Services Sector Activity Drops on Declining New Orders


Factory Orders Drop After Three Months of Gains

2 hr 30 min ago

After moving higher for three straight months, factory orders surprised economists by moving lower in June.

Despite another increase in orders for aircraft, new orders for manufactured goods came in at $583.1 billion in May, a decline of 0.5% from the April reading, Census Bureau data showed. Economists were expecting an increase in May factory orders of 0.3%.

Transportation equipment orders, primarily consisting of aircraft, were higher by 0.5%, while machinery orders were down by the same percentage. 

-Terry Lane

Services Sector Activity Drops on Declining New Orders

2 hr 30 min ago

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

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

Economists surveyed by the Wall Street Journal and Dow Jones Newswires expected a more modest drop than the nearly five percentage points fall.

“Survey respondents report that in general, business is flat or lower, and although inflation is easing, some commodities have significantly higher costs,” said Steve Miller, chair of the ISM Services Business Survey Committee.

Wells Fargo economists Tim Quinlan and Shannon Seery Grein said while the results show growing weakness in the services sector, it also demonstrates that the Federal Reserve’s higher interest rates are working. 

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

-Terry Lane

Mortgage Rates Rise This Week

4 hr 45 min ago

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

Mortgage rates grew to 6.95% this week, up from 6.86% last week. High mortgage rates have gridlocked the housing market—keeping buyers from being able to afford a new home and discouraging sellers from putting their houses on the market.

“Mortgage rates have remained above 6% since fall 2022, which has stifled seller activity and made homebuying a daunting prospect,” said Sr. Economic Research Analyst Hannah Jones.

Mortgages Demand Slips as Rates Top 7%

6 hr 40 min ago

Mortgage demand slipped last week as interest rates moved back above the 7% threshold, data from the Mortgage Bankers Association showed.

Mortgage applications moved lower by 2.6% for the week ending June 28, dropping as the 30-year, fixed-rate mortgage moved up to 7.03%.

Demand for home loans decreased across most categories, with purchase applications down by 3% from the prior week, while refinancing activity was also down.

“Purchase applications decreased the final full week of June, even as both new and existing inventories have increased over the past few months,” said Mike Fratantoni, MBA senior vice president and chief economist.

-Terry Lane

Labor Market May Be Slowing But It’s Not Stagnant 

6 hr 51 min ago

Three separate measures from different corners of the labor market show job availability may be slowing this summer.

The ADP employment report came in just under economists’ expectations and slowed for the third straight month. The private sector added 150,000 jobs in June as leisure and hospitality jobs accounted for more than two out of every five new jobs.

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

In other labor market data released Wednesday, layoffs were down 23.6% in June from the month prior, according to a monthly report from Challenger, Gray & Christmas. The report found that employers cut 48,786 jobs last month, with many layoffs concentrated in consumer products manufacturing and technology.

Those filing for unemployment benefits for the first time increased last week, further raising the four-week moving average that economists use as a weekly measure of job losses. Some Federal Reserve officials said they’re keeping a close watch over this measure as an early alert for any tumult in the labor market.

“Despite the recent increase, initial claims remain below the level we think would signal a significant slowdown in job growth,” wrote Nancy Vanden Houten, lead U.S. economist for Oxford Economics. “Current labor market conditions allow the Federal Reserve to be patient before lowering interest rates, although recent favorable inflation data provide them latitude to respond to any unexpected weakening in the labor market.”

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