More bad economic news for those investors who prefer to rely on forward looking indicators as opposed to last quarter’s earnings results (and the obvious incapability of analysts to get estimates even remotely right). Mortgage applications continue to foreshadow a rapidly deteriorating housing market while retail sales show that the consumer is coincidentally weakening. Mortgage applications hit a 14 year low as demand for housing has clearly fallen off a cliff following the end of the home buyers tax credit. Econoday details the results:
“In yet another negative indication for the post-stimulus housing market, the Mortgage Bankers Association’s purchase index fell 3.1 percent in the July 9 week signaling yet another decline for mortgage applications. The index is at a 14 year low. Applications for refinancing, which have been very high due to low interest rates, slipped back 2.9 percent. Refinancing made up 79 percent of all applications in the week. Thirty-year mortgages edged higher to 4.69 percent, still near a record low.”
On the retail side sales disappointed to the downside as well. The number is being brushed off by many economists, but the second straight month of negative results and a clearly reversing trend is not a good sign for the US consumer going forward. Via Econoday:
“The headline retail sales number was disappointing but there were a number of cross currents in the detail. Overall retail sales in June shrank 0.5 percent, following a 1.1 percent decline in May. The June figure posted lower than the market forecast for a 0.2 percent decline. Auto sales were a big part of the June decrease as sales ex autos only edged down 0.1 percent, following a 1.2 percent drop in May. Analysts had projected no change in sales excluding autos. Weak gasoline prices came into play also. Sales excluding autos and gasoline rebounded 0.1 percent, following a 1.0 contraction in May.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.