Last week was a tough one for the markets. The major stock indexes all fell, with the Nasdaq notching its largest weekly decline since March. Many of the market sectors decreased, with only information technology and energy posting modest gains. The yield on 10-year Treasuries, an important indicator of the economy, climbed 11.0 basis points, reaching a 16-year high earlier in the week. The Federal Reserve projected that interest rates would remain higher for longer than expected, which might lead to a slowing of the economy. Crude oil prices ended last week slipping marginally. The dollar and gold prices eked out gains.
Last Week’s Economic News
- The Federal Open Market Committee decided to maintain the current target range for the federal funds rate at 5.25%-5.50%. Striving to achieve maximum employment and inflation at the rate of 2.0%, the Committee suggested that it would continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2.0% over time, the Committee said it would consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. Nevertheless, the Committee projected interest rates would end the year at 5.50%-5.75%, implying another rate hike before the end of 2023. However, the FOMC stated that it would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. Inflation has moderated somewhat since last year but has a long way to go before reaching the 2.0% target.
- August saw a spike in the number of issued residential building permits, after climbing 6.9% above the July estimate. However, compared to August 2022, building permits were down 2.7%. The number of single-family building permits issued in August was 2.0% above the previous month’s total. Housing starts declined 11.3% in August and 14.8% below the August 2022 rate. The decline in housing starts may have been attributable to the increase in housing completions, which rose 5.3% in August from July, and 3.8% above the August 2022 rate. However, single-family completions were down 6.6% last month.
- Sales of existing homes declined for the third consecutive month after retreating 0.7% in August. Existing home sales were down 15.3% from August 2022. The median existing home sales price was $407,100, up from July’s price of $405,700 and well above the August 2022 price of $391,700. The August median sales price has surpassed $400,000 for the third straight month. The number of existing homes for sale in August sat at a 3.3-month supply at the current sales pace, unchanged from the July estimate. Sales of existing single-family homes decreased in August, down 1.4% from July and 15.3% from August 2022. The median existing single-family home price in August was $413,500, up from the July price of $411,200 and higher than the August 2022 price of $398,800.
- The national average retail price for regular gasoline was $3.878 per gallon on September 18, $0.056 per gallon higher than the prior week’s price and $0.224 more than a year ago.
- For the week ended September 16, there were 201,000 new claims for unemployment insurance, a decrease of 20,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended September 9 was 1.1%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended September 9 was 1,662,000, a decrease of 21,000 from the previous week’s level.
Eye on the Week Ahead
This is a very busy week for the release of some important economic data. The final estimate of second-quarter gross domestic product is available. The prior estimate showed the economy accelerated at an annualized rate of 2.1%. Also out this week is the August release of the report on personal income, consumer spending, and consumer prices. The previous month saw income creep up 0.2%, while consumer spending rose 0.8%. The personal consumption expenditures (PCE) price index, an indicator of inflation preferred by the Federal Reserve, revealed prices rose 0.2% in July and 3.3% over the past 12 months. As with the Consumer Price Index, rising energy prices, particularly oil and gasoline, are expected to impact the overall PCE price index.
Have a nice week!