Loan Officer Survey: Weaker demand for commercial loans, stronger demand for mortgages

On balance, demand for commercial and industrial loans weakened over the second quarter of 2017 while banks left their standards on C&I loans basically unchanged. Survey respondents also reported that standards on commercial real estate (CRE) loans tightened while demand weakened on net.

For loans to households, banks reported that lending standards on all categories of residential real estate (RRE) loans eased or remained unchanged, although the net share of banks reporting easing was, at most, moderate in each category.

Banks also reported, on net, that demand for most categories of RRE loans strengthened over the second quarter, although, again, the net share was never more than moderate.

In addition, modest net fractions of banks reported tightening standards and weaker demand for auto and credit card loans.

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Chicago Business Barometer fell sharply in July but still well into positive territory

The MNI Chicago Business Barometer fell to 58.9 in July from 65.7 in June, the lowest level in three months.  Each of the five Barometer components receded from last month but remained above their respective 12-month averages.

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July consumer confidence index down 5.1 points from January

Consumer confidence remained largely unchanged at the same favorable level recorded at mid-month. The overall Sentiment Index has declined by 5.1 Index-points since the January peak, which was the highest figure in a dozen years.

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2Q 2017 employment cost index rose 0.5 percent, up 2.4 percent year-on-year

Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month period ending in June 2017. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.5 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.6 percent.  These same total costs increased 2.4 percent for the 12-month period ending in June 2017.

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2Q 2017 GDP grew by 2.6 percent in advance estimate

Real gross domestic product increased at an annual rate of 2.6 percent in the second quarter of 2017 according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.2 percent.

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Pending Home Sales Index rebounded 1.5 percent in June after three months of declines

The Pending Home Sales Index climbed 1.5 percent on June. The index also increased year-on-year for the first time since March, rising 0.5 percent.

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Federal Reserve opts to keep interest rates at current levels until inflation is higher

The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term...

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation...

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Mortgage loan applications rise 0.4 percent in latest survey as rates drop slightly

The Market Composite Index increased 0.4 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 2.0 percent and refinances rising 3.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.17 percent.

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June new home sales rise for second straight month, up 9.1 percent year-on-year

Sales of new single-family houses in June 2017 were at a seasonally adjusted annual rate of 610,000. This is 0.8 percent above the revised May rate of 605,000 and is 9.1 percent above the June 2016 estimate of 559,000.

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Gallup: U.S. Economic Confidence Index slightly more positive than negative

Americans continue to evaluate the economy slightly more positively than negatively, with Gallup's U.S. Economic Confidence Index averaging +4 last week. Since late March, Americans' assessments of the economy have been largely stable, with weekly averages of Gallup's U.S. Economic Confidence Index typically ranging between +3 and +5. Though Americans remain optimistic about the state of the economy, this sentiment is not as strong as it was in the weeks just before and after Donald Trump's presidential inauguration, when the index hit +10 or higher several times.

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Richmond Fed's Manufacturing Index rises 3 points in July

The Richmond Federal Reserve Bank's manufacturing composite index rose from 11 in June to 14 in July — the result of a slight increase in the measures of new orders and employment. Manufacturing executives remained generally optimistic about activity six months ahead. 

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State Street Investor Confidence Index rises 7.9 points in July

The Global Investor Confidence Index increased to 108.9, up 7.9 points from June’s revised reading of 101.  Strong earnings growth expectations and optimism grounded in the improving economic outlook have taken precedence over the rising anticipation of reduced central bank balance sheets and a more a hawkish tone.

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Consumer confidence bounces back in July

Consumer confidence increased in July following a marginal decline in June. Consumers’ assessment of current conditions remained at a 16-year high and their expectations for the short-term outlook improved somewhat after cooling last month.

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FHFA: May house prices up 0.4 percent from April and 6.9 percent year-on-year

U.S. house prices rose in May, up 0.4 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI). From May 2016 to May 2017, house prices were up 6.9 percent.

