Macro Economy

Trade Deficit up 7%, Imports up Exports Down: Census Reports that the June goods and deficit was up $46.3 billion, up $3 billion from May after both exports declined 0.7% and imports increased 0.6%. Year to date the deficit also increased 7% over the same period in 2017. Export declines were in consumer goods, as well as capital goods like aircrafts and engines as Boeing has been hampered on deliveries of its products due to supply constraints.

More Job Openings than Hires for June Openings and Quits Flat From Last Year: The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) reported that there were 6.7 million job openings in June—down slightly from last month but up 16.7% from last year. Hires and separations were flat at 5.7 and 5.5 million jobs respectively, while voluntary quits remained steady at 3.4 million. The number of unemployed remained largely steady at 6.56 million. It appears that workers are looking for jobs and feel stronger about the job market, despite hires not showing growth.

CPI Growth Accelerates to 2.9%, But is it Just Housing? Consumer prices rose 0.3% in July after a 0.1% rise in June, culminating in a 2.9 % 12-month increase (same as last month) without seasonal adjustment. Core CPI, which strips away food and energy, was up 0.2% last month or 2.4% for the year. Yet, consumer prices without shelter just rose 1.5% over the last year, and again much of the increase in shelter costs came from the western coast, leading many to ask if housing is too strongly affecting CPI measures and rate movement. Still, these rates remain in line with the Fed’s broadcast target band, yet prices for shelter (unlike surprisingly, health care) show no sign of slowing.

Producer Prices Flat: The producer prices were unchanged last month is being pinned on commodity inputs as producer inflation edged up 0.1% in July, while final demand index dropped 0.1%. Removing energy, final demand fell .5%, as energy continues to dominate inflation.

Wholesale Trade Sales Flat, Inventories Up: Wholesalers saw sales rise $632.4 billion, down 0.1% from June, abut up 10.2% year-over-year on a seasonally-adjusted basis. Inventories rose slightly, 0.1% month-to-month and 5.1% year-over-year, while the inventory-to-sales ratio declined slightly. Trade is still strong but fell as large orders were placed prior to tariff placements.

Real Earnings Flat,  Eaten by Inflation (Housing and Energy Costs) and Slow Growth: Hurt by CPI growth, mid-wage worker pay is down .2% year-over-year and has been flat since 2016, as prices have exceeded wage growth. Productivity remains low but has not hurt workers as much as prices and flat wages, despite a strong economic context that includes growth, high corporate profits, and low unemployment.

Four-week Averaged National Unemployment Claims drops to 213,000, down 4000: Department of Labor reports initial claims were at 213,00 jobs, down 4,000 from last week’s revised number. The four-week average is at 214,000, down 500 from last week.

Professional Forecasters See Steady Economic Growth, Strong Labor Markets: The Philadelphia Fed’s Survey of Professional Forecasters shows that economists are steady in their optimism about the short-term prospects for economic growth, though they are more bullish on jobs. The median forecast for 2018 Q3 economic growth was 3.0% for this quarter, they also predict total real GDP to be 2.8% for 2018 and 2019 and 1.8% in 2020. Forecasters also see small unemployment rate changes: dropping to 3.6% by 2018, before rising slightly. Finally, they see lower inflation in 2018, down 0.2% from their previous estimate to a total of 2.3% for 2018.

Real Estate Finance

Mortgage applications decreased 3% in latest MBA Weekly Survey: The Mortgage Bankers Association report indicates that applications are down slightly. Refinances decreased 5% to their lowest rates since December 2000, but new home purchase applications increased 3.6%. Meanwhile, Freddie Mac reports that mortgage rates remained steady with the 30 year at 4.59% with 0.5 points, down from last week’s 4.6% rate. Rates reached a recent peak 5 week ago, and have been sliding back since until the recent jump. The 5-year has followed a similar trend and is at 3.9% with 0.3 points (up from 3.9%).

Past Market Minutes  

August 13, 2018 -  Nonresidential construction, CPI growth, mortgage applications
August 6, 2018 - Construction spending, U.S. economy, delinquency  rate
July 30, 2018 - Home sales, consumer sentiment, mortgage applications
July 16, 2018 - Housing sentiment, job openings, mortgage applications
July 5, 2018 - Construction spending, consumer credit, mortgage applications