U.S. economic analysis week of July 25, 2005
New home sales continue to scorch old records and a surprise rise in June durable goods lead a small wealth of good news but a weaker-than-expected gross domestic product ends the week on a somewhat sour note.
U.S. Census Bureau data showed that new home sales increased four percent in June to 1.374 million. Economists had originally forecast a 1.30 million sales pace.
The new homes data follows closely on the heels of existing homes data released on Monday which also hit an annual sales pace record of 7.33 million.
The median price for a home rose to $268000, another record and rise of four percent from May.
The Federal Reserve also reported that U.S. business activity rose in June and early July in all districts except the New York region. Most districts showed moderate to solid expansion in
manufacturing activity.
Meanwhile, data showed that jobless claims rose for the week ended June 23 but only by 5000 which beat previous expectations. Wall Street analysts had expected jobless claims to rise to 317000, however, they only reached 310000.
The news was not all rosy as the nations gross domestic product failed to meet expectations for the second quarter. The U.S. Department of Commerce reported today that the GDP grew at an annual rate of 3.4 percent which was off from the first quarters read of 3.8. Most analysts had forecast that the GDP would grow at least 3.5 percent.
Despite the news, the GDP growth did mark the ninth consecutive quarter where it has shown growth over three percent.
Also, a report released on Monday showed that consumer confidence slipped in July. Analysts had been expecting a reading of 106.0 in July. The gauge of consumer sentiment actually fell to 103.2 from a revised June reading of 106.2.
Data also showed that bankruptcies soared 12 percent in April, May, and June over the same period last year. Individuals are rushing to file bankruptcy before a new law passed by the U.S. Congress in April takes effect. Under the law, individuals would be forced to reorganize their debts under Chapter 13 bankruptcy law which forces them to pay their debts back.
In stock news, steel shares primarily showed gains this week. Major steelmakers
US Steel and AK Steel both posted market gains after the announcement of their earnings.
US Steel cautioned that despite a 16 percent jump in profits, this quarter it is likely to see a drop in operating result due to weaker spot prices.
The major markets got off to a shaky start on Monday but rallied throughout the week as strong earnings reports sent all indices into positive territory. Todays GDP report and news that oil has again crossed above $60 per barrel, however, has halted that rally and sent all the major indices into negative territory.
All in all, the numbers indicate the U.S. economy is sound despite some mixed news. Inflation is being held in check while the
manufacturing sector is reporting positive progress. There is some uncertainty that inflation will remain steady and that may be accounting for the jitters being seen on Wall Street on Friday.
Finally, on the currency end, the dollar showed little change against the euro while it was up slightly against the yen.