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May Case-Shiller Index up another 0.2 percent from April, 5.6 percent year-on-year

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.6% annual gain in May, the same as the prior month. After seasonal adjustment, the National Index recorded a 0.2% month-over-month increase.

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IMF forecast bullish on global growth but downgrades U.S. estimates

The recovery in global growth that we projected in April is on a firmer footing; there is now no question mark over the world economy’s gain in momentum….

The distribution of this growth around the world has changed, however: compared with last April’s projection, some economies are up but others are down, offsetting those improvements.

Notable compared with the not-too-distant past is the performance of the euro area, where we have raised our forecast. But we are also raising our projections for Japan, for China, and for emerging and developing Asia more generally. We also see notable improvements in emerging and developing Europe and Mexico.

Where are the offsets to this positive news on growth? From a global growth perspective, the most important downgrade is the United States. Over the next two years, U.S. growth should remain above its longer-run potential growth rate. But we have reduced our forecasts for both 2017 and 2018 to 2.1 percent because near-term U.S. fiscal policy looks less likely to be expansionary than we believed in April.

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July IHS Output Index strongest expansion since January

July data revealed a further acceleration in business activity growth across the U.S. private sector. At 54.2, up from 53.9 in June, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index signaled the strongest rate of expansion since January.

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June existing home sales drop 1.8 percent, largely due to lack of supply

Total existing-home sales decreased 1.8 percent to a seasonally adjusted annual rate of 5.52 million in June from 5.62 million in May. Despite last month's decline, June's sales pace is 0.7 percent above a year ago, but is the second lowest of 2017.

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Initial unemployment claims fall by 15,000 in latest report

In the week ending July 15, initial unemployment claims were 233,000, a decrease of 15,000 from the previous week's revised level. The 4-week moving average was 243,750, a decrease of 2,250 from the previous week's revised average.

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New York Fed: Manufacturing firms still positive in July, but less so than in June

Business activity grew modestly in New York State, according to firms responding to the July 2017 Empire State Manufacturing Survey. Firms remained positive about future conditions, though they were less optimistic than in June.

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Philadelphia Fed: Manufacturing firms optimistic about future growth

Manufacturing activity in the region continues to grow but at a slower pace, according to results from the July Manufacturing Business Outlook Survey. Firms remained generally optimistic about future growth. More than one-third of the manufacturers expect to add to their payrolls over the next six months.

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June Achitectural Billings Index rose one point to 54.2, indicating strong business conditions

Architecture firms continued to report strong business conditions to start the summer, with AIA's Architecture Billings Index (ABI) climbing by more than a point from May to a score of 54.2 in June (any score over 50 indicates billings growth).

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Leading Economic Index rose sharply in June, largely due to more building permits

The U.S. LEI rose 0.6 percent in June, pointing to continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year. The broad-based gain in the U.S. LEI was led by a large contribution from housing permits, which improved after several months of weakness.

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Mortgage applications rise 6.3 percent in latest survey

The Market Composite Index increased 6.3 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 1 percent and refinances up 13 percent. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 4.22 percent.

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June building permits rebounded 7.4 percent from May, up 5.1 percent year-on-year

Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,254,000. This is 7.4 percent above the revised May rate of 1,168,000 and is 5.1 percent above the June 2016 rate of 1,193,000.

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June housing starts rebounded 8.3 percent from May, up 2.1 percent year-on-year

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,215,000. This is 8.3 percent above the revised May estimate of 1,122,000 and is 2.1 percent above the June 2016 rate of 1,190,000.

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Builder confidence dips two points to 64 as lumber prices take a toll

Builder confidence in the market for newly-built single-family homes slipped two points in July to a level of 64 from a downwardly revised June reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). It is the lowest reading since November 2016. 

