U.S. Pending home sales climbed last month to the highest level in almost a year. The National Association of Realtors said that the number of contracts signed to purchase previously-owned homes rose for the fourth consecutive month in July, climbing 3.3%. This was the highest level since August 2013. “Interest rates are lower than they were a year ago, price growth continues to moderate and total housing inventory is at its highest level since August 2012,” said NAR chief economist Lawrence Yun. “The increase in the number of new and existing homes for sale is creating less competition and is giving prospective buyers more time to review their options before submitting an offer.” The most recent data shows that the housing market is returning to more normal conditions after the rapid price appreciation seen over the past two years.
Second Quarter U.S. GDP Growth Strong:
The second estimate for second quarter GDP growth came in a little stronger than expected, rising 4.2% (annualized). This is stronger than the previous forecast of 4.0%. This forecast came after the U.S. saw a 2.1% (weather-related) drop in the first quarter of this year. Overall, the weather-related rebound in the second quarter was stronger than expected. It appears the economy is gradually regaining momentum.
Durable Goods Orders Rise:
Durable goods orders soared in July, boosted by a surge in orders for commercial aircraft and autos . The Commerce Department said that orders for goods meant to last at least three years jumped 22.6% last month after a revised 2.7% gain in June that was bigger than previously estimated. The report showed that orders for commercial aircraft increased 318%, the most since January 2011. One highlight was that Chicago-based Boeing (BA) said it received 324 orders last month, almost three times the 109 planes ordered in June. Demand for motor vehicles and auto parts also climbed 10.2%, the most since August 2009. We are beginning to see the “macro” trend of pent up demand translating into strong sales in the aircraft and motor vehicles sales category. We have been speaking about this trend for some time now and expect that we are still in the “early innings”.
Russia and Ukraine Talk:
Russian President Vladimir Putin said talks with his Ukrainian counterpart on ending separatist fighting that’s killed more than 2,000 people were “positive” as the parties began discussions on a political resolution. “Russia, for its part, will do everything for this peace process,” Putin said early today after meeting Ukrainian President Petro Poroshenko at a summit in the Belarus capital of Minsk. “In our opinion, it should start as soon as possible.” Poroshenko said that Russia, Belarus and Kazakhstan are backing a Ukrainian peace strategy that would work toward a truce.
Eurozone Inflation Slows:
Eurozone inflation slowed this month while unemployment remained near a record high, increasing pressure on the European Central Bank to take more aggressive steps to support Europe’s faltering recovery. The European Union’s statistics office said today that consumer prices rose only 0.3% in August from a year ago. This translates to the weakest annual increase since October of 2009. In a separate report, Eurostat said that unemployment in the 18 nation currency bloc remained at 11.5%. The weak data will reinforce the case for more stimulus when ECB policy makers meet next week. Speaking at the Fed’s Jackson Hole conference last week, ECB President Mario Draghi signaled that the ECB may embark on a quantitative easing program in an effort to boost growth and steer inflation back toward the central bank’s 2% target. Mario Draghi is appealing to the governments in the 18-country currency union to complement accommodative monetary policy with “structural reforms” to boost competitiveness and overcome the legacy of Europe’s debt crisis.