Today is National Veep Day. August 9th marks the day in 1974 when Richard Nixon’s resignation allowed for Gerald Ford to succeed him as the 38th President of the United States. Today also closes a week in which we couldn’t be more proud of our current Veep, Joe Biden, who eloquently spoke to the “nation of Africa” at the U.S. – Africa Business Summit.
This was a light week in economic news, a sharp contrast from last week. Monday’s lone bit of news was Gallup’s U.S. Consumer Spending Measure, which tracks answers of consumers asked by Gallup “How much money did you spend yesterday?” July’s average answer was $94, up from June’s answer of $91. This is way up from the $60 to $70 answer Gallup polled during “The Great Recession”, but down from the $100 answer leading up to “The Great Recession” in 2008.
Tuesday’s first report was Gallup’s U.S. Economic Confidence Index (ECI). Gallup was busy this week, while everyone else took a leisure week. The ECI index dropped two points to -17 in July from -15 in June. The only thing less shocking than Miley Cyrus’ Fourth of July NBC special is that middle and lower-income Americans’ confidence fell, while upper-income Americans’ confidence stayed as flat as the pancake I’m eating for breakfast today. The news maintained its plateau when Markit reported that its U.S. Services Purchasing Managers’ Index fell 0.2 points from 61.0 in June to 60.8 in July. While anything above 50 suggests expansion, the 0.2 point drag is being attributed to a slowdown in new business growth and hiring as backlog orders are being worked down. Those high inventories that inflated last week’s GDP now must be worked out and down.
Things took a turn for the better when the Commerce Department reported that U.S. factory orders for June rose 1.1 percent, up from May’s -0.6 percent drop. The increase was led in large part by the 8.4 percent increase in orders for commercial aircraft, followed by industrial machinery, computers and electronics. The Institute for Supply Management closed out the day with its report that non-manufacturing business activity, which covers a broader swath of industries than the U.S. Services Purchasing Managers’ Index, for July rose to 62.4, up from 57.5 in June and the highest increase in 8.5 years. Attributing factors were new orders, increased employment and general business growth.
Wednesday started out with the standard Mortgage Bankers Association index of mortgage application activity for new mortgage and refinancing, which rose 1.6 percent the week ended August 1st. This is the first glimmer of hope housing has had in a few weeks, led in large part by a 3.8 percent increase in refinances. New mortgage application’s increase was barely readable from 4.33 percent to 4.35 percent.
Gallup then completed its hat-trick when it announced its Job Creation Index for July increased to 28, up from 27 in June and its highest level in more than six years. The Commerce Department wrapped up the day when it announced that the U.S. trade deficit shrank 7 percent to $41.5 billion in June from May’s $44.7 billion. This was mostly driven by a decrease of petroleum imports. Yea, ND!
Unlike to reports of Bey and Jay’z marriage demise, Thursday started out with good news and confirmed that the economy is slowly, very slowly improving. The Labor Department reported that initial jobless claims for the week ended August 8, 2014 fell 14,000 to 289,000. The four-week average of claims fell 4,000 to 293,500, the lowest level since February 2014 and a more solid sign of job recovery.
Then it took a magnifying glass to see Bloomberg’s Consumer Comfort Index’s barely readable 0.1 point drop to 36.2 for the week ended August 3, 2014, compared to 36.3 the week prior. The personal finance sub-index was at 50.1. This is its lowest reading since May, which seems to more accurately reflect the overall market data, contrary to last week’s consumer sentiment index. While the economy is slowly improving, American workers will be the last to know. Consumer spending does not equate to consumer comfort or consumer sentiment.
Finally, consumer credit for June increased, but at a slower pace than May. Non-revolving credit, such as auto and student loans, were responsible for most of the gains. Revolving credit, or credit card usage, was up slightly and suggested consumers still have concerns about the economy.
As inspiring as 90 year old WWII vet Ernie Andrus’ run across America, the Labor Department Reported early Friday that U.S. productivity for the second quarter (April through June) increased 2.5 percent after a 4.5 percent decrease (yes, negative) performance in the first quarter. Goods and services, hours worked and unit-labor costs all contributed to the productivity increase, while hourly wages barely budged after adjusted for inflation. The last report of the day and the week was U.S. wholesale inventories reported by the Commerce Department. Whole inventories increased 0.3 percent in June, the same as May.
Our overall assessment is that the economy continues to recover, albeit at a frustratingly slow pace and not with much help from our fearless leaders in Washington DC. Our main concerns remain jobs, wages and quantitative easing. Overall, the world seems to be a ticking time bomb and the wrong spark in the wrong place at the wrong time could push any gains back to 2010. Our advice is to #bemoneyconscious, reduce spending, save and make sure your portfolio is well diversified with a slight overweight towards cash.
In last week’s #MoneyConscious Mash Up and in an earlier article this week, we questioned last week’s seemingly overzealous data, such as the consumer sentiment report, consumer spending and second quarter GDP. It seems we’re not the only ones, as the Money Honey and her former employer shared this week. We do agree that elements of the economy are improving, but the party hasn’t started yet. That said, we’re happy to share that the consumer isn’t dead, but 40 percent of households feel financially stressed. If you feel financially stressed, reduce your consumption. You won’t die.
We like to focus on the positive and we think the usage of credit cards being down is positive, at least according to our money philosophy. To help you focus on the positive, here are seven elements of the economy that are improving.
Ultimately, though, the country needs significant change and not change because change makes a good campaign slogan, but change that brings middle America/consumers out from inland and back to her shores.
If you’re nearing retirement, you’re experiencing a lot of change. Consider the risk of being a part of the “sandwich generation” and plan accordingly, whether you’re in the U.S. or Australia. Even if you’re not close to retirement, don’t be like the 31 percent of American with $0 in retirement savings, plan more aggressively and get the most out of your hard earned money. If you don’t think you can squeeze out anymore spare change, try these three tips.
We continue to harp on the need to prepare for retirement because of reports American’s are financially unfit. It’s no wonder that a $400 unexpected expense would cause most Americans to fall back onto their credit cards. Use a pragmatic approach when you review your assets (cash and investments) and liabilities (debt) and don’t be misled by the desire of banks and credit rating agencies who want to move the goal posts so you borrow more.
That’s everything in the economic and personal finance world that we think is worth your time this week. Come back every Saturday for our #MoneyConscious Mash Up. Finally, if you haven’t done so already, download your free copy of #MoneyConscious Student from Smashwords, iBooks and Barnes & Noble today. It’s free for the month of August to help kids and parents prepare for college expenses.