Investors rode a bumpy ride, opening last week lower only to rebound later but not enough to avoid a third consecutive weekly dip. Only the Nasdaq was able to avoid closing the week in the red, but barely. The Dow and the Global Dow fell nearly 1.0%, while the S&P 500 and the Russell 2000 declined more than 0.8%. Traders were able to overcome concerns early in the week of the possible financial collapse of a major Chinese property developer, only to learn last Friday that Chinese regulators will now consider crypto-related transactions illicit financial activity.
Last Week’s Economic News
- Following its meeting earlier in the week, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at its current 0.00%-0.25%. The Committee also agreed to continue to increase its holdings of Treasury securities and agency mortgage-backed securities. The FOMC noted that the economy has made progress toward the Committee’s goals of maximum employment and price stability. If progress continues, a moderation in the pace of asset purchases may soon be warranted and the FOMC Chairman said that the Fed could wrap up its asset purchase program before the end of 2022 as long as the economic recovery remains on track.
- New home construction picked up the pace in August. The number of building permits increased 6.0% from the July rate and are 13.5% above the August 2020 pace. Housing starts rose 3.9% in August, while housing completions dipped 4.5%. However, single-family housing completions advanced 2.8% last month.
- Existing home sales retreated 2.0% in August, following two consecutive monthly increases. Sales are down 1.5% from August 2020. Rising existing home prices may have caused potential buyers to be more measured about their financial limits, prompting a slowdown in the pace of sales. The median existing-home price in August was $356,700, down from $359,900 in July. However, home prices have increased 14.9% since August 2020. Unsold inventory sat at a 2.6-month supply in August, unchanged from July. Single-family existing-home sales fell 1.9% in August and are down 2.8% from a year ago. The median existing single-family home price was $363,800 in August ($367,000 in July), up 15.6% from August 2020.
- Sales of new single-family houses in August were 1.5% above the July rate, but 24.3% below the August 2020 pace. The median sales price of new houses sold in August was $390,900, unchanged from July. The average sales price was $443,200, down from $448,700 in July. The estimate of new houses for sale at the end of August represents a supply of 6.1 months at the current sales rate.
- Industrial production rose 0.4% in August after climbing 0.8% the previous month. Late-month shutdowns related to Hurricane Ida held down the gain in industrial production by an estimated 0.3 percentage point. Despite interruptions caused by the hurricane, manufacturing output increased 0.2%. Hurricane Ida impacted mining production, which fell 0.6%. Utilities increased 3.3%, as unseasonably warm temperatures boosted demand for air conditioning.
- For the week ended September 18, there were 351,000 new claims for unemployment insurance, an increase of 16,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended September 11 was 2.1%, an increase of 0.1 percentage point from the previous week’s rate.
Eye on the Week Ahead
There’s plenty of important economic data available the last week of September. Orders for durable goods slipped in July but are expected to rebound in August. The third and final estimate of second-quarter gross domestic product is also out this week. The economy expanded at an annualized rate of 6.6%, according to the second estimate.
Have a nice week!
Sincerely,
Robert G. Carpenter