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Weekly Economic Update

January 26, 2018

The Economy

  • Preliminary readings of Markit’s January purchasing managers’ index (PMI) pointed to mildly accelerating growth. Services came in below expectations, due to weak output; manufacturing hit a three-year high, on export sales, production and employment.

  • Durable-goods orders jumped by 2.9% in December, reaching a six-month high. Strength in orders for civilian aircraft and aviation parts mitigated weakness in nondefense capital goods, pointing to expanding business investment.

  • Initial jobless claims grew by a smaller-than-expected 17,000 to 233,000 in the week ending January 20, as labor market conditions continued to tighten. The less volatile four-week moving average dipped by 3,500 to 240,000. Continuing claims fell by 28,000 to 1.92 million in the week ending January 13.

  • Existing-home sales unexpectedly pivoted lower by 3.6% in December to an annualized rate of 5.57 million, as tight supply and increasing prices sidelined many potential buyers.

  • December new-home sales fell by 9.3% to an annualized rate of 625,000, as a recent boost from hurricane-related rebuilding dissipated; the total figure remained strong by historical standards, the fourth-highest in a decade.

  • The Conference Board’s index of leading economic indicators recorded a better-than-expected 0.6% gain in August, its twelfth straight monthly increase. The reading, used by economists to gauge the health of the U.S. economy, pointed to continued economic acceleration and strength.

  • Mortgage-purchase applications jumped 6% higher in the week ending January 19, driven by a combination of accelerating strength in the housing market and a recent trend of slowly rising rates. Refinancing activity (which is sensitive to even small rate changes) climbed by 1% in the same period.

  • The European Central Bank (ECB) left interest rates unchanged in January and reaffirmed that its asset-purchase program would remain at €30 billion per month through at least September 2018 (or longer, if necessary). ECB President Mario Draghi emphasized the need for rates to remain steady in the near-term as inflation continues to undershoot the central bank’s target.

  • The U.K. economy is estimated to have expanded by 0.5% during the fourth quarter and by 1.5% year over year, despite areas of Brexit-related weakness. Industrial production and service-sector output gained, while construction fell.

  • In another sign of Japan’s continued economic recovery, The Bank of Japan maintained its short-term interest-rate target and government-bond purchase rate.

U.S. Economic Calendar

  • January 29: Personal Income and Outlays

  • January 30: S&P Corelogic Case-Shiller HPI

  • January 31: Mortgage Applications

  • February 1: Jobless Claims, Productivity and Costs, PMI Manufacturing, Construction Spending

  • February 2: Employment Situation, Consumer Sentiment



  • Global equities were up this week. Emerging markets led developed markets.
  • U.S. equity sector performance was positive across the board. Healthcare and telecommunications led, and industrials and consumer staples finished last. Growth stocks had the edge over value stocks and large-company stocks beat small-company stocks.



  • Global bond markets moved higher this week. Global government bonds outperformed, followed by corporate bonds; high-yield bonds lagged.
  • Treasury yields rose as the week’s economic data did little to change investor expectations for an increase in rates by the Federal Reserve in March.




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