August Data Looks Good
• The ISM Non-Manufacturing Index for August increased to 55.3, indicating good conditions.
• The U.S. International Trade Deficit widened to -$43.7 billion in July.
• Mortgage Applications for the week ending September 1 increased with stronger refi activity.
The ISM Non-Manufacturing Index for August increased to 55.3, indicating good and improving conditions for the bulk of the U.S. economy. The ISM Manufacturing index for August previously reported strong conditions for the nation’s manufacturing sector. Most non-manufacturing industries reported growth in August, including construction. Only two industries, agriculture/forestry/fishing and transportation/warehousing reported contraction for the month. Anecdotal comments were positive. All ten sub-indexes were above 50, indicating improving conditions. Together, the ISM Non-Manufacturing Index and the ISM Manufacturing Index capture the mood of the U.S. private sector economy and are consistent with a moderate GDP expansion for the third quarter. The data for both August ISM reports was largely collected before Hurricane Harvey flooded South Texas.
The U.S. international trade deficit widened slightly in July to -$43.7 billion. Exports eased by $0.6 billion for the month, due to weaker goods exports. Imports eased by $0.4 billion, with weaker imports of goods. If sustained through August and September, the Q3 trade deficit would narrow compared to Q2 and provide a boost to Q3 GDP growth. However, we may see some drag on exports in September due to the after effects of Hurricane Harvey. This could reduce Q3 GDP slightly. The Port of Houston is a major petroleum and petrochemical export facility.
The Mortgage Banker Association’s composite mortgage application index increased by 3.3 percent for the week ending September 1. Refi apps were strong, up 5.1 percent, as mortgage rates eased. According to the MBA, the rate for a 30-year fixed rate mortgage eased 4.06 percent. Purchase apps increased by 1.4 percent for the week after falling for the three previous weeks.
Market Reaction: U.S. equity markets are mixed. The yield on 10-Year Treasury bonds is up to 2.06 percent. NYMEX crude oil is up to $48.63/barrel. Natural gas futures are down to $2.97/mmbtu.
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