What's Happening with the Economy?

Gross Domestic Product

Consumer spending was stronger than previously estimated in the second quarter, rising at an annual 4.7 percent inflation-adjusted pace. This pace is a reminder that the strong labor market is underpinning the consumer and helping to offset weakness in global growth and the resulting weakness in domestic manufacturing. Overall GDP was shaved by 1 tenth in the second estimate for the second quarter though still managed a respectable 2.0 percent showing.

The key for the second quarter was consumer spending and so far in the third quarter strength here appears to be solid once again and may well offset uneven readings for other components, whether business investment or residential investment which are two areas where recent indications have been up and down.

Jobless Claims

Unemployment claims did edge higher in the latest data but remain favorable, indicating strong demand for labor and pointing to another solid showing for the monthly employment report. New claims in the August 24 week rose 4,000 to 215,000 with the 4-week average at 214,500 and slightly lower than the prior week. Continuing claims in lagging data for the August 17 week did rise 22,000 but the 4-week average, at 1.697 million, nevertheless edged lower. The unemployment rate for insured workers is unchanged at 1.2 percent.

Home price indexes

Both this yesterday's (Aug 28) FHFA and Case-Shiller reports show very weak price traction in the housing market during June. Shiller's adjusted 20-city index for June came in below Econoday's consensus range at no change. The year-on-year rate of 2.2 percent is the lowest pace of price growth in seven years. FHFA's data, also released yesterday, are at a five-year low. Yet both of these reports are lagging, tracking way back in June which was before what is an ongoing and steep decline in mortgage rates which is very likely to provide firmer support to underlying housing demand and prices with it.

Consumer Confidence

Despite stock market volatility and escalating trade tensions, the consumer confidence report from the Conference Board did not give back very much of July's gain at all in August, easily beating high-end expectations with a 135.1 showing versus a revised 135.8 in July. The present situation component, in fact, jumped more than 6 points to 177.2 and a 19-year high. What weakness there is in today's report is on the expectations side, down more than 5 points but at a still strong 107.0.

EIA Petroleum Status Report

Crude oil inventories fell 10.0 million barrels in the August 23 week to 427.8 million, 5.4 percent above their level last year at this time. Product inventories also declined, with gasoline down 2.1 million barrels to 232.0 million, 0.3 percent lower than last year at this time, while distillates fell 2.1 million barrels to 136.1 million, 4.7 percent above their level a year ago. The outsized crude oil draw was nevertheless smaller than the decline of 11.1 million barrels reported Tuesday by the American Petroleum Institute, a private industry group, which also reported a draw of 0.3 million barrels for gasoline and a 2.5 million draw for distillates. WTI prices jumped about 25 cents per barrel higher to around $56.65 per barrel immediately following the release of the EIA data but quickly retreated to pre-release levels.

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