

CONSUMER SENTIMENT DECLINES FOR NOVEMBER The University of Michigan’s monthly gauge of how households perceive current and future economic conditions ended the month at a mark of 98.5. Compared to the 100.7 final October reading, this was a disappointment. Still, the index was up 5.0 points year-over-year. Richard Curtin, the economist in charge of the consumer survey, noted that the index has hovered near “the highest levels since 2004” since January.1    HOME BUYING GETS A FALL BOOST Existing home sales rose 2.0% in October, surpassing the consensus 0.7% gain forecast by analysts polled by Investing.com. Elsewhere in its latest

HIRING REBOUNDS, INDUSTRIES EXPAND According to the Department of Labor, October brought a net gain of 261,000 jobs. (Last month’s net loss of 33,000 was revised to a net gain of 18,000.) The headline unemployment rate ticked down to 4.1%, while the broader U-6 rate fell to 7.9% (down 1.3% in 12 months). Wages were up 2.4% year-over-year. The Institute for Supply Management’s purchasing manager indices alternately rose and fell in October. The readings were strong: 58.7 for the factory PMI (down 2.1 points), 60.1 for the service sector PMI (up 0.3 points).1,2 CONSUMER SPENDING, CONFIDENCE IMPRESS Personal spending rose

THIRD QUARTER SAW SOLID ECONOMIC GROWTH Friday, the Bureau of Economic Analysis issued its first estimate of Q3 GDP: 3.0%. Its report showed increases in personal spending and business stockpiling offsetting a dip in home building. The economy grew 3% or more for a second straight quarter for the first time since 2014. Growth has averaged 2.2% per quarter since the end of the recession in 2009.1 NEW HOME SALES LEAP UP Unexpectedly, new home buying increased by 18.9% in September; the Census Bureau said that the sales pace reached a ten-year peak. The surge put the year-over-year gain for

SEPTEMBER SAW SLIGHTLY MORE HOME BUYING Existing home sales advanced 0.7% last month, according to a National Association of Realtors report. This gain broke a 3-month streak of retreats. Single-family home sales rose 1.1%. Housing inventory increased 1.6% last month, but it was still 6.4% under year-ago levels.1 GROUNDBREAKING FALLS TO A 12-MONTH LOW Housing starts slumped 4.7% in September, the Census Bureau reported last week. Building permits also declined, decreasing 4.5%. Fall hurricanes may have slowed construction activity, but investment in homebuilding was also down 7.3% year-over-year during the second quarter.2 DOW SURGES ABOVE 23,000; GOLD DROPS Across last

RETAIL SALES, SENTIMENT NUMBERS IMPRESS Two economic indicators stood out last week. Retail purchases rose 1.6% during September as households and businesses replaced cars and trucks damaged in hurricanes. This was the best monthly advance recorded by the Department of Commerce since March 2015, and the gain was 1.0% even with auto buying removed. The University of Michigan’s initial October consumer sentiment index displayed a reading of 101.1, which was nearly a 14-year high. Economists polled by Briefing.com had forecast just a half-point improvement to 95.6.1,2 GAS PRICES DRIVE UP INFLATION A 13.1% spike in retail gasoline costs accounted for

HURRICANES HURT SEPTEMBER JOB NUMBERS For the first time in seven years, the economy went a month without payroll growth. The Department of Labor’s September employment report revealed the impact of Hurricanes Harvey and Irma: it showed 33,000 fewer people working. Average hourly wages rose 0.5% to take the annualized gain to 2.9%, but this may have been an effect of the net loss of 105,000 lower-paying bar and restaurant jobs. In a statistical fluke, the headline jobless rate fell to 4.2%, and the U-6 rate, counting the underemployed, declined to 8.3%, even as slightly more Americans looked for work.1

PERSONAL SPENDING BARELY IMPROVES Consumer spending increased by only a seasonally adjusted 0.1% in August, while consumer incomes rose 0.2%. Those gains precisely matched the projections of economists surveyed by the Wall Street Journal. Factoring in inflation, household spending actually retreated 0.1% during August. Hurricane Harvey may be partly to blame for these numbers.1 ROUNDING UP REAL ESTATE INDICATORS Census Bureau data shows new home buying down 3.4% in August; this dip comes on the heels of a (revised) 5.5% fall in July. Pending home sales, as measured by a National Association of Realtors index, slipped 2.6% in August after

FEDERAL RESERVE: UNWINDING WILL BE GRADUAL Last Wednesday, the country’s central bank detailed how it would shrink its mammoth balance sheet. During the fourth quarter, the Fed will unload $10 billion of maturing bonds per month; in each subsequent quarter, the monthly runoff will increase by $10 billion until reaching a limit of $50 billion. Fed chair Janet Yellen said that this schedule is set in stone, barring a “sufficiently great” economic threat. The Fed made no interest rate move last week, but 12 of 16 Fed officials do project a hike before 2017 ends.1   HOME SALES RETREAT AGAIN

EQUIFAX BREACH MAY IMPACT 44% of AMERICANS Thursday evening, credit reporting agency Equifax disclosed that hackers had raided its databases this spring, accessing the personal information of up to 143 million people. Equifax believes that about 209,000 credit card numbers may have been collected in the process, plus numerous Social Security and driver’s license numbers. Consumers can visit equifaxsecurity2017.com to see if they may have been affected by the breach. Equifax is offering a free year of identity theft insurance and credit monitoring for those at risk.1 SERVICE SECTOR EXPANDS FASTER At an August reading of 55.3, the Institute for