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Second Quarter 2017 Economic Update: Slow, Steady Growth as Expansion Continues

Whether due to an actual “Trump bump” or other factors, so far the data is showing the second quarter of 2017 to be stronger than the first on multiple fronts.  Despite its relative age – which in another two years would be the longest recovery on record – the current expansion is still showing signs of life ahead.

According to the Federal Reserve’s Beige Book, the pace of recent growth has ranged from slight to modest, although there has been a mixed message on consumer spending, especially for auto sales, which were down three percent between the first and second quarters of 2017.

Still, this dip was reportedly partly due to automakers holding back on fleet sales to rental car companies and government agencies in order to help prop up brand values.

GDP growth, which averaged just 1.6 percent in 2016, did dip to 1.4 percent in the final estimate for the first quarter of 2017.  However, as of mid-July, analysts were projecting second quarter 2017 growth to rise to 2.4 percent due to improvements in construction spending, a rebounding manufacturing sector and continuing pent-up demand for housing.

Job growth averaged nearly 194,000 new positions per month in the second quarter, up substantially from under 170,000 in both the previous quarter as well as the same quarter of 2016, resulting in a June unemployment rate of 4.4 percent.  Labor markets continued to tighten across a wide spectrum of both low- and high-skilled positions, especially in construction and information technology.

However, as has been reported in the past, a wider range of industries are also reporting difficulty in finding qualified workers even as the expansion reaches into the furthest corners of the economy, including teenagers.  This shortage has certainly had some benefits for employees, with rising wage pressures for both low- and high-skilled positions prompting annual increases averaging about 2.5 percent.

Due in part to this relatively minor wage pressure, overall inflation remains low, with the Consumer Price Index (less food and energy) rising by 1.7 percent for the year ending in June 2017, or below the 2.0 percent target rate preferred by the Federal Reserve.  The Producer Price Index was slightly higher for the same period, rising by 2.0 percent for final demand minus more volatile indices for food, energy and trade services.

Looking next at consumer confidence, although the University of Michigan’s Consumer Sentiment Survey had been on a high plateau since last November, preliminary results for July were showing a split between future expectations – which have fallen sharply since their January 2017 peak – and current economic conditions, which have since rebounded to their March 2017 peak.  Moreover, given the small June dip in the Small Business Optimism Index, it’s possible that expectations for prolonged GDP growth rates of three percent in the future have softened, and what we’re likely to see is an annual growth rate of just above two percent for 2017.

Builder confidence remained bullish at a reading of 67 in June, and while the average for total construction spending in April and May of 2017 was down slightly from the first quarter of 2017, residential spending was up by one percent.  Even better, when compared against the second quarter of 2016, average residential construction spending in April and May was up by ten percent.

Although this extra spending did not show up meaningfully in the field during April or May, it certainly did in June, with both starts and permits rebounding sharply from May. In addition, year-on-year housing starts and permits for June were up by 2.1 percent and 5.1 percent, respectively.

New home sales, however, were up by over 11 percent during the same time periods to an annual rate of 610,000 units, while median new home prices rose to nearly $346,000.  At May’s sales rate, existing inventory would take 5.3 months to sell, up slightly from 5.2 months a year earlier.

For existing homes, the biggest challenge remains available inventory, with the pending home sales index dipping in both April and May from earlier in the year as the median sale price rose to $247,600.  This level marks a new peak, and is up 5.8 percent year-on-year.

Closed sales averaged 5.59 million in April and May of 2017, down 0.53 percent from the first quarter but up over four percent from the second quarter of 2016.  At current sales rates, inventory at the end of May would take 4.2 months to sell, down from 4.7 months a year earlier.

Business inventories rebounded sharply in May as sales recorded biggest drop in 10 months

U.S. business inventories rebounded 0.3 percent in May as sales recorded their biggest drop in 10 months, falling by 0.2 percent.

