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Economic Week in Review: Let the retailers beware

November 29, 2013

U.S. consumers may be more cautious about spending during the holiday season as their confidence plummeted in November for the second straight month. Yet there were encouraging signs—leading economic indicators and the housing market are signaling that the economy is continuing its slow recovery.

For the week ended November 29, 2013, the S&P 500 Index was up a fraction of a percentage point to 1,806 (for a year-to-date total return—including price change plus dividends—of about 29%). The yield on the 10-year U.S. Treasury note was unchanged at 2.75% (for a year-to-date increase of 97 basis points).

Consumer confidence takes another dive

U.S. buyers continued to be skittish about the economy. The Conference Board's consumer confidence index dropped to 70.4 in November, its second consecutive decline and the lowest level since April. For the nation's retailers, many of whom have decided to open on Thanksgiving Day to drum up sales, the report likely raises troubling questions about household spending. The expectations subindex dropped to 69.3, the lowest reading since March.

Durable-goods orders plunge

New orders for durable manufactured goods dropped 2% in October, a sharp decline from the 4.1% increase in September. Aircraft orders, as usual, were volatile, with Boeing orders down for the month as customers were still wary of making large commitments given the recent government shutdown. The declines in new orders for aircraft and capital equipment offset strength in autos and electrical equipment.

Housing permits surge

Housing permits jumped 6.2% in October to an annualized rate of more than 1 million, paced by the strong demand for multifamily buildings, such as apartments and condos. This comes on the heels of September's 5.2% increase. The October numbers were the highest since June 2008 and represented a 14% leap from last October. Permits for single-family homes also rose for the month after dropping in September. Analysts consider single-family home construction to be a more accurate gauge of the new housing market as potential buyers adjust to increasing interest rates.

Leading indicators up

The Conference Board's index of leading economic indicators rose 0.2% percent in October, slightly above expectations and the fourth consecutive monthly gain. Higher initial jobless claims and the economic drag of the government shutdown, among other factors, kept the increase on the low side. Even so, seven of ten indicators were up for the month.

The economic week ahead

Next week's reports begin Monday with the ISM index and construction spending. Wednesday features the U.S. trade balance, sales of new homes, the ISM Non-Manufacturing index, and the Federal Reserve's Beige Book. Thursday brings reports on the gross domestic product and factory orders, followed Friday by the employment situation, personal income and spending, and consumer credit.

Summary of major economic reports
Date Report Actual
value
Consensus
expected value
10-year note yield S&P 500 Index
November 25       –1 bp –0.1%
November 26 Consumer Confidence (November)
Source The Conference Board
70.4 72.6 –3 bp 0.0%
November 27 Initial Jobless Claims (week ended November 23)
Source: Labor Department
316,000 330,000 +3 bp +0.2%
  Durable-Goods Orders (October)
Source: Commerce Department
–2.0% –1.8%    
  Leading Economic Indicators (October)
Source: The Conference Board
+0.2% 0.0%    
November 28 Thanksgiving holiday—U.S. financial markets closed    
November 29       0 bp –0.1%
      Weekly change 0 bp +0.0%

bp=basis points. 100 basis points equal 1%. For example, if a bond's yield rises from 5.0% to 5.5%, the increase is 50 basis points.

Notes

  • The economic statistics presented in this report are subject to revision by the agencies that issue them. For more information on the reports mentioned in this article, read our Guide to major U.S. economic reports.
  • All investing is subject to risk, including the possible loss of the money you invest.
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