Weekly Economic Update
Last Week and the Economy
- The New York Fed’s SCE Housing Survey revealed troubling expectations for housing affordability.
- New data from the Federal Reserve Board showed that Americans accepted more debt at higher interest rates in the first quarter.
- The University of Michigan released preliminary results for the May Survey of Consumers.
There were few major economic headlines last week and the major stock indices continued their steady ascent. The Dow Jones Industrial Average had its best week of the year and climbed 2.16%. The S&P 500 and Russell 2k Small Cap Index also rose by 1.85 and 1.18%, respectively, while the NASDAQ ended the week 1.14% higher. In international markets, the MSCI-EAFE index rose by 1.59%.
Consumers Report Pessimistic Outlook on Housing Affordability
The Federal Reserve Bank of New York released the SCE Housing Surveyon Monday. This is an annual report detailing consumer expectations of the housing and rental markets.
The 2024 report showed that consumers expect home prices to rise by 5.1% over the next year, the second highest reading in the survey’s history. Survey respondents also expect mortgage rates to rise substantially over one- and three-year timeframes, which would further increase the cost of home ownership.
With higher interest rates and home prices expected, current renters unsurprisingly lowered their expected chances of ever owning a home from 44.4% one year ago to 40.1% – a record low for the survey. Survey respondents also see rent rising by 9.7% over the next year.
Americans Accepted More Debt in the First Quarter
The Federal Reserve Board released updated data for Consumer Credit in the first quarter. Overall, Americans’ debt increased by 3.2% to $5.06 trillion. Total revolving debt increased by 5.7% to $1.34 trillion while nonrevolving debt increased by 2.2% to $3.72 trillion.
Along with more debt, consumers paid higher interest rates. Rates for 60-month auto loans issued by commercial banks rose from 8.15% in the fourth quarter to 8.22%. Additionally, credit card rates rose from 21.47% to 21.59% over the same time frame and rates for personal loans rose from 12.35% to 12.49%.
Consumer Sentiment Retreated
According to the University of Michigan’s May Survey of Consumers, Americans reported the lowest economic optimism in about six months. Survey respondents reported 12.9% less confidence in the current economic situation and 12.5% less confidence in future economic conditions.
Surveys of Consumers Director Joanne Hsu explained that survey respondents “expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead.” Hsu also noted that these concerns applied to consumers across age, income, and education groups which contributed to the steep decline in sentiment.
Data Sources for stock and index quotes: Yahoo Finance, WSJ
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Weekly Economic Update
May 13, 2024School of Financial Wellness
New data revealed concerns regarding housing costs. Americans accepted more debt in the first quarter. Consumer sentiment declined.
Key Economic Data Points
Unemployment Rate:
As of April 2024: 3.9% (Next Report: 6/7/24)
FOMC Target Rate:
As of May 2024: 5.25% – 5.50% (Next Report: 6/12/24)
GDP:
Q1 2024: +1.6% (Next Report: 5/30/24)
PCE Inflation Rate:
As of March 2024: 2.7% (Next Report: 5/31/24)
Data Sources: U.S. Bureau of Labor Statistics, FRED – St. Louis Fed, U.S. Bureau of Economic Analysis
Weekly Quote:
Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.
-Charlie Munger, Vice Chairman of Berkshire Hathaway
The Week Ahead – Economic Data & Events
Monday: Survey of Consumer Expectations
Tuesday: Producer Price Index
Wednesday: Advance Retail Sales, Consumer Price Index, Empire State Manufacturing Survey, Business Inventories, Outlook-At-Risk
Thursday: Business Leaders Survey, Imports and Exports, New Residential Construction, Philadelphia Fed Manufacturing Survey, Industrial Production & Capacity Utilization
Weekly Reports: Mortgage Applications (Wednesday), EIA Petroleum Status Report (Wednesday), Jobless Claims (Wednesday), EIA Natural Gas (Thursday), Fed Balance Sheet (Thursday), Baker Hughes Rig Count (Friday)
Source: New York Fed
The Week Ahead – S&P 500 Companies Reporting Earnings
Tuesday: Home Depot, Inc. (HD)
Wednesday: Cisco Systems, Inc. (CSCO)
Thursday: Walmart, Inc. (WMT), Take-Two Interactive Software, Inc. (TTWO), Deere & Company (DE), Applied Materials, Inc. (AMAT), Copart, Inc. (CPRT)
Source: Select Sector SPDRs Earnings Calendar
Weekly Tip:
Allow yourself some “fun money.” One of the fastest ways to derail your budget is to set spending goals that are too strict and, therefore, too difficult to obtain so it is important to leave some cash in your budget for splurges.
Data Sources for stock and index quotes: Yahoo Finance, WSJ
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Last Week's Riddle and Answer
Last Week's Riddle:
Only one color, but not one size. Stuck at the bottom, yet easily flies. Present in sun, but not in rain. Does no harm and feels no pain. What is it?
Last Week's Answer:
A shadow is only one color but not one size, stuck at the bottom but easily flies, present in sun but not in rain, does not harm and feels no pain.
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