Cautiously Optomistic finish to 1st Half of 2007
At the end of the 2nd quarter of 2007 the economy continues to stagger, although optimistically.
Existing Home Sales for May (Nationally) were off slightly from the previous month, but still above analysts’ estimates with 5,990,000 units sold.
New Home Sales came in at 915,000 units and were off by 15,000 units from both the analysts’ estimates and the prior months actuals of 930,000 units.
U. Michigan’s Consumer Sentiment Survey showed slight improvement in contrast to the Conference Board’s Consumer Confidence Index which was slightly lower at the end of the 1st half of the year, perhaps reflective of a lower than expected rise of 0.4% in Personal Income, where analysts were predicting a 0.6% increase. This is also consistent with Consumer Spending which remained unchanged at 0.5% while analysts had been forecasting an increase of 0.7%.
Perhaps the shining light for the future was manifest in the Core Inflation Index of 0.1%, which represents no change from the previous period and gives comfort to the FED-Watchers that inflation seems to be curtailed and the likelihood of a FED Rate-Hike is substantially diminished. The current Core Rate puts the rate for the year at 1.9%, which is just under the FED’s unofficial comfort range of 1.0% to 2.0%. This news results in higher bond prices which result in lower yields and, for the consumer, consequently in lower “long term” interest rates.
The Status is “quo!”
For economic indicators for the first week of the 3rd Quarter (next week) we will be looking at Factory Orders, Employment/Unemployment data and more importantly Hourly Earnings and Hours Worked Weekly as they weigh in as potentially inflationary factors.
We will have to wait until the end of July to see the 2nd Quarter GDP (Gross Domestic Product) reports.