Construction spending underwhelmed market expectations. Incomes and spending notched up and layoffs increased but remained in safe territory.
Construction spending for May surprised many housing market watchers by declining to an annual rate of $1.14 trillion, which was 0.8 percent below April’s rate of $1.15 trillion, the Census Bureau reported last week.
This was completely off from market expectations, which had predicted a 0.5 percent gain for May’s construction spending. While down on a monthly basis, when compared annually, May’s performance was 2.8 percent higher than May 2015’s annual rate of $1.11 trillion.
Despite construction spending as a whole declining, residential construction in May was more robust, hovering at an annual rate of $451.9 billion, which was nearly unchanged from April’s pace of $451.7 billion.
With the previous week’s Brexit already impacting interest rates, the housing market is a bit unpredictable at the moment
“Net-net it is certainly a bit of a mixed picture, a mixed bag, but I think in terms of direction, what is evidenced here, is that growth momentum has rebounded,” TD Securities Deputy Chief Economist Millan Mulraine told Reuters.
Personal Incomes and Spending
Personal incomes grew by $37.1 billion, or 0.2 percent, in May, and disposable personal income (DPI; incomes after taxes) also expanded by $33.9 billion, or 0.2 percent, according to last week’s report from the Bureau of Economic Analysis.
Personal consumption expenditures (PCE) also increased in May, growing by $53.5 billion, or 0.4 percent. Personal outlays — PCE, plus interest payments, and transfer payments — increased $57 billion in May.
This put personal savings — DPI less personal outlays — at $730.6 billion in May, compared with $753.7 billion in April. May’s personal saving rate — personal saving expressed as a percentage of DPI — was 5.3 percent, slightly down from April’s 5.4 percent.
Initial Jobless Claims
First-time claims for unemployment benefits filed by the newly laid off during the week ending June 25 hit 268,000, a gain of 10,000 claims from the preceding week’s total of 258,000, the Employment and Training Administration reported last week.
The total number of jobless claims was still well below the 300,000-claim mark, which economists consider indicative of a growing job market.
“We’re not seeing any huge increase in job losses out there,” Raymond James Financial Inc. Chief Economist Scott Brown told Bloomberg. “It’s consistent with further improvement in the labor market.”
The four-week moving average — considered a more stable measure of lay-offs — hovered at 266,750 claims, which was unchanged from the preceding week’s average of 266,750.
This week we can expect:
- Tuesday — May factory orders from the Census Bureau.
- Wednesday — May balance of trade from the Census Bureau.
- Thursday — Initial jobless claims for last week from the Employment and Training Administration.
- Friday — May consumer credit from the Federal Reserve; unemployment rate, payrolls, earnings and average workweek for June from the Bureau of Labor Statistics
Written by Summit Mortgage Corporation located in Lakewood, Colorado.