University of Michigan

The University of Michigan Consumer Sentiment Index for August dropped to 95.3 from 97.9 in July, economists were expected a reading of 98.5.  This marked an 11-month low for the index.  Rising prices were noted as a concern, especially for households in the bottom third of income distribution.  Conditions for purchasing large durable goods declined to the lowest level in four years, with vehicle prices being less favorable than any time in the past ten years.  Perceptions of buying conditions for homes was less favorable than in the past twelve years, as affordability remains a concern. 

Lagging wage growth, especially for lower income workers, may be coming to roost as buying perceptions are shifting.  According to the Bureau of Labor Statistics, real average hourly earnings (adjusted for inflation) for non-management employees decreased 0.4% in July compared to a year ago levels.  Consumers are expecting inflation of 2.90% in the next year, which is in-line with the Consumer Price Index over the past twelve months ending in July.  

The U.S. is not the only country experiencing home affordability issues.  New Zealand's parliament has implemented a ban restricting foreigners from buying existing homes in the country, a move aimed at making properties more affordable.  Australians and Singaporeans are exempt because of free-trade deals with New Zealand. 

Leading Indicators

The Conference Board’s Leading Economic Index rose 0.6% in July, building upon June’s 0.5% increase.   July’s reading indicates the economy should expand “at a solid pace for the remainder of the year,” according to Ataman Ozyildirimk, Director of Business Cycles and Growth Research at The Conference Board. 

• The Coincident Economic Index increased 0.2% in July after increasing 0.3% in June
• The Lagging Economic Index declined 0.2% in July after increasing 0.2% in June

Equites opened unchanged to slightly lower is morning.  A reversal in farm equipment maker Deere & Co. (DE) has helped propel the Dow and S&P 500 further into the green.  The Nasdaq has rallied off its lows, but it remains in negative territory.

• The Dow is higher by 0.30%
• The S&P 500 is higher by 0.12%
• The Nasdaq is lower by 0.23%
• The Russell 2000 is higher by 0.12%

Breadth:

• NYSE advances 1,809 to declines of 1,036; new 52-week highs 77 to new lows of 38
• Nasdaq advances 1,494 to declines 1,337; new 52-week highs 59 to new lows 55

Have a great weekend.