Activity in the services sector is declining due to falling new orders

Factory orders fall after three months of growth

6 hours 14 minutes ago

After three months of growth, factory orders surprised economists with a decline in June.

Despite another increase in aircraft orders, new orders for manufactured goods totaled $583.1 billion in May, down 0.5% from April, according to the Census Bureau. Economists had expected factory orders to rise 0.3% in May.

Orders for transportation equipment, mainly aircraft, rose 0.5%, while orders for machinery fell by the same percentage.

-Terry Lane

Activity in the services sector is declining due to falling new orders

6 hours 14 minutes ago

Economic activity in the services sector was weaker than expected in June.

A key survey of service industry leaders fell for the second time in three months. Before April, the Institute of Supply Management (ISM)’s Purchasing Managers’ Index (PMI) for the services sector had risen for 15 consecutive months.

Economists surveyed by “Wall Street Journal” and Dow Jones Newswires was expecting a more modest decline than that of almost five percentage points.

“Survey respondents say that overall, business conditions are stable or lower, and while inflation is falling, some goods are facing much higher costs,” said Steve Miller, chairman of ISM’s Services Business Survey Committee.

Wells Fargo economists Tim Quinlan and Shannon Seery Grein say that while the results point to growing weakness in the services sector, they also show that the Federal Reserve’s higher interest rates are having an effect.

“An optimist looks at this release and sees much of what the Fed is fighting for. Service sector activity is cooling off, giving way to a moderating labor market and, ultimately, softer price pressures,” Wells Fargo economists wrote.

-Terry Lane

Mortgage rates are rising this week

8 hours 28 minutes ago

The average interest rate on a 30-year fixed-rate mortgage rose this week, erasing declines over the past two weeks, according to Freddie Mac.

Mortgage rates rose to 6.95% this week, up from 6.86% last week. High mortgage interest rates have stalled the housing market, preventing buyers from purchasing a new home and discouraging sellers from putting their homes up for sale.

“Mortgage rates have remained above 6% since the fall of 2022, which has limited seller activity and made buying a home a daunting prospect,” said Hannah Jones, senior economic research analyst at Realtor.com.

Mortgage demand falls, interest rates exceed 7%

10 hours 23 minutes ago

Demand for mortgages fell last week as interest rates once again topped 7%, according to data from the Mortgage Bankers Association.

Mortgage applications fell 2.6% in the week ending June 28, while 30-year fixed-rate mortgages rose to 7.03%.

Mortgage demand weakened across most categories, with applications down 3% from the previous week; refinancings also fell.

“Purchase requests declined in the last full week of June, even as both new and existing inventories increased over the past few months,” said Mike Fratantoni, senior vice president and chief economist at MBA.

-Terry Lane

The job market may be slowing down, but it is not standing still

10 hours 35 minutes ago

Three independent indicators from different parts of the labor market show that job availability could tighten this summer.

The ADP jobs report was slightly below economists’ expectations and slowed for a third straight month. The private sector added 150,000 jobs in June, as jobs in the entertainment and hospitality industry accounted for more than two of five new jobs.

The payroll provider’s report is often seen as a precursor to the Bureau of Labor Statistics (BLS) Employment Situation Report, which will be released on Friday. ADP’s employment report covers only private companies and does not include government jobs.

Other labor market data released Wednesday showed that job losses fell 23.6% in June compared with the previous month, according to the monthly report from Challenger, Gray & Christmas. The report found that employers laid off 48,786 workers last month, with the largest number of layoffs occurring in the consumer goods and technology industries.

The number of people filing for first-time unemployment benefits rose last week, further increasing the four-week moving average that economists use as a weekly gauge of job losses. Some Federal Reserve officials said they were closely monitoring the decision to provide timely warning of possible labor market turmoil.

“Despite the recent increase, initial claims remain below the level that we believe would signal a significant slowdown in job growth,” wrote Nancy Vanden Houten, chief U.S. economist at Oxford Economics. “Current labor market conditions allow the Federal Reserve to remain patient before cutting interest rates, although recent favorable inflation data give it room to respond to any unexpected weakness in the labor market.”