Week of August 30–September 3, 2010

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Weekly Economic ForecastIndicator This Week Last Week

GDP 2010 Q3: 1.9% 2.0% ↓

GDP 2010 Q4: 2.4% 2.5% ↓

GDP 2011 Q1: 2.4% 2.3% ↑

Unemployment rate by the year-end 2010:

10% 10% ↔

Average 30-year fixed mortgage rate by the year-end 2010:

4.8% 4.7% ↑

NAR's monthly official forecast as of September 2

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Monday, 08/30/10

•Both consumer spending and income increased slightly in July. Personal income in July increased 0.2 percent. Consumer spending increased 0.4 percent in July. Durable goods increased 0.9 percent, nondurables increased 0.3 percent, and services increased 0.4 percent.•Consumer spending and personal income were flat in June. •This is a positive sign of the overall economy as consumers will be leading the way to push forward the housing market and economic conditions.

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Tuesday, 08/31/10•The Case-Shiller 20 city price index increased 0.3% in June, and 4.2% from June 2009. The index has increased in 11 of the last 13 months through June.•San Francisco, San Diego, and Minneapolis exhibited the largest gains from June 2009. Seattle, Charlotte, and Las Vegas showed the largest declines from June 2009.•The Conference Board’s consumer confidence index increased by 4.9% In August to 53.5. Despite the increase, the index remains 1.8% below the August 2009 figure of 54.5.•The increase in August was primarily driven by an increase consumer expectations over the next six months, which increased by 7.4% in August.•Increases in consumer confidence and home prices suggest that consumer demand is increasing which is certainly a benefit to the existing home market. However, both home price and consumer confidence are still well below historical norms.

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Wednesday, 09/01/10•Mortgage purchase applications were up slightly (1.8 percent) for the week ending August 27th, continuing the weakness in the home purchase market after the expiration of the tax credit. The level of mortgage activity remains close to 13-year lows.•Purchase applications do not take into consideration all-cash purchases which according to the June REALTORS® Confidence Index made up roughly one-fourth of transactions.Year-over-year purchase applications were down 37.5 percent.Refinances were an 82.9 percent share of mortgage activity as mortgage rates fell to the lowest level in 20 years of the survey’s data coming in at an average rate of 4.43 percent for a 30-year fixed mortgage.

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Wednesday, 09/01/10 (Cont’d)•The private sector cut 10,000 jobs in August according to the ADP report that came out today; analysts had expected the report to show some job creation. This is further negative news for the employment sector that is a key for the housing market. Friday, the government will release a more extensive report for August.•The ISM report showed that the manufacturing sector continued to improve in July as there was a strengthening in both the import and export markets. •Construction spending was weak in July falling one percent month-over-month and 10.7 percent year-over-year. Private residential construction was down 2.6 percent from June, but up 5.5 percent from the previous year.

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Thursday, 09/02/10 •The Pending Home Sales Index rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1 percent below July 2009 when it was 98.1. The data reflects contracts and not closings, which normally occur with a lag time of 1-2 months.•Jobless claims remain high, posing lingering challenges to economic recovery. The Department of Labor reported that the number of people filing for unemployment checks for the first time decreased by 6,000 last week, to 472,000 from the previous week’s revised number.•Comparatively, the jobless claim number was above 568,000 per week a year ago. A figure under 400,000 is needed to ensure net job creation.

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Thursday, 09/02/10 (Cont’d)•The increase in orders for manufactured goods is a positive sign for the economy. Businesses boosted their inventory levels after last month’s decline. New orders for manufactured goods increased $0.6 billion in July, up 0.1 percent from June, driven by a surge in transportation orders. The advance follows a 0.6 percent decline in June.•Manufacturers’ shipments of goods increased $4.4 billion or 1.1 percent. Inventories rose $5.1 billion or 1.0 percent, following a 0.1 percent increase in June.•During the second quarter of this year, employment productivity declined. Based on a Department of Labor report, labor productivity declined at a 1.8 percent annual rate, prompted by a 1.9 percent decrease in business sector productivity and a 2.4 percent drop in nondurable manufacturing sector productivity.

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Friday, 09/03/10•Overall, the employment situation is better than expected. While overall payroll employment did fall for the third straight month due to government layoffs of temporary Census workers, private nonfarm employment continued a second month of increases. •Private service jobs rose 67,000 after a 70,000 increase in July. The largest increase was the 45,000 jobs in education and health services, with health care up 40,000. Professional and business services also increased by 20,000 after falling 3,000 in July. The weakness was seen in retail trade and the goods-producing sector.•Construction jobs actually increased after dropping in July. Compared to a year ago, overall payroll jobs pushed up to 0.2 percent in August from up 0.1 percent in July.

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Friday, 09/03/10 (Cont’d)•Another positive note was that average hourly earnings improved 0.3 percent from 0.2 percent in July. The average work week for all workers was unchanged at 34.2 hours. •The ISM non-manufacturing report was less encouraging, showing generally slower business activity. Backlog orders showed mainly flat, export orders fell, and deliveries are showing less delay. Imports did increase as did raw material prices.

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