Last week the housing market continued showing signs of a slump. For the week, the S&P 500 Index fell 0.6% to 1,295 and the yield of the 10-year U.S. Treasury note fell 5 basis points to 4.78%.
July existing home sales fell for the fourth straight month, dropping 4.1%. (Economists only expected a 0.9% decline).
July new home sales also fell by 4.3% (above the 108% predicted decline).
July orders for durable goods droped 2.4% following two monthly increases.
The market rallied last week on generally benign reports and falling oil prices.
For the week the S&P 500 rose 2.8%, to 1,302
July’s PPI showed an increase for 0.1% (on an expected 0.4% - this is good new, however intermediate and crude producer goods’ prices have risen. Higher prices may be on the way.
July industrial production was up, but mostly due to a boost in utilities production. Outside of this volatile component, indications pointed to continued slow-down in manufacturing production.
July residential construction continued to slow, falling 2.5% (the 5th decline in the last 6 months).
The conference board’s release of leading indicators fell short of expectations, declining 0.1% (expectations were at a 0.1% increase).
Teaching is the best way to learn. It puts me under pressure to stay ahead, and conversations during class bring out the tough topics we could otherwise overlook. Leading this Java class reminds me of taking Linear Algebra with all the math majors (which I was not). We would meet up in the library and use an old greenboard for hours discussing matrices and eigenvalues. I’d get hungry and want to stop, but the rush of trying to explain things to others propelled me. I nailed that class with a solid A.
For the next 16 weeks I’ll be teaching (and learning) the Sun Certified Java Programmer material along with my coworkers. To ace the exam, we’ll all need to turn ourselves into javac compilers.
From what I’ve read so far, Kathy Sierra and Bert Bates do an awesome job of helping you stay interested in this beefy reading material. I’d highly recommend the book.
Last weeks’ highlight was the Federal Reserve Board’s decision to keep the target federal funds rate unchanged at 5.25%. This is the first time rates did not rise since Spring of 2004. Other news includes:
July retail sales posted a surprisingly high 1.4% gain
June business inventories rose, as did that month’s inventory/sales ratio
2Q 2006 business productivity was lackluster: rising 1.1% (annualized), compared with 4.3% in Q1 2006
2Q 2006 employment costs were up: hourly compensation up 5.4% (annualized) and unit labor costs 4.2% (annulalized)
June’s trade deficit shrunk 0.3%, to $64.8 Billion. The US imported 331 million barrels of crude, valued at $20.5 Billion.
June personal debit increased 5.7% (annualized) to $2.2 trillion. It was driven by revolving credit (credit cards) and nonrevolving credit (auto and studnet loans). This is the sixth consecutive monthly increase.
Full text of the FOMC interest rate decision from Aug. 8, 2006:
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.
Readings on core inflation have been elevated in recent months, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.
Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target at this meeting.
Construction spending in June rose 0.3% from May (driven from private nonresidential construction). Signs indicate the housing market is cooling, as private residential construction fell 1.0%).
However, total construction spending for the first half of 2006 rose 8.5% compared with the same 6 month period in 2005.
ISM reported U.S. manufacturing economy expanded again in July. Production, employment, supplier deliveries, and inventories increased for the month, while new orders decreased.
The ISM non-manufacturing sector report showed slowing growth in July.
Unemployment rose in July to 4.8% (still lower than last year’s 5.0%)
