7/28/2015
By Dominique Paul, Research Analyst

The S&P Dow Jones Indices released its Case-Shiller Home Price report for the month of May. In this specific report, we focus on the 20-City Composite. Year-over-year, the 20-City Composite increased by 4.9% in May after rising by an upwardly revised 5.0% (from 4.9%) in April. The composite currently stands at 179.03. This is the highest level since January 2008 where the reading was 180.68 for the month. Month-over-month, the index actually decreased by a seasonally adjusted 0.2% after remaining unchanged in April. Chicago saw the greatest monthly price decrease of 0.9% after falling by 0.5% during the month of April. Detroit and San Francisco tied for the second greatest monthly price decrease, both indicating 0.5% lower in May. Miami was quite the opposite as it saw prices rise by 0.5% in May. However, Las Vegas takes the cake for May with housing prices increasing by a monthly 1.0% after gaining 0.9% in April. Overall, we’re seeing improvement in housing prices in major metropolitan areas which should translate to higher prices in surrounding neighborhoods. This bodes well for home builders as it shows demand for housing is improving.

For the month of July, Markit released its flash services purchasing mangers’ index (PMI) report. The service sector has seen well needed improvement over the past few weeks. The July flash reading came in at 55.2, 40 basis points higher than the June final reading and flash reading of 54.8. Higher consumer spending has pushed new orders in the services sector to three-month highs. While mangers in the service sector voiced concerns about the future of the global economy, they are seeing backlogs increase and are hiring more workers to meet demand. Ultimately, the service sector is moving in the right direction.

Lastly, The Conference Board released its Consumer Confidence report for the month of July. Consumer confidence has taken a nasty fall. Currently, the index reads 90.9, down significantly from the downwardly revised June reading of 99.8 (from 101.4). When breaking down consumer confidence into current and future expectations, we’re able to see that the global economy and jobs market weighed heavily on the minds of survey respondents. The present situation index fell to 107.4 from 110.3 in June. The amount of respondents that feel that business conditions are good fell to 24.2% from 26.1% and the amount of respondents that feel the amount of jobs are plentiful decrease to 20.7 from 21.3%. The only increase was in the amount of respondents that believe finding a job has gotten harder.

As for the future, the expectations index fell dramatically. It now stands at 79.9, nearly 14% beneath the June expectation index level of 92.8. Unchanged from June, 17.9% of respondents feel that business conditions are bad. The amount of consumers who believe business conditions will improve over the next six months dropped to 14.7% from 17.9% in June. Also, while the amount of consumers who believe there will be more jobs created dropped to 13.1%, the amount of consumers that believe there will be fewer jobs rose to 20.0% from 15.2%. Perhaps consumers are being a little too pessimistic when considering the jobs growth in the services sector. Then again, manufacturing across the country has delivered mixed results. All in all, higher consumer confidence is vital for our economy to improve.

Dominique Paul
Wall Street Strategies

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