Consumer Confidence Down, Oil Prices Up Increasing prices and weakness in the housing markets and the economy continue to hurt consumer confidence. Consumer confidence in June fell for the sixth straight month with rising costs at the supermarket and the gas pump along with continued troubles in the housing market and stock market weighed negatively on sentiment. Housing data on new and existing homes gave off mixed signals which show that conditions in the housing markets are far from stable. Weakness in the overall economy has also been weighing on Wall St. Major stock indexes finished considerably lower in June and for the quarter. The broader S&P 500 index fell 3.2% in the second quarter and is down 8.6% for the month of June.
Negativity continues to loom over the markets while surging crude prices captured headlines over the past week. Crude prices jumped to new all-time highs last Friday, trading intra-day at nearly $143/barrel before closing at just over $140/barrel. It was the first time ever that crude had closed at over the $140 mark. Crude traded roughly sideways on Monday to close at $140/barrel. The run-up in crude prices last week was mainly due to geopolitical concerns along with the weakening U.S. dollar. Higher food and energy prices have forced the Federal Reserve to shift their focus to inflation while stating at their meeting last week that "although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased." The Fed kept its target Fed Funds rate unchanged at 2.0% last week.
The Economy Final estimates for first quarter gross domestic product were revised slightly higher to 1.0% from the preliminary figure of 0.9%. First quarter growth was revised higher with each estimate during the first three months of the year. Many had expected the economy to contract during the first quarter due to the credit crunch and the continued troubles in the financial and housing markets. Slight positive revisions to both consumer and government spending along with increased exports helped to improve economic expansion during the quarter.
Consumer confidence in June fell for the sixth straight month to its lowest levels since February 1992. The consumer confidence index declined to 50.4 in June from an upwardly revised 58.1 in May which represents a 7.7 point drop from the previous month. Both the present situation and expectations index reported monthly declines as well.
Personal incomes posted a large jump in May due to economic stimulus checks that went out last month. Personal incomes increased 1.9% from April and 6.4% from May of last year. The monthly increase in personal incomes in May was the largest since September 2005 while annual income growth in May is at its highest levels since September 2007.
Housing Market New and existing home sales moved in opposite directions again in May but it was the existing home market that showed improvement while new home sales faltered. New home sales declined in May after posting its first monthly gain since October 2007 last month. Sales fell 2.5% in May to a seasonally-adjusted 512,000 homes, down from a revised April figure of 525,000. Sales for the previous three months were also revised lower by 9,000 units. At the current sales pace, there are 10.9 months of new homes supply on the market. The number of new homes for sale continued to decline as builders continue to scale back production. New home inventory declined to 450,000 which is the lowest it has been since May 2005. In May, median new home prices fell back to their lowest levels since March to $231,000 after posting a strong rebound in the previous month. Lower prices helped to increase the new home affordability ratio to 48.8% in May.
Annualized sales of total existing homes in May increased for the first time since February, rising 2.0% from April levels to 4,990,000 units. Sales of existing homes are still down 15.9% from the 5.93 million units in May 2007. Median existing home prices in May increased for the third straight month to $208,600 from a revised $201,200 in April. This is the highest median existing home prices have been since November 2007. The number of existing homes for sale declined 1.4% to 4.485 million units in May. At the current sales pace, there are 10.8 months of existing homes supply on the market. Existing home affordability declined for the third straight month due to increases in both mortgage rates and existing home prices in May.
National average mortgage rates increased to 6.45% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on June 26th. This is the fifth straight week that rates have increased and the highest rates have been since early September 2007. In the week ending June 20th, the MBA's seasonally-adjusted Purchase Index declined to 333.4 from 360.2 in the previous week. This is the second straight week that purchase applications have declined while reaching their lowest levels since February 2003. The latest figure reflects a 7.44% decrease from last week and a 22.27% drop from the same period last year.
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|Real GDP Growth||1.0%||D-|
|Purchase Mortgage Applications||333.4||F|
|Median Price Existing Home||$208,600||F|
|Existing Home Sales||4,990,000||D+|
|Existing Home Inventory||4,485,000||F|
|Existing Home Affordability||53.2%||B|
|Median Price New Home||$231,000||F|
|New Home Sales||512,000||F|
|New Home Inventory||450,000||F|
|New Home Affordability Ratio||48.8%||B-|