Rover’s Weekly Market Brief —8/3/2018

Economy

The seasonally adjusted annual rate of personal income rose to $17,572.4 billion (+0.4%) in June, with after tax disposable personal income (DPI) rising to $15,520.4 billion (+0.4%). The savings rate remained steady at 6.8%, while personal consumption expenditures (PCE) rose to $14,470.8 billion (+0.4%), with the bulk of that spending going toward services ($9,591.9 billion, +0.6%). On a yearly basis, DPI rose +3.1% and PCE increased for durable goods by +6.6%, nondurable goods by +2.6%, and services by +2.2%. The PCE price index was up +0.1% (+2.2% Y/Y), as a +0.2% (+2.6% Y/Y) increase in service prices was offset by a -0.1% (+1.4% Y/Y) drop in goods prices. Energy prices dropped -0.1% for the month, but were up +13.1% for the year, and core PCE inflation, which excludes the volatile food and energy components, was up +0.1% for the month, and +1.9% for the year.

The Federal Open Market Committee (FOMC) ^[6] left the target range for the federal funds rate unchanged at 1-3/4% – 2%, but upgraded their assessment of economic activity from “solid” in their June report ^[7] to “strong”. The Implementation Note issued with the meeting announcement included an additional directive for normalizing the Federal Reserve’s balance sheet: “to continue rolling over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing during June that exceeds $18 billion, and to continue reinvesting the amount of principal payments … received during June that exceeds $12 billion.” For July, the balance sheet normalization directive reverts to the previous policy of rolling over matured securities that exceed $24 billion and reinvesting matured securities that exceed $16 billion.

There were 157,000 jobs created ^[8] in July, and the number of jobs created in May and June were revised upwards to 268,000 (+24,000) and 248,000 (35,000) respectively, bringing the 3-month average jobs gain to 224,000/month. The unemployment rate edged downward to 3.9% from 4.0%, and the more comprehensive U-6 measure of total unemployed dropped from 7.8% to 7.5%, with the workforce participation rate remaining steady at 62.9%. The average workweek decreased -0.1 hours to 34.5 hours, and average hourly earnings increased $0.07 to $27.05/hour, bringing the yearly increase in earnings to $0.71/hour (+2.7%). For production/non-supervisory employees, earnings increased $0.03 in July to $22.65/hour. Jobs were created in professional and business services (+51,000 in July, +518,000 /12 months), manufacturing (+37,000 in July, +327,000 / 12 months), health care (+34,000 in July, +286,000 /12 months), restaurants (+26,000 in July, +203,000 /12 months), and construction (+19,000 in July, +308,000 /12 months).

Upcoming Economic Reports:

Thursday August 9 – Producer Price Index – Final Demand (PPI-FD)

Friday August 10 – Consumer Price Index

Earnings Calendar:

 

Monday	Tuesday	Wednesday	Thursday	Friday
Softbank Group (SFTBY) [9]	Walt Disney (DIS) [10]	Booking Holdings (BKNG) [11]	Novo Nordisk (NVO) [12]	Telus (TU) [13]
Marriott International (MAR) [14]	Emerson Electric (EMR) [15]	Twenty-First Century Fox (FOX) [16]	Brookfield Asset Mgmt (BAM) [17]	Enerplus (ERF) [18]