In this week’s economic view, the Fed made moves on hiking interest rates for the second time in three months, home builders grew even more confident in the new home market, and job openings were in line with their 2-year trend. Mortgage rates continued their climb.
The Fed moved on their second interest rate hike in three months on Wednesday. The Fed raised the benchmark rate to a range of 0.75 to 1.00 percent. Janet Yellen said in a press conference that their decision “reflects that economy’s continued progress toward the employment and price stability objectives”.
Optimism is high in the new home market. The March Housing Market Index was up 6 points to a level of 71, which is the best reading of the economic cycle. Home builders reported expanding optimism in both the current sales and future sales components. As far as homebuyer traffic goes, the component gained 8 points in March, putting it at a level of 54, which is the third plus-50 reading of this component in the last four months.
Single-family permits are leading the pack for the February Housing Starts report. Permits for single-family homes increased by 3.1 percent to a rate of 832,000. However, multi-family units dropped a heavy 22 percent in the month to a rate that is down 11.2 percent year-over-year. Starts for single-family homes were up 6.5 percent with a 3.7 percent decline in multi-family homes.
Employment & Labor Market
Despite booming growth in last week’s employment report, the Labor Market Conditions Index held barely above zero. This experimental indicator, compiled by the Federal Reserve to track labor activity, dropped from a level of 1.3 in January to 0.6 for February.
According to the January Job Openings and Labor Turnover Survey (JOLTS), job openings are in line with their 2-year trend. Openings came in at 5.626 million. Considerable strength was in the hiring component, which rose 2.6 percent in the month to the best reading of the economic cycle. The quit rate, which signals how confident works are in finding new employment after quitting, is up 0.1 percent to 2.2 percent.
While the consumer price index didn’t have much of a liftoff in February, up just 0.1 percent for the month but within expectations, core CPI is up 2.2 percent year-over-year. This is the highest headline gain for the index since February 2012.
The March preliminary consumer sentiment report showed increasing strength after some declines in the previous months. The preliminary report came in at 97.6 for the month versus February’s final reading of 96.3. The gain came largely from strength in the current conditions component, which increased 3.0 points to 114.5, a 17-year high.
This week in the economy:
- The 30-year fixed-rate increased as of March 16 with the average at 4.30 percent with 0.5 points, according to Freddie Mac.
- Purchase applications rose a seasonally adjusted 2 percent despite rising mortgage rates. Refinance applications also increased by 4 percent, according to MBA Mortgage Applications.
- Initial jobless claims decreased by 2,000 in the March 11 week to 241,000, according to Bloomberg. The 4-week average is down almost 10,000 from mid-February at 237,250.
- After reaching an economic cycle high in the week of March 7, the Bloomberg Consumer Comfort Index increased even more, up 0.4 points to a level of 51.
- February retail sales brought a 0.1 percent gain for the month but a revision for January, which was already strong, brought that index 2-tenths higher to 0.6 percent.
The economic calendar for the week of March 20, 2017:
- Wednesday – MBA Mortgage Applications, FHFA House Price Index, Existing Home Sales
- Thursday – Jobless Claims, Bloomberg Consumer Comfort Index, New Home Sales
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