Comerica Economic Weekly, August 2, 2019

Robert A. Dye, Ph.D.


Daniel Sanabria

Tablet on a desk with papers, pen, mobile phone and cup of coffe

Economic data was mixed again this week, consistent with an ongoing moderate GDP expansion in Q3.

Economic data was mixed again this week, consistent with an ongoing moderate GDP expansion in Q3. 

Labor data continues to look solid. U.S. payrolls expanded by 164,000 in July and the unemployment rate was unchanged at 3.7 percent. 

Initial claims for unemployment insurance increased by 8,000 for the week ending July 27, to hit 215,000. Continuing claims gained 22,000 for the week ending July 20, to hit 1,699,000, still a very low number. 

The ISM Manufacturing Index declined for the fourth consecutive month in July to 51.2, which is still a positive number, indicating a weak expansion. Comparable indexes for other countries have been below 50 for several months highlighting the risk of a global manufacturing contraction that may spill over into the U.S.

The Employment Cost Index (ECI) for Q2 showed that total compensation for civilian workers increased by 0.6 percent Q/Q. Over the previous 4 quarters, the ECI is up by a reasonable 2.7 percent. The Q2 ECI data is showing us that labor is getting more expensive. But given the fact that productivity looks like it is on an increasing trend this year, unit labor costs may remain contained.

Estimated U.S. auto sales eased for the second month, to a 17.0 million unit rate in July. Light truck sales increased to a 12.2 million unit rate, while auto sales dipped to a 4.8 million unit rate.

The U.S. international trade gap narrowed a bit in June, to -$55.2 billion. Exports eased by $4.4 billion for the month, while imports eased by $4.6 billion. This, along with weak construction spending for June, implies that there will be a slight downward revision to Q2 GDP. 

Yesterday, the Trump Administration threatened to increase tariffs on imports from China by an additional 10 percent on September 1. 

Total mortgage applications dipped by 1.4 percent for the week ending July 26. Refi apps were little changed for the week, up by 0.1 percent after falling the week before. Purchase apps were down by 3.0 percent, the third consecutive weekly drop. On a four-week moving-average basis, refi apps are up by 84.9 percent from a year ago, while purchase apps are up by 6.2 percent. According to the Mortgage Bankers Association, the rate for a 30-year fixed rate mortgage was stable at 4.08 percent. 

The Case-Shiller U.S. National Home Price Index for May showed a 3.4 percent year-over-year increase. This is the weakest yearly increase since September 2012.

June was the fourth consecutive month showing a 0.4 percent increase on nominal personal income. The Personal Consumption Expenditure Price Index (PCE), was tame in June, increasing by just 0.1 percent for the month, as it did in May. The core PCE Price Index (less food and energy) gained 0.2 percent in June. Over the previous 12 months, the headline PCE Price Index was up by just 1.4 percent, while the core PCE Price Index was up by 1.6 percent. Real disposable income increased by a moderate 0.3 percent in June. Real consumer spending notched up by 0.2 percent in June. The personal saving rate was strong at 8.1 percent. 

Consumer confidence increased at mid-summer according to The Conference Board. Their Consumer Confidence Index jumped from 124.3 in June, to 135.7 in July.

The Federal Reserve lowered the fed funds rate range by 25 basis points on Wednesday. They also ended their program of balance sheet runoff two months early. The Bank of Japan said this week that it would like to keep its current low interest rates unchanged until at least spring 2020. The Bank of England left the Bank Rate unchanged at 0.75 percent at the meeting ending July 31 as it looks ahead to a possible hard Brexit in October. 

For a PDF version of this publication, please click here: Comerica Economic Weekly, August 2, 2019.

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August 2, 2019
Robert A. Dye, Ph.D., Senior Vice President and Chief Economist at Comerica Bank

Robert A. Dye, Ph.D.

Senior Vice President and Chief Economist
Daniel Sanabria, Senior Economist at Comerica Bank

Daniel Sanabria

Senior Economist

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