Economic update for the month ending April 30, 2017

Stocks markets rise in April – Stocks declined in the first two weeks of the month after disappointing March job gains, a decline in the pace of wage gains, lower retail sales, and a decline in the CPI rate were announced. Stocks rallied in the final week of April as first quarter earnings that beat expectations were announced by several companies. A disappointing first quarter GDP growth report slowed the earnings rally. Next Friday’s jobs report is on everyone’s mind. After strong January and February job growth, March’s figure, which showed that only 98,000 new jobs were created, about 1/2 of what was expected, surprised everyone. The April report will show if the pace of hiring is slowing, or if March’s results were just an aberration. The Dow Jones Industrial Average ended the month at 20,940.51, up from its March 31, 2017 close of 20,663.22. The S&P 500 closed the month at 2,384.20, almost unchanged from its March close of 2,362.72. The NASDAQ closed the month at 6,047.61, up from last month’s close of 5,911.74.

Treasury Bond yields end month lower – The 10-year Treasury bond closed on April 30, 2017 at 2.29%, down from 2.40% at the end of March. The 30-year treasury yield ended the month at 2.96%, down from 3.02% last month.

Mortgage Rates lower in April – Mortgage rates dropped to a 5-month low in April. The April 27, 2017 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.03%, down from 4.14% on March 30, 2017. The 15 year fixed was 3.27%, down from last month’s close of 3.39%. The 5-year ARM was 3.12% down from 3.18% on March 30.

California’s unemployment rate falls to 4.9% in March – The Employment Development Department reported that California’s employers added 19,300 new non-farm jobs in March. The state’s unemployment rate dropped to 4.9% from 5% in February. Since February 2010 when the state’s unemployment peaked at 10%, California has gained 2,507,400 jobs. 

Economy grows at slowest pace in three years – Gross Domestic Product rises just 0.7% in Q1 2017 – The Commerce Department reported that the Gross Domestic Product, the broadest measure of growth in the economy, rose at just a 0.7% annual rate in the first quarter of 2017. That was the slowest quarterly growth in 3 years. Consumer spending was up at an annual rate of just 0.3% in the quarter. It was the smallest increase since 2009. Economists surveyed expected GDP growth to be closer to 1% in Q1, and expect growth to pick up in the second half of the year. 

Retail sales fall for second straight month – The Commerce Department reported that retail sales dropped 0.2% in March. This followed a 0.3% decrease in February, which was the first decrease in a year. Last March retail increased 5.2%, so a 0.2% decline this March has investors wondering just how strong the economy is. 

Inflation becomes more tame in March – The Labor Department reported that it’s Consumer Price Index slipped 0.3% in March. It was the first decline in prices since January 2015. For the last 12 months through March the consumer prices rose 2.4%. That’s down from last month when prices were 2.7% higher than last February.

California existing home sales and prices strong in March – Low inventory pushes prices up – The California Association of Realtors reported that home sales totaled 416,580 in March on a seasonally adjusted annualized rate. That represented a 4% increase from February’s pace and a 6.9% increase from last March’s sales pace. The Los Angeles Region was even stronger. It saw an 8.5% year over year increase in sales numbers from March 2016. The median price paid for a home in California was $517,020. It increased 8% month over month from $478,570 in February. We did see month over month prices down in January and February, so the 8% rebound made up those declines. Year over year the median price was 6.8% higher than $484,120 last March. Inventory levels decreased as less people put their homes up for sale. The unsold inventory index dropped one full month to a 3 month supply of homes for sale. That’s down from a 4 month supply in February. A 3-month supply of homes for sale is the lowest March reading ever. 

California pending home sales decline in March – The California Association of Realtors reported that new contracts for existing single family homes declined in March. The number of contracts signed statewide in March declined 4.5% from the number of contracts signed in March 2016. They were also down 2.9% month over month from February. Los Angeles County faired better than the state as a whole. Contracts signed in Los Angles County increased 1.6% from the number signed one year ago. The C.A.R. attributed an unusually tight supply of inventory as the reason for the decline in new sales contracts. There was just a 3-month supply of homes for sale in March. A normal market has a 6 to 7 month supply. We watch pending sales because they are an indicator of what closed sales will 30 to 60 days later.

U.S. existing home sales at highest pace in over 10 years in March – The National Association of Realtors reported that sales of single family homes increased 4.4% in March to an annualized adjusted rate of 5.71 million homes. March’s sale pace was 5.9% higher than March 2016. It was the highest monthly rate of sales since February 2007. Year over year the median price paid for a home nationwide increased 6.8% from last March. It was the 61st consecutive month of year over year price gains. The number of homes for sale has dropped year over year for 22 straight months. Nationally there is just a 3.8 month supply of homes for sale. The National Association of Realtors single family home figures include sales of detached homes, condominiums, town-homes, and co-ops. 

U.S. new home sales at 8-month high – The Commerce Department reported that new home sales jumped 5.8% in March. Analysts expected a much tamer jump. New home sales were at an 8-month high

Have a great weekend,