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Consumer sentiment mixed in early July reading

Confidence in future economic prospects continued to slide in early July, with the Expectations Index now 10.1 index points below its January 2017 peak. In contrast, consumers' assessments of current economic conditions regained the March 2017 peak, the highest level since the July 2005 survey. Overall, the recent data follow the same pattern repeatedly recorded around past cyclical peaks: expectations start to post significant declines while assessments of current economic conditions continue to reach new peaks.

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June retail sales fell 0.2 percent

June retail sales fell 0.2 percent, weighed down by declines in receipts at service stations, clothing stores and supermarkets. Americans also cut back on spending at restaurants and bars, as well as on hobbies. This decline, the second in two months, could temper expectations of strong acceleration in economic growth in the second quarter.

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CPI flat in June, up 1.6 percent over past 12 months

The Consumer Price Index for All Urban Consumers was unchanged in June, but has risen 1.6 percent over the past 12 months. The index for all items less food and energy rose 0.1 percent in June, its third straight such increase, and is up 1.7 percent year-on-year.

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Job openings fell 5.0 percent in May, but hires rose 8.5 percent

The number of job openings decreased 5.0 percent to 5.7 million on the last business day of May. Over the month, hires increased 8.5 percent to 5.5 million and separations increased 5.0 percent to 5.3 million.

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June Small Business Optimism Index fell 0.9 points, little euphoria for rest of 2017

The Index of Small Business Optimism fell 0.9 points to 103.6, but sustained the surge in optimism that started the day after the election. The Index peaked at 105.9 in January and has dropped 2.3 points to date, no doubt in part due to the mess in Washington, D.C.

Progress is being made, but poorly communicated, and the biggest issues, healthcare and tax reform remain stuck in the bowels of Washington politics. Economic growth in the first half of this year will be about the same as we have experienced for the past three or four years, no real progress. There isn’t much euphoria in the outlook for the second half of the year.

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Consumer credit use expanded in May at fastest rate in seven months

Consumer credit expanded in May at 5.8 percent, or the fastest rate in seven months.  This could be a sign that strong levels of confidence will lead to growth in consumption.The monthly growth of consumer credit often seesaws, but the first quarter’s 4.8% growth was the slowest quarterly expansion in more than six years.

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Labor Market Conditions Index rose 1.5 in June, up for 13th straight month

The US Labor Market Conditions Index (LMCI) registered an increase of 1.5 for June following a revised increase of 3.3 for the previous month. The index has increased for the last 13 months.

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Job growth rebounded strongly to 222,000 in June, unemployment rate ticks up slightly to 4.4 percent

Total nonfarm payroll employment increased by 222,000 in June, and the unemployment rate rose slightly to 4.4 percent. Employment increased in health care, social assistance, financial activities, and mining.  This rate of job growth compares to 152,000 in May and 297,000 in June of 2016.

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ISM: Service sector economy index rose slightly in June

The NMI registered 57.4 percent in June, which is 0.5 percentage point higher than the May reading of 56.9 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. The majority of respondents’ comments are positive about business conditions and the overall economy.

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IHS Markit: Services Business Activity Index rose for third straight month in June

The seasonally adjusted IHS Markit U.S. Services Business Activity Index registered 54.2 in June, up from 53.6 in May. This signalled a third month of accelerated growth in business activity among US service providers. Panellists linked growth to increased new orders and strong client demand. Overall, activity during the second quarter expanded at a solid pace that was only fractionally softer than that seen in the first quarter.

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Bloomberg: Consumer Comfort Index dips in latest survey; first half of 2017 strongest since 2011

Consumer optimism is showing signs of pulling back from its post-election surge, with the comfort index easing after three months of robust readings just below an almost 16-year high. Still, the gauge closed out the best half-year since the final six months of 2011 as households embraced solid opportunities in the labor market.