SEPTEMBER BRINGS A MEDIOCRE JOBS REPORT The Department of Labor’s latest employment snapshot shows payrolls expanding by 156,000 net new jobs in August. This was a retreat from the job gains of 200,000+ reported in both June and July. The headline jobless rate ticked up to 4.4%; the U-6 rate, which factors in the underemployed, held steady at 8.6%. Annualized wage growth remained stuck at 2.5%.1 POSITIVE NEWS FROM MAIN STREET Climbing once again, the Conference Board’s consumer confidence index ascended 2.9 points to 122.9 in August. That topped the forecast of economists surveyed by MarketWatch, who anticipated a 122.5

SUMMER SLOWDOWN HITS HOUSING MARKET Low inventory and high prices are taking a toll on existing home sales. They declined 1.3% in July, according to the National Association of Realtors, making a second straight monthly retreat. In the past 12 months, the number of existing homes on the market has shrunk 9.0%, while the median sale price has risen 6.2% to $258,300. While resales were up 2.1% year-over-year, the seasonally adjusted annual sales rate reached a 2017 low in July. Census Bureau data showed new home sales falling 9.4% last month.1,2 GASOLINE FUTURES RISE, BUT OIL FUTURES FALL On the

RETAIL SALES RISE IMPRESSIVELY In July, they were up 0.6% – the largest monthly increase seen so far in 2017. This gain suggests the economy has gathered momentum in the third quarter. Core retail sales (which do not include food, construction, gas, and auto buying) advanced 0.6% for July as well. The Department of Commerce also revised some spring numbers: retail purchases improved 0.3% in June and were flat a month earlier.1 AN UPTURN FOR CONSUMER SENTIMENT The University of Michigan’s monthly gauge of how U.S. households view current and future economic conditions rose 4.5 points in its preliminary August

TAME INFLATION PERSISTS Can the Federal Reserve justify another interest rate hike in the second half of 2017? Given weak inflation pressure, maybe not. The central bank has set a 2% yearly inflation target, but the Consumer Price Index rose only 0.1% in July, resulting in a 1.7% year-over-year gain. Core consumer prices rose 0.1% for a fourth consecutive month in July, so annualized core inflation was also at 1.7%. The Producer Price Index fell 0.1% last month; analysts polled by Briefing.com expected a 0.2% rise.1,2 ANALYSIS: EARNINGS GROW AT a 10% PACE More than 90% of companies in the

LATEST JOBS REPORT BRINGS GOOD NEWS U.S. payrolls swelled with 209,000 net new workers in July, according to the Department of Labor. That beat the 183,000 estimate by analysts surveyed by Reuters. About 53,000 of the hires were at restaurants and bars, with another 49,000 in the professional and business services category. While yearly wage growth remained at 2.5%, the headline jobless rate ticked back down to 4.3%. The U-6 rate (which includes the underemployed) stayed at 8.6%.1 A MEAGER GAIN IN CONSUMER SPENDING The 0.1% June advance reported by the Department of Commerce matched the (low) expectations of economists

HOUSEHOLDS ARE FEELING OPTIMISTIC Unemployment is at a 16-year low, and the Conference Board’s consumer confidence index is near a 16-year high. It reached 121.1 in July, rising 3.8 points; analysts polled by MarketWatch expected a reading of 116.9. The University of Michigan’s consumer sentiment index rose to 93.4.1,2 HAVE HOME SALES REACHED A PLATEAU? Last week, the National Association of Realtors announced a 1.8% June retreat for existing home sales. New home buying only advanced 0.8% for June by Census Bureau calculations. Analysts point to tight supply limiting resales and a scarcity of affordably priced new developments discouraging new

WILL STOCKS GET AN EARNINGS BOOST? While the first full week of the Q2 earnings season saw no pronounced rallies, there were also no shocks. By Friday’s closing bell, 20% of S&P 500 member firms had reported calendar Q2 results, and a FactSet analysis showed 77% had topped sales projections and 73% had beaten earnings-per-share forecasts – a good sign in an earnings-driven market climate. The Nasdaq Composite gained 1.19% last week and settled at 6,387.75 Friday; the S&P 500 rose to 2,472.54 after a 5-day gain of 0.54%. As blue chips fell 0.27% across five trading days, the Dow

INFLATION PRESSURE WEAKENS The Consumer Price Index was unchanged in June, according to the Bureau of Labor Statistics. That left its yearly advance at only 1.6%, nearly half a point below the Federal Reserve’s target (the core CPI was up 1.7%). After the announcement, some economists and market strategists wondered whether the Fed would rethink its plans for a third interest rate hike in 2017. The Producer Price Index rose 0.1% in June, leaving its yearly increase at 2.0%.1,2  RETAIL SALES, CONSUMER SENTIMENT INDEX DECLINE For the second month in a row, households scaled back their retail purchases – retail

THE QUARTER IN BRIEF After a remarkable first quarter, the stock market cooled off slightly in Q2 – but investors still saw substantial gains. Strong earnings helped take Wall Street’s collective mind off a decidedly mixed bag of economic signals. Consumers remained confident as the quarter unfolded; although hiring, inflation, and consumer spending weakened. Home sales declined, then rebounded. Overseas, factory activity in China and the eurozone showed improvement, and foreign equity benchmarks continued climbing. Many commodities took sizable Q2 losses. When the quarter ended, the bulls were still firmly in charge.1     DOMESTIC ECONOMIC HEALTH As one quarter ends,

HIRING PICKS UP AGAIN The Department of Labor announced some good news Friday: the creation of 222,000 net new jobs in June, the largest hiring gain in four months. Approximately 4.7 million people reentered the labor force and found work in June, a peak unmatched in 27 years of monthly data. Wages rose 0.2% for an annualized gain of 2.5%. The main unemployment rate ticked north to 4.4% as more Americans joined the job hunt; the U-6 rate, including the underemployed, increased 0.2% to 8.6%, its first rise since January.1