Wednesday, October 22, 2014

One Third of Middle-Class Americans Not Saving for Retirement

Thirty-four percent of middle-class Americans are not currently contributing to any sort of retirement savings vehicle, according to the fifth annual Wells Fargo Middle-Class Retirement study. Of the middle-class Americans between the ages of 50 and 59, 41% are not currently saving for retirement. Thirty-one percent of all respondents and 48% of respondents in their 50s say they will not have enough money to “survive” on in retirement. The study was based on 1,001 telephone interviews from July 20 to August 25, 2014 of middle-class Americans between the ages of 25 and 75 with a median household income of $63,000.

Joe Ready, the director of Institutional Retirement and Trust said:

Saving for retirement isn’t easy. It requires sacrifice, and it’s not something people can push off and hope to achieve later in life. If people in their 20s, 30s or 40s aren’t saving today, they are losing the benefit of time compounding the value of their money. That growth can’t be made up later, so people have to commit early in life to make savings a regular discipline year after year – it is the only way most people will achieve their financial goals to carry them through retirement.

While 61% of middle-class Americans admit they are not sacrificing “a lot” to save for retirement, 72% say they should have started earlier, up from 65% in 2013. More than half of respondents surveyed said they would cut spending “tomorrow” in certain areas in order to save for retirement, mainly in areas such as spa treatments, jewelry, impulse purchases, eating out at restaurants, or even major purchases such as a car, a computer, or a home renovation. Fewer people (38%) said they would forgo a vacation to save for retirement.

Respondents with a 401(k), 70% of those surveyed, have been able to save more than those without a 401(k), particularly among those who are younger. Respondents in their 20s with 401(k)s have saved a median of $10,000 more than those without. The savings difference between those who have access to a 401(k) and those who do not have access is $34,000 for those in their 30s and $40,000 for those in their 40s.

Read the Wells Fargo news release.

Consumer Prices Rose 0.1% in September

The consumer price index increased 0.1% over the month of September, according to the BLS. The increase was driven primarily by gains in food prices. Year-over-year price growth remained at 1.7%, slightly below the 2.0% Federal Reserve target.

Overall inflation has been constrained by falling energy prices. Overall energy prices shrank 0.7% in September, the third consecutive monthly decline. This decline was driven by a 2.1% drop in fuel oil prices.

Food prices increased 0.3% from the previous month and 3.0% from the previous year. The month-over-month increase was driven by an increase in the price of dairy and related products. Meats, poultry, fish, and eggs was the only category to see monthly price depreciation.

Read the Bureau of Labor Statistics report.

Tuesday, October 21, 2014

Existing Home Sales Saw Uptick in September

Existing home sales improved to a seasonally adjusted annual pace of 5.17 million units, a 2.4% increase from the month prior. Sales declined over the month in the Midwest but grew in the Northeast, South and, especially the West (7.1% SAAR).

Nonetheless, September's sales were down nationally by 1.7% from a year prior. All regions were down except for the South.

The market supply tightened to 5.3 months' inventory.

The median house price decreased to $209,700. However, September's median price was 5.6% higher than the year ago level and grew in each of the four regions.

This data suggests that the housing market is recovering moderately, albeit without robust growth.

Read the NAR report.

Friday, October 17, 2014

Housing Starts Rebound Above 1 Million Unit Pace in September

Housing starts rebounded in September, to an annualized rate of 1.017 million units. September’s pace grew 6.3% from a slight downwardly revised August rate. September’s growth was due to both single family and multi-family construction improvements. The pace of new construction is now 17.8% higher than a year ago.

Of the four regions, only the South did not contribute to the overall gain. Multifamily starts jumped 16.7% in September, bringing the annual pace to 371,000 units. It is important to note that multifamily starts declined 28.7% in August, so September’s gain has yet to fully offset the decline from the month prior. Single family starts also improved by 1.1% to an annual rate of 646,000 units.

Permit issuance was also stronger in September. Overall housing permits increased 1.5%, driven by a 4.8% monthly growth in multi-family permits. Single-family permit issuance declined.

Despite the positive September report, housing starts remain well below the long-run average of 1.5 million units.

Read the Census release.

Thursday, October 16, 2014

Industrial Production Rebounded in September

Industrial production grew 1.0% in September. The largest gain this year more than offset a decline the month prior. All three major components increased, with the largest gain in utilities. The six-month annualized growth rate increased to 3.9%. Year-over-year growth was 4.3%, an increase from August and the fifth consecutive month of improvement.

Manufacturing growth improved 0.5% in September, led by a 0.8% increase in high-tech. Manufacturing is the core component of industrial production and does not fluctuate like mining and utilities. As such, growth in manufacturing demonstrates that the core of industrial production is improving.

Mining production increased 1.8%, a massive uptick from the month prior. Utilities production jumped 3.9%, driven by a 4.5% growth in electric. The capacity utilization ratio improved in September, rising 0.6% to 79.3%.

Read the Federal Reserve release.

U.S. Treasury: Budget Results for Fiscal Year 2014

U.S. Treasury Secretary Jacob Lew and Office of Management and Budget (OMB) Director Shaun Donovan yesterday released details of the fiscal year (FY) 2014 final budget results. The deficit in FY 2014 fell to $483 billion, $197 billion less than the FY 2013 deficit and $165 billion less than forecast in President Obama's FY 2015 Budget. As a percentage of Gross Domestic Product (GDP), the deficit fell to 2.8 percent, the lowest level since 2007 and less than the average of the last 40 years. In dollar terms, the FY 2014 deficit is the lowest since 2008.

Read the full release.

Beige Book: U.S. Economy Grew at “Modest to Moderate Pace”

The Federal Reserve’s Beige Book, released yesterday indicated that economic expansion is continuing at a “modest to moderate" pace, a slowdown from the previous report. Reports from Cleveland, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco Districts all indicated moderate growth. The New York, Philadelphia, Richmond, Atlanta, and Kansas City Districts saw the pace of growth improve modestly. Growth in the Boston District was mixed. Several districts were generally optimistic about future growth.

The growth in consumer spending ranged from slight to moderate, with a pace similar to the previous report. Notably, the New York District reported that general merchandise sales slowed. While auto sales varied across districts, most reported a positive outlook and growth. Tourism activity was reported to have increased across much of the nation, with many Districts reporting higher hotel occupancy rates and optimism about the remainder of 2014 and 2015.

Manufacturing growth generally increased since the last report, with many districts reporting a positive outlook. The two weak spots were that, “New York noted that manufacturing growth had stalled, and Boston indicated that their contacts cited weaker results than in the past few reports.”

Loan volumes generally increased since the last reporting period. Credit standards generally remained unchanged since the previous Beige Book. The bright spots were that, “New York reported... delinquency rates continued to decline, particularly for commercial loans and mortgages. Philadelphia banking contacts described steady improvement in credit quality, and San Francisco noted that asset quality has improved since the previous report.”

The report noted that the pace of employment growth remained the same since the last reporting period. Continuing a recent trend, many districts report difficulty filling qualified workers for high-skilled positions. Notably, the districts reported increased upward pressure for wage growth, particularly for skilled labor. The report stated that, “Cleveland, Richmond, and Kansas City noted upward wage pressures for transportation workers; Richmond also reported upward wage pressures for skilled engineers, managers, information technology professionals, and bankers. San Francisco noted that software developers were receiving above-average wage increases. New York reported that workers were more frequently leaving jobs for higher pay, while a contact in the St. Louis District noted increased turnover of skilled employees who were switching to higher-paying jobs.”

Read the Federal Reserve release.