Almost every day a major government agency or private organization releases new information covering the status of some pocket of the economy. I’m here to help you sift through the barrage of economic data out there and determine what this will mean for your stocks.
Existing Home Sales
What It Measures: The report is a good indicator of activity in the housing sector. Aside from total sales, two other indicators are worth watching in this report: the inventory of homes for sale and the median price.
The Breakdown: In September, existing home sales jumped 2.4% to an annual rate of 5.17 million units. This surpassed economists’ estimates of a 5.10 million unit pace. September’s results also represented a sharp reversal from August’s 1.8% decline to a 5.05 million annual rate. While existing home sales hit its highest pace of 2014, it’s still 1.7% below last September’s levels.
The Bottom Line: The housing market continues its slow recovery, but there are bright spots. Last, week the 30-year mortgage rate dropped due to declining U.S. Treasury yields and this should encourage more Americans to buy homes.
Consumer Price Index
What It Measures: The price level of a fixed market basket of goods and services purchased by consumers. CPI is the most popular inflation indicator, so this is a very important report that can move the market.
The Breakdown: In September, the Consumer Price Index (CPI) rose only 0.1%, in line with economist’s expectations. This represented a reversal from the deflationary 0.2% decline we saw in August. In September, food costs rose 0.3% (led by increasing beef prices), while energy prices declined 0.7% (mostly due to a drop in retail gasoline prices). Core CPI, which excludes food and energy prices, increased 0.1%.
The Bottom Line: In the past 12 months, the CPI has risen 1.7%, matching last month’s annual reading. Overall, deflationary fears persist, but have not materialized on the consumer level.
Initial Claims for Unemployment
What It Measures: It is an indicator of the direction of the job market. Increases in jobless claims show slowing job growth; decreases in claims signal accelerating job growth. On a week-to-week basis, jobless claims are volatile, so one of the best ways to track this measure is to look at the four-week moving average. It usually takes a jump or decline of at least 30K claims to signal a meaningful change in job growth.
The Breakdown: Last week, new claims for jobless benefits rose 6% to a seasonally adjusted 283,000. This largely met economists’ estimates. The prior week’s claims were revised up 2,000 to 266,000. Now that the four-week moving average has fallen 3,000 to 281,000, jobless claims are at their lowest level since 2000.
The Bottom Line: The decline in the four-week moving average shows that the labor market continues to gain traction.
Index of Leading Economic Indicators
What It Measures: This is an index that compiles all of the economic indicators, including jobless claims, money supply, new orders, building permits and stock prices. It is a broad measure that is a good predictor of patterns in the economy.
The Breakdown: The Conference Board’s leading economic index increased 0.8% in September, after no change in the month of August. This beat analysts’ expectations of a 0.5% increase, and also represents a 1.1% increase since July. In September, nine of the ten economic indicators increased, including the interest rate spread, manufacturing hours, stock prices and building permits. The lone lagging indicator was consumer sentiment regarding future business conditions.
The Bottom Line: It just goes to show that while the stock market has been on a roller coaster ride, the U.S. economy is still experiencing broad-based growth.
New Home Sales
What It Measures: This report, released by the Commerce Department, shows how many new privately owned single-family houses were sold and for sale for in the past month. The report also calculates median home price, which is an indicator of inflation in the housing sector. Personally, I prefer the existing homes sales report because its data pool is four times larger, but this is still an important gauge of the housing market’s health.
The Breakdown: In September, U.S. single-family home sales increased 0.2% to a seasonally adjusted annual rate of 467,000 units. This is up from August’s revised rate of 466,000 units, but missed analysts’ estimates of 475,000. August new home sales were revised sharply lower; earlier the Commerce Department had reported 504,000 in new home sales. Even so, September 2014 sales were up 17% over September 2013. The sales pace in September suggests that it would 5.3 months for the supply of houses in the market to be cleared. The median price for a home sold in September 2014 was $259,000, a 4% decline from a year ago.
The Bottom Line: While the August downgrade was a disappointment, the bottom line is that new home sales are at a six year high.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
