Economic Update 12/01/14

CAUTIOUS SPENDING, BUT IMPRESSIVE GROWTH

Personal income and personal spending both rose 0.2% in October, according to the Commerce Department. Not too impressive? Maybe, but the federal government’s second estimate of Q3 GDP was. Pair the newly revised 3.9% reading with the final 4.6% mark for Q2, and you get the best 6 months for the economy since 2003. The Federal Reserve’s personal consumption expenditure (PCE) price index was only up 1.4% in the past year; the Fed has set its annual consumer inflation target at 2.0%.

CONSUMER SENTIMENT BAROMETERS RISE & FALL

At 88.7, the Conference Board’s November consumer confidence index slipped badly from October’s 94.5 mark. In better news, the University of Michigan’s consumer sentiment index notched a monthly gain of 1.9 points with an 88.8 final November reading.

HOUSING MARKET CONTINUES TO NORMALIZE

Last week, September’s 20-city S&P/Case-Shiller home price index showed a 4.9% yearly rise, much less than the double-digit annual gains seen in the March and April editions. Pending home sales, as measured by the National Association of Realtors, were down 1.1% for October; that is the third retreat in five months. October did see a third straight monthly advance in new home buying; sales were up 0.7% according to the Census Bureau.

MINOR ADVANCE FOR STOCKS, MAJOR RETREAT BY OIL

NYMEX crude closed out the month at $66.15 a barrel, the lowest since September 2009; prices slipped 10.2% on Friday alone after OPEC decided not to cut supply. The S&P 500, on the other hand, gained 0.20% last week to settle at 2,067.56 Friday. The Dow’s weekly advance of 0.10% took it to a close of 17,828.24 Friday afternoon; the Nasdaq rose 1.67% on the week to end November at 4,791.63.

THIS WEEK: Monday, ISM puts out its November manufacturing PMI. Tuesday, Wall Street considers earnings from Radio Shack, Bob Evans and Omnivision. Wednesday sees the release of ISM’s November services sector PMI, a new Fed Beige Book, ADP’s November employment change report and earnings from Guess? and Abercrombie & Fitch. Barnes & Noble, Smith & Wesson, American Eagle, Kroger and Dollar General all announce earnings Thursday, which is also when November’s Challenger job-cut report and the latest initial jobless claims numbers arrive. Friday offers the Labor Department’s November employment report, data on October factory orders and earnings from Big Lots.