The only thing that got slapped harder this week than Brad Pitt was the U.S. Gross Domestic Product (GPD) when the Department of Labor’s report suggested it contracted in the first quarter for the first time since 2011. Up until yesterday’s report, this week’s economic news was apparently more exciting than Kimye’s honeymoon.
It was first reported on Tuesday that U.S. durable goods orders were up 0.8 percent in April. This is the third positive monthly report in a row. A large portion of the gains was due to defense spending, while capital goods orders (business orders) fell 1.2 percent. Business doesn’t want to spend money nearly as much as Mrs. Obama doesn’t want kids to eat potatoes.
Durable goods are made by manufacturers and manufacturers in the central Atlantic region held a flat note longer than Gwyneth Paltrow. The Federal Reserve Bank of Richmond reported the Richmond’s Fed Manufacturing Index held steady in May at 7, the same as April’s 7. (I just now realized that Pitt and Paltrow were both in the movie Seven!) The underlying data, however, suggests better tunes are coming. Data affecting employees, who like Superman and Clark Kent are employees and consumers, were positive. Richmond’s May employment index, workweek index and wage index were all up.
Increased work and pay have an oddly positive influence on consumers apparently, as the Conference Board said on Monday that May consumer confidence increased to 83 from April’s 81.7. Consumers have so much confidence that they’ve pushed the U.S. March FHFA House Index up by 0.7%. The S&P/Case Shiller Index confirmed the increased price trend with a report that March prices rose 0.2 percent over February prices. All which seems to be contrary to what consumers are feeling as Consumer Sentiment dropped this month to 81.9 from 84.1, not a small number. Could this be the driver for Consumer Spending to be slightly down as well? This seems like another mixed bag for the economy.
On Tuesday, we refinanced our condo down to a 3.5%, 15-year fixed rate that will save us over $75,000 and seven years compared to our original mortgage. MBA Purchase Applications released on Wednesday, however, suggests we’re an anomaly. Mortgage applications fell 1.2 percent for the week ended May 23rd, compare to the week earlier, while at the same time the Refinance Index decreased 1 percent.
Also on Wednesday, the ICSC-Goldman Store Sales for the week ended May 24th were down 1.2 percent from the previous week, but still remains up 2.1 percent year-over-year. The Johnson Redbook Sales report, which measures more accessible chain, department stores and discounters stores, posted a 0.7 percent increase for month-to-date for the week ended May 24th.
The only other economic news reported on Thursday other than Q1’214 GDP was the weekly jobless claims report, which posted a decline of 27,000 applications that puts the seasonally adjusted count at 300,000. The four-week moving average of jobless claims, which irons out week-to-week volatility like a couple of RHOBH firings, fell 11,250 to 311,500 last week. This is great news, especially as this is the lowest report since August 2007.
April’s person income was up 0.3 percent or $16.9 billion, which is the smallest gain since January. Personal consumption expenditures was down 0.1 percent. The April savings rate was up 0.4 percent, as a result. So, we’ll take some good with some bad. May’s Thomson Reuters/University of Michigan’s sentiment index was 81.9, down from 84.1 in April. Our Maleficent-like crystal ball suggests Q2 GDP may not be much better than Q1. (Damn, another Pitt connection! This is accidental, I swear.) Unless the Democrats want a bruising in November, the economy better turn around.
Now that consumers have started to feel the benefits of modest economic improvements, we think it’s a good idea for everyone to put themselves in a better financial position for the next economic downturn. Let’s beef up our emergency savings. The better prepared we are, the smoother the next bump will be.
For the fundamentals of an emergency savings plan and how to build one, check out Matt’s article. He highlights one of the most important ways to build a financial plan and that’s automatic savings. If you want a financial buffer or strategic emergency savings plan, check out Sam’s intriguing post. It’s pretty inspiring and insightful, especially for those who will cut ties from “the man” someday. If that’s too aggressive, find ways to save a little bit here and there, such as saving $100 a month on cell phone bills. Every little bit helps and can put you in a better financial position one dollar at a time.
That’s what we think is important to know about money this week. Come back every Friday for the Debt Free Guys’ #MoneyConscious Mash Up where we attempt to make economics a little less boring than your tenth grade teacher.