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Weekly Update – August 31, 2018

  • Upbeat economic news and robust earnings propelled stocks to early new highs, but a late pullback led to mixed results for the week. Stocks fell after suggestions the Trump administration might move ahead with tariffs on Chinese imports. Oil prices rose, whereas gold fell. The 10-year U.S. Treasury yield reached 2.9% but ended the week about flat.
  • The Commerce Department revised second-quarter GDP growth from 4.1% to 4.2%. The increase was largely due to rising trade and inventories, which offset slightly slower personal consumption growth. The Chicago Fed National Activity Index declined to 0.13 in July after registering 0.48 in June, as the pace of growth from production-related indicators slowed. Positive readings indicate above average economic growth.
  • The Conference Board Consumer Confidence Index® rose to 133.4 in August, its highest level since 2000. The release noted the historically high level should support consumer spending in the near term. The present situation and the expectations indexes both rose.
  • U.S. consumer spending rose 0.4% in July, adding another month to steady gains this year. The rise partly reflected higher prices for goods and services, a sign that demand is strong. Consumer spending was the biggest factor driving the 4.2% annual rate of GDP growth in the second quarter.
  • Higher consumer spending in July drove core personal consumption expenditures (core PCE) price index up to the Federal Reserve’s 2% annual target rate for the first time in six years. The Fed considers core PCE, which excludes food and energy prices, a key indicator of the economy’s longer-term inflation rate. The stronger data support expectations that the Fed will continue gradually raising interest rates.
  • Home prices continued to rise over the last 12 months. The S&P CoreLogic Case-Shiller U.S. National Home Price Index reported a 6.2% annual gain in June, down from 6.4% in May. Six of the 20 cities reported greater price increases in the year ended June versus the year ended May.
  • July pending home sales declined 0.7% after rising 1.0% in June. It was the latest housing-market indicator to disappoint, following earlier misses in new and existing home sales.

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