Heading into the second half of the last quarter of the year, U.S. economic data continues to clean up after the August and September hurricanes.
U.S. real GDP growth for the third quarter registered a moderately strong 3.0 percent, according to the advance estimate. Real consumer spending, the lion’s share of GDP, was good, increasing at a moderate 2.4 percent annual rate, boosted by the replacement of cars and trucks damaged by the recent hurricanes.
New order for durable goods increased by 2.2 percent in September, supported by gains in commercial aircraft orders. Core orders (nondefense capital goods excluding aircraft) increased by a healthy 1.3 percent for the third consecutive month.
Sales of new single-family homes surged in September, reversing two consecutive monthly drops. Sales increased by 18.9 percent, to a 667,000 unit annual rate. This was the strongest monthly sales rate this side of the Great Recession. Good to see that, but we will not be surprised to see some give back in October.
Mortgage applications fell by 4.6 percent for the week ending October 20, after growing by 3.6 percent the week before. Both purchase and refi apps fell in the recent data. This looks consistent with our expectations of lower new home sales for October.
Initial claims for unemployment insurance increased by 10,000 for the week ending October 21, to hit 233,000, still a very low number. Continuing claims eased by 3,000 for the week ending October 14, to hit 1,893,000, also a very low number.
The European Central Bank announced Thursday that they will “downsize,” but not “taper” their asset purchases. This wordsmithing allows the ECB to take a cautious approach to eventually ending their asset purchase program without committing to a schedule. The ECB will cut asset purchases in half, to 30 billion euros worth per month from January through September 2018, reserving the option to go beyond September, if necessary. The unwind of asset purchases by the ECB will add slightly to upward pressure on U.S. Treasury bond yields.
The Federal Reserve is still a few steps ahead of the ECB in terms of asset purchases. This month the Fed began to taper down the amount of maturing assets that it is reinvesting. This will allow the overall size of the Fed’s balance sheet to gradually diminish.
We expect the Trump Administration to announce its choice for the next chair of the Federal Reserve any day now. Jay Powell looks like a slight favorite.
Chart of the Week
October/ November 2017
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