It was a quiet week ahead of next week’s Fed policy meeting. There were no major economic data releases and stocks remain at near record highs.
The European Central Bank (ECB) left its key rate unchanged, but revised lower its inflation forecast in an admission that its policies aren’t working. The ECB has their own version of QE in place and has pushed rates into the negative, all without stimulating inflation. Like Japan and the U.S. stimulus programs, they haven’t worked as advertised!
Next week our Fed is up to bat with an expected rate hike in the face of recent weak economic data. We’ll see how that shakes out Wednesday afternoon.
Thanks to Dent Research, provided here is our weekly information roundup ending the week of June 9, 2017. We start each subject with what you hear in the news and finish with what that information means to you. We hope this information will help you separate the noise from the news.
April U.S. Factory Orders Down 0.2%… Durable goods dropped 0.8% amid widespread weakness.
What it means – Core capital goods orders (excluding defense and aircraft) rose 0.1%, which is not enough to drive up second-quarter GDP. One positive note in the report was motor vehicle orders, up 0.6%. But remember, this was way back in April, which is ancient history. Expect this number to drop for May and June, putting more pressure on factory orders and other parts of the economy.
Department of Labor (DOL) Reverses Obama-Era Guidance on Joint employment and Contract Workers… The shift removes the possible burden of franchise businesses being held responsible for joint employment of workers in franchised locations.
What it means – Big. Fat. Win. Anyone wondering why business owners are so happy with the current administration need look no further than this directive.
The last administration told franchise businesses like McDonald’s they would be jointly responsible for employment of all employees at franchise locations. This put a tremendous burden on the company, making it jointly liable for all human resource issues and problems, even though the company had no role in hiring, firing, or assigning work duties. The change at the DOL crushes the hopes of some labor unions while giving business owners a chance to breathe.
First-Time Home Buyers Could Expand Real Estate Market… First-time home buyers, those that have not owned a home in the last three years, accounted for 38% of buyers last year, above the long-run average of 35%.
What it means – This is welcome news! For the past decade, first-time home buyers were somewhat absent from the markets. A recent study showed that such buyers accounted for 1.2 million purchases each year when, based on historical figures, the number should have been closer to 1.5 million. The people still exist, they just weren’t buying homes. If those buyers play the game of catch-up, it will supercharge the entry level market, driving up real estate activity.
If this happens, it will also finally put those consumers on the path of predictable spending, which will eventually drive our economic growth to higher levels.
British Conservatives Fail to Gain Majority in Parliament… Prime Minister Theresa May called for a snap election, hoping to pad her party’s plurality and give them a solid majority of the 650 seats in parliament. It didn’t happen.
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