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Gallup: June Good Jobs rate highest so far in 2017

The U.S. Gallup Good Jobs (GGJ) rate, which measures the percentage of the U.S. adult population with full-time jobs, rose to 46.3% in June, up from 45.4% in May. This is the highest level so far in 2017. The current level is roughly equal to the rate in June 2016, when the GGJ stood at 46.0%.

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Initial unemployment claims rise 4,000 in latest report

In the week ending July 1, initial unemployment claims were 248,000, an increase of 4,000 from the previous week's unrevised level of 244,000. The 4-week moving average was 243,000, an increase of 750 from the previous week's unrevised average of 242,250.

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Mortgage loan applications rise 1.4 percent in latest survey

The Market Composite Index increased 1.4 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 3 percent and refinances falling 0.4 percent.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to its highest level since May 2017, 4.20 percent.

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Planned job cuts dipped six percent in June from May; also down 28 percent for first half of year

Employers announced plans to cut payrolls by 31,105 jobs in June, the lowest monthly total of the year as well as being 6 percent lower than in May and 19.3 percent lower year-on-year.  Through the first six months of 2017, employers announced 227,000 planned job cuts, down 28 the same period of 2016.

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ADP: Private Sector Employment Increased by 158,000 Jobs in June

Private-sector employment increased by 158,000 from May to June, which compares to 230,000 the previous month and 258,000 during the same period of 2016.

Employers announced plans to cut payrolls by 31,105 jobs in June, the lowest monthly total of the year as well as being 6 percent lower than in May and 19.3 percent lower year-on-year.

Through the first six months of 2017, employers announced 227,000 planned job cuts, down 28 the same period of 2016.

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June Federal Reserve meeting minutes shows split on inflation outlook and asset sales

Federal Reserve policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises.

The details of the meeting, at which the U.S. central bank voted to raise interest rates, also showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year.

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Online advertised job vacancies dropped in June after May increase

Online advertised vacancies decreased 45,800 to 4,763,400 in June, according to The Conference Board Help Wanted OnLine® (HWOL) Data Series. The May Supply/Demand rate stands at 1.43 unemployed for each advertised vacancy, with a total of 2.1 million more unemployed workers than the number of advertised vacancies. The number of unemployed was approximately 6.9 million in May.

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CoreLogic: May home prices up 1.2 percent from April and 6.6 percent year-on-year

Home prices nationally increased year over year by 6.6 percent from May 2016 to May 2017, and on a month-over-month basis, home prices increased by 1.2 percent in May 2017 compared with April 2017.

Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 5.3 percent on a year-over-year basis from May 2017 to May 2018, and on a month-over-month basis home prices are expected to increase by 0.9 percent from May 2017 to June 2017.

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Factory orders fell 0.8 percent in May, but capital equipment stronger than expected

New orders for U.S.-made goods fell 0.8 percent in May, but orders for capital equipment were a bit stronger than previously reported, suggesting the manufacturing sector remained on a moderate growth path.

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Gallup: June Job Creation Index drops one point from record high

Gallup's Job Creation Index was virtually unchanged at +36 in June, down one point from last month's record high. For 16 straight months, the Job Creation Index has been at or over +30, signifying a greatly improved and steady job market compared with the years during and immediately after the Great Recession.

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Gallup: June consumer spending highest in that month since 2008

Americans' daily self-reports of spending averaged $103 in June, similar to their average of $104 in May. Last month represents the highest level of reported June spending since 2008, when spending averaged $104. It falls just short of the nine-year high of $114, from May 2008.

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PMI manufacturing index up nearly 3 points in June due to expanding business conditions

The June PMI registered 57.8 percent, an increase of 2.9 percentage points from the May reading of 54.9 percent. Comments from the panel generally reflect expanding business conditions; with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace.

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Construction spending flat in May, residential fell 0.6 percent

Private residential construction fell 0.6% in May, the first decline in that category since April 2016 and its biggest decline since a 0.6% drop in July 2014. Non-residential construction declined 0.7%, the fifth straight monthly decline for the category.

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