Economic news this week:
Know your numbers…they are powerful and are telltale signs of the economy and opportunities.
- The International Monetary Fund (IMF) reduced their forecast for the US GDP from 2.8% to 2.0% due to weaker than expected first half of the year. Mortgage backed securities may also be getting support from increased tensions in the Ukraine and fighting in Iraq. Price of oil has surged 4% over the past 5 days to $107/barrel – 9 month highs due to turmoil in Iraq. (Source) Prices at the pump have a negative impact on the economy further making the 2% goal of the IMF lofty. Remember, investors will often seek the safety of bonds over stocks when global issues are causing concerns generally pushing interest rates lower.
Here are some economic indicators released this week:
- Tuesday, June 17: Consumer Price Index (CPI) – Rose y .4% in May versus .3% expected (Source) led higher by climbing costs of electricity, gasoline, and food hit highest monthly rate since 9/2012. The year over-over-year headline CPI rose to 2.1% versus 1% just one year ago. This indicates inflation, folks. Housing Starts fell 6.5% to an annual rate of 1.001M against estimates of 1.028M and building permits declined by 6.4% to an annual rate of 991K versus expected 1.050M. This is a sign of weakness and that the housing market is cooling from its 2013 pace. (source: MMG 6/17/14)
- Wednesday, June 18: FOMC Meeting Statement – Policy rates remain unchanged and taper of stimulus remains on schedule. Red policy rates are expected to remain low for some time as indicated by policy rate forecasts still putting the first rise in 2015. (Source)
- Thursday, June 19: Initial Jobless Claims; and Philadelphia Fed Index
So what does this all mean? Inflation can put upward pressure on interest rates causing them to rise and directly affected buying power. There is a inverse relationship of interest rates to buying power…the higher rates are, the less consumers can afford and vice versa.
Interesting factoids – Did you know…
- 77% consumers (and 85% of Millennials) have a favorable view of housing
- 79% of people (and 83% of Millennials) believe the housing market is on the right track
- 69% consumers are committed to buying or selling a home now
- 74% of consumers are most concerned about higher than expected prices when buying a home
- 83% are motivated to act sooner versus later because they fear interest rates will rise. (Source)