News for Prescott AZ - AmericanTowns.com

Friday, September 04, 2009

WEEK IN REVIEW

 

 

 

 

Volume 15, Number 33

Economic Highlights for the Week Ending September 4, 2009

MONDAY, August 31st

Although recent data suggests the recession is at an end, it will probably be mid-2010 before the Fed begins to consider any upward movement in rates because of lingering problems in the asset-backed securities market. Weakness in commercial mortgage-backed securities market and the coming downdraft in the commercial real estate market will keep monetary policy accommodative this year and into next until the commercial market begins to correct.

TUESDAY, September 1st

The pending home sales index increased to 97.6 in July from a reading of 94.6 in June. This was the sixth straight monthly gain for the index to reach its highest point since June 2007. The level of the index suggests continued gains in existing home sales in August and September and continued mild recovery effects in the housing market.

The ISM manufacturing index rose to 52.9% in August from a level of 48.9% in July. A reading over the key 50% level indicates growth in the manufacturing sector, its first expansionary reading since January 2008. Details in the data series also suggest manufacturing activity will continue to expand going forward.

Motor vehicle sales surged 25.4% in August to an annualized pace of 14.1 million units as many potential car buyers came out of the woodwork to take advantage of the government's cash-for-clunkers program. Now that the program has ended, sales are expected to decline in coming months because the fundamentals of job and income growth are not there to support major purchases.

WEDNESDAY, September 2nd

The minutes from the mid-August FOMC meeting revealed that policymakers believed the recession would end sometime in the latter half of this year and that the recovery would initially be weak. Because of economic weakness most on the Committee did not think inflation would be a problem. Rates were held near zero, were expected to remain near zero for an extended period of time while the Fed continued its many financial asset purchase programs.

The MBA mortgage applications index fell 2.2% to 564.1% for the week ending August 28. The purchase index fell 1.0% while the refinance index dropped 3.1%. The declines follow several weeks of gains with the overall trend remaining somewhat flat. Application activity has stabilized for now at a fairly weak level.

THURSDAY, September 3rd

Jobless claims fell 4k to 570k for the week ending August 29. Meanwhile, continuing claims increased 92k to 6.234 million for the week ending August 22. The levels of initial and continuing claims remain elevated indicating still weak labor market conditions.

The ISM non-manufacturing index rose to 48.4% in August from a level of 46.4% in July. This is the highest service sector reading since before the financial crisis hit last October. Service sector activity is still contracting however it is at a much slower pace.

Chain store sales fell 2.0% in August from August one year ago. August results followed steeper 5% declines in June and July. Back to school purchases boosted spending last month however, spending remains weak and consumers, cautious.

Mortgage rates dipped this week as subdued inflation tamed yields in the bond market. 30-year fixed rate mortgages averaged 5.08% this week compared to 5.14% last week according to Freddie Mac's mortgage market survey.

FRIDAY, September 4th

Payroll employment fell by 216k in August compared to market expectations for a 230k decline. Meanwhile, downward revisions in the past two months resulted in net 49k additional jobs lost. Payroll declines have moderated relative to earlier this year however; they still remain steep especially given the outlook for an anemic recovery with little, new job creation. The unemployment rate rose 0.3% to 9.7% of the workforce, the highest rate since 1983.

Stock Market Close for the Week

Index

Latest

A Week Ago

Change

DJIA

9441.27

9544.20

-102.93 or -1.08%

NASDAQ

2018.78

2028.77

-9.99 or -0.49%

WEEK IN ADVANCE

The coming week is light on economic data so financial markets will be the main focus after the holiday weekend marks an end to summer. Investors will be watching oil and the dollar and their effect on equities while the Treasury plans to sell another $70 billion in debt.

Key Interest Rates

Latest

6 Mos Ago

1 Yr Ago

Prime Rate

3.25

3.25

5.00

Fed Discount

0.50

0.50

2.25

Fed Funds

0.16

0.22

1.96

11th District COF

1.473

2.455

2.698

10-Year Note

3.44

2.90

3.69

30-Year Treasury Bond

4.27

3.60

4.31

30-Yr Fixed (FHLMC)

5.08

5.15

6.35

15-Yr Fixed (FHLMC)

4.54

4.72

5.90

1-Yr Adj (FHLMC)

4.62

4.86

5.15

6-Mo Libor (FNMA)

0.75500

1.80313

3.11750

Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco


Upward pressure on interest rates
Downward pressure on interest rates
No pressure to change interest rates
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