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Weekly Economic Update
June 19, 2017
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The Markets (as of market close June 16, 2017)
The Fed raised interest rates based on what it perceived as favorable labor and economic reports, inflation is definitely receding and the housing market has stalled. Equities were mixed as the small caps of the Russell 2000 and the tech stocks of the Nasdaq fell back, while the large caps of the S&P 500 and Dow posted marginal gains. Rising interest rates were offset by lower inflationary trends, which may account for the lack of movement in the 10-year Treasuries.
The price of crude oil (WTI) fell again last week, closing at $44.67 per barrel, down from the prior week’s closing price of $45.90 per barrel. The price of gold (COMEX) decreased last week, closing at $1,255.20 by late Friday afternoon, down from the prior week’s price of $1,268.80. The national average retail regular gasoline price decreased to $2.366 per gallon on June 12, 2017, $0.048 lower than the prior week’s price and $0.033 less than a year ago.
Last Week’s Headlines
- Despite declining inflation that continues to run below the Fed’s 2.0% target rate, the Federal Open Market Committee raised the range for the federal funds rate 0.25% to 1.00%-1.25%– basing its decision on the expectation that the labor market will continue to strengthen, and the fact that economic activity has been rising moderately so far this year. The Committee further noted that the unemployment rate has declined, household spending has picked up in recent months, and business fixed investment has continued to expand. Additional Fed actions should raise long term interest rates further this year.
- In a sign of receding inflationary pressure, consumer prices fell 0.1% in May, according to the latest report from the Bureau of Labor Statistics. A sizable decrease in the energy index contributed to the monthly decrease in the CPI. The index for all items less food and energy rose 0.1% in May, as it did in April.
- On the heels of May’s drop in the Consumer Price Index, retail sales (a measure of what consumers are spending at retailers) decreased slightly in May from the previous month. Nonstore (online) retail sales increased 0.8% for the month, and are up 10.2% since May 2016.
- Producer prices showed no movement in May compared to the prior month, according to the Producer Price Index. For the year, overall producer prices are up and costs are lower, allowing producers to realize higher margins (profits) without actually increasing prices for goods and services.
- Eight months into the government’s fiscal year, the budget deficit sits at $432.9 billion, which is 6.8% higher than the deficit for the same period last fiscal year. While government receipts are up 1.4% from a year ago, spending is 2.3% higher. For the 2017 fiscal year, the government has spent $390 billion on defense, $623 billion on Social Security, and $368 billion on Medicare.
- Prices for imports and exports fell in May, according to the latest report from the Bureau of Labor Statistics.
- Industrial production was unchanged in May following a noteworthy increase in April. A negative in the report is in the manufacturing sector, which fell 0.4% in May. This drop was offset by a 1.6% gain in mining and a 0.4% bump in utilities. Capacity utilization for the industrial sector edged down 0.1 percentage point in May to 76.6%, a rate that is 3.3 percentage points below its long-run average.
- The housing sector has been slowing of late, and May’s housing starts report adds to that trend. Housing starts in May were 5.5% below the revised April estimate and are 2.4% below the May 2016 rate. Building permits were 4.9% off their April rate and are now 0.8% below the rate for May 2016. Housing completions are up 5.6% for the month and 14.6% above the May 2016 rate. Accelerating housing completions coupled with receding starts and permits will likely lead to shrinking inventory and possibly rising prices.
- In the week ended June 10, the advance figure for seasonally adjusted initial claims for unemployment insurance was 237,000, a decrease of 8,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the ninth consecutive week. For the week ended June 3, there were 1,935,000 insured unemployed, an increase of 6,000 from the previous week’s level, which was revised up 12,000.
BWFA Eye on the Week Ahead
This week focuses on the latest information from the housing sector. Both new home sales and sales of existing homes have fallen recently, so it will be interesting to see if sales picked up the pace in May.
