I’m having ongoing computer trouble, so it’s been an interesting day. Hopefully, it’s no cause for concern. After all, there’s a lot to do and only so much time to do it.
Coronavirus continues to be a public health scourge, and it’s starting to have serious economic implications. Time is of the essence in dealing with the outbreak. We’ll have more on that later.
First, let’s jump into the economic headlines, with summary assistance provided by Econoday.1
ISM Manufacturing Index
Manufacturing showed growth for the first time in 5 months in January. The overall index came in at 50.9 as compared to 47.8 in December. Numbers above 50 indicate manufacturing growth.
New orders were up 4.4 points to settle at 52. New export orders were especially strong, up six points to come in at 53.3. Production had the biggest uptick on the month, rising almost 10 points to show new growth at 54.3.
However, employment levels continued to drop, albeit at a slower pace. Employment levels in this index read 46.6, which is one point better than last month. While there are still fewer backlog orders than last month at 45.7, this improved a little bit. Prices paid were up 1.6 points, but this is on the lower side of growth at 53.3.
Of 18 manufacturing industries looked at, eight reported growth, with an equal number reporting slowdowns in business, while the remaining two were flat. Global trade continues to be a concern.
MBA Mortgage Applications
Mortgage applications were up 5% overall on the week. On the refinance side, they were up 15%, which made up for a 10% drop in purchase applications. The refinance boom was no doubt helped by the fact that the average rate on a conventional 30-year fixed mortgage with a 20% down payment was down 10 basis points to 3.71%.
Despite this week’s drop, purchase applications are still up 11% on the year.
The nation’s trade deficits increased by $5.2 billion to $48.9 billion in December. This is still the third-lowest trade deficit anytime in 2019.
Exports rose by $800 million to come in at $209.6 billion. Exports of industrial supplies and capital goods were up and there’s a $20.8 billion surplus on the services side, despite it falling by $100 million in December. Exports of foods, feeds and beverages were up $100 million to $10.5 billion. This category is being closely watched because a major piece of the trade pact with China was that they were going to import more U.S. agricultural products. We’ll get into this more later, but there’s some speculation that the Chinese, worried about the economic impact of the ongoing coronavirus crisis, may not be able to meet the import targets specified in the agreement.
A key part of the deficit increase was the fact that imports were up 2.7% to $258.5 billion. The goods deficit was at $69.7 billion in December; this included increases in both imports of industrial supplies and consumer goods.
Initial jobless claims were down 15,000 to come in at 202,000. Meanwhile, the 4-week moving average was down 3,000 at 211,750.
On the continuing claims side, these were up 48,000 to 1.751 million. The average over the last 4 weeks was down 13,250 to just over 1.742 million.
Expectations for 160,000 jobs added in January were blown out of the water as nonfarm payroll numbers beat all consensus estimates and 225,000 jobs were added in January. The unemployment rate did go up 0.1% to 3.6%, but this was only because the labor force participation rate was up 0.2% to 63.4%. Basically, more people are feeling good about the economy and looking for work for the first time in a while.
There were 206,000 jobs added to private payrolls, while the public sector added 19,000. Wages increased at a pace of 0.2% on the month and have gone up 3.1% on the year, a 0.1% increase in the pace of annual appreciation. Analysts still see this pace of wage growth as being on the low side. The average workweek remained at 34 hours, 18 minutes for all workers.
As we dig into what’s happening across different industries, it wasn’t all good news. U.S. manufacturing lost 12,000 jobs, including 11,000 in the auto industry. However, other industries showed major gains, including healthcare, which added 36,000 jobs. Transportation and warehousing saw an increase of 28,000 jobs. Construction workers were the big winners last month, seeing 44,000 new job openings.
Mortgage rates fell again last week. If you’re in the market for a mortgage, rates have been especially low recently. It’s a great time to lock your rate if you’re ready.
The average rate on a 30-year fixed mortgage was down six basis points to 3.45% with 0.7 points paid in fees. This is down from 4.41% a year ago.
Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.7 points paid with that 2.97%, down three basis points, and dropping from 3.84% last year.
Finally, the average interest rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage was up eight basis points to 3.32% with 0.2 points paid. This has fallen from 3.91% at the same time a year ago.
Stronger-than-expected jobs data generally means good things for a Friday trading session on Wall Street, but this coronavirus bug has traders quite concerned that there will be a major impact on the Chinese economy. As the number of infected and the death toll continue to mount, Chinese citizens have stopped going out, whether under orders or otherwise. A lack of activity is having a massive negative impact on the economy.
Despite Friday’s losses, the Dow Jones Industrial Average was up 3% for the week to come in at 29,102.51 Friday, despite falling 277.26 points on the day. Meanwhile, the S&P 500 fell 18.07 points Friday to close at 3,327.71, still up 3.17% on the week. Finally, the Nasdaq finished Friday at 9,520.51, down 51.64 points Friday, but up 4.04% on a weekly basis.
The Week Ahead
Wednesday, February 12
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Thursday, February 13
Consumer Price Index (CPI) (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The 4-week moving average of new claims smooths out weekly volatility.
Friday, February 14
Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.
Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.
Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.
Much like last week, there’s not a high volume of data coming out this week. However, we’ll have it all covered in next week’s Market Update!
If you could use a pick-me-up on this winter Monday, not to worry. We’ve got plenty of home, money and lifestyle content to share with you if you subscribe to our mailing list below. As a reminder, Valentine’s Day is this Friday if you are celebrating. However, you can get your girls together no matter what. Check out our tips for a fantastic Galentine’s Day! Have a great week!
1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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