A snag for housing. An 'oops' from Dunkin'. This week in the economy
Weak housing numbers released this week have some analysts worried that the housing recovery is losing momentum. Personal income lags, durable goods fall, and Dunkin' Donuts gets in hot water for a 'blackface' ad campaign in Thailand.
Has the housing market hit a snag? A run of lackluster housing numbers this week has analysts wondering if the housing market recovery has lost momentum. Home prices rose in June, but at a slower pace, according to the S&P Case-Shiller Home Price indices. The 10-city composite index rose 1.1 percent in June; the 20-city index rose 0.9 percent. Year over year, the 10- and 20-city composites have risen 11.9 percent and 12.1 percent since June 2012, respectively. Wednesday, the National Association of Realtors (NAR) reported that pending home sales fell for the second straight month. Mortgage applications, too, continued their downward trend, with the four-week moving average hitting its lowest level since May 2011.
“The softness [in pending home sales] is likely to raise fears about whether the recovery in US housing will prove durable to the rise in mortgage rates observed since early May," Barclays Research economist Michael Gapen wrote in an e-mailed analysis. "Our view has been that the recovery in housing may slow due to the sizable fiscal drag in place during 2013 and higher mortgage rates, but that housing fundamentals were strong enough to prevent a sharp correction in activity”
Personal income and spending lag: Personal income ticked up 0.1 percent in July, but wages fell 0.3 percent, according to the US Bureau of Economic Analysis (BEA). Spending remained flat from June. “Wages took a hit in July, while spending hardly grew and the saving rate remained unchanged,” IHS Global Insight economist Chris Christopher wrote via e-mailed analysis. “It is becoming very evident that even though the housing market is gaining some traction and auto sales are looking up, there is not a tremendous amount of income support to keep consumer spending ... growing at very robust rates.”
Consumer sentiment revised upward: The August reading of the University of Michigan Consumer Sentiment Index was revised upward from 80.0 to 82.1 That figure was slightly higher than expected, but consumer sentiment is still relatively weak in historical context.
Durable goods fall: Orders for durable goods in the US plunged 7.3 percent in July, with the vast majority of the loss, 94 percent, coming from defense and aircraft orders. Everything else in the durable goods category slipped 0.5 percent.
Jobless claims fall, continue downward trend: There was a bit of good news on the jobs front, at least. The number of initial jobless claims fell by 6,000 to 331,000 claims last week, and the four week moving average went unchanged at 331,000. Continuing claims also fell, to 289,000, and the insured unemployment rate went unchanged at 2.3 percent.
Dunkin' Donuts apologizes: In a bid to advertise its new chocolate-flavored "Charcoal Donut," a Dunkin' Donuts franchise in Thailand started an ad campaign featuring a woman in blackface makeup. The image appeared in TV commercials, posters, and on Facebook. After Human Rights Watch criticized the ads as "bizarre and racist" on Friday, the US company apologized: "We are working with our Thailand franchisee to immediately pull the ad. DD recognizes the insensitivity of this spot," Dunkin' Donuts tweeted.