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BWFA Sponsors Columbia’s 50th Birthday Summer Concert
Wednesday, June 21, 2017
7:00 PM – 9:00 PM
Downtown Columbia
The New Chrysalis at
Merriweather Post Pavilion
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Salute to John Williams, highlights from The Music Man, hits by the Beatles, a piece written for Columbia by Morton Gould, and the ultimate outdoor classic: the 1812 Overture! Come sing “Happy Birthday” to great city with a great orchestra.
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Retirement Planning:
The 5 Years Before You Retire
Tuesday, June 27, 2017
11:45 AM – 1:00 PM
Lunch will be provided
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Presented by:
Managing Director,
Wealth Management
Thad Ismart,
CFP®
Senior Financial Planner
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Will you be prepared to retire?
Join BWFA as we discus Emily Guy Birken’s book, The 5 Years Before You Retire: Retirement Planning When You Need it the Most.
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Roth vs Traditional IRA?
Which is right for you?
Thursday, July 6, 2017
11:45 AM – 1:00 PM
Lunch will be provided
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Presented by:
Managing Director,
Wealth Management
Thad Ismart,
CFP®
Senior Financial Planner
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Roth IRA’s and 401(k)s can be extremely beneficial for retirement investors.This BWFA workshop will show you how to take advantage of both of them.
This discussion will include:
- Positioning your assets before you retire
- Reducing your taxes during retirement
- Extending the life of your financial assets
- Creating tax planning flexibility during retirement
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Savvy Social Security Planning:
Maximizing your Benefits
Thursday, July 13, 2017
11:45 AM – 1:00 PM
Lunch will be provided
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Presented by:
Managing Director,
Wealth Management
Thad Ismart,
CFP®
Senior Financial Planner
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Baltimore Washington Financial Advisors invites you to a discussion on:
- How work, age and marital status affect your benefits
- Synchronizing spousal benefits
- Minimizing taxes on your benefits
- Integrating social security with other retirementincome
Come join us as we discuss these issues and more!
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The Difference Between Alzheimer’s and Dementia with Special Guest Speaker Mary Faith Ferretto
Thursday, July 20, 2017
11:45 AM -1:00 PM
Lunch will be provided
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Presented by:
Managing Director,
Wealth Management
Mary Faith Ferretto
LCSW-C, C-ASWCM
Ferretto Eldercare
Steve Elville, Esq.
Principal
Ellville and Associates
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Baltimore Washington Financial Advisors invites you to a discussion on:
- Many types of dementia’s – No one size fits all
- A thorough medical evaluation is key
- Gather the team
Come join us as we discuss these issues and more!
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Selecting your State of Residence in Retirement
Tuesday, July 25, 2017
6:00 PM – 7:30 PM
Dinner will be provided
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Presented by:
Managing Director,
Wealth Management
Thad Ismart,
CFP®
Senior Financial Planner
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Baltimore Washington Financial Advisors invites you to a discussion on:
- What state is best?
- How much will it cost to stay in Maryland?
- How to decide where you will retire
- Should you purchase or rent?
- Healthcare costs by state
- Differences in state and local income taxes
- Estate planning and estate taxes by state
- Property and sales tax by state
- Cost of living by state
Come join us as we discuss these issues and more!
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Charitable Giving & Philanthropy, Endowments, and Foundations
Thursday, July 27, 2017
11:45 AM – 1:00 PM
Dinner will be provided
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Presented by:
Managing Director,
Wealth Management
Beverly White-Seals
President & CEO
CFHC
H. Dean Bouland
Managing Partner
Bouland & Brush
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Baltimore-Washington Financial Advisors, Bouland & Brush, LLC, and the Community Foundation of Howard County inviteyou to a discussion on charitable giving and philanthropy.
Topics to include:
- Donor-Advised Funds (DAFs)
- Charitable Remainder Trusts
- Private Foundations
- Gifting Complex Assets
Come join us as we discuss these issues and more!
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