Bill Losey’s Weekly Economic Update for Aug. 29, 2011

COULD SEPTEMBER BRING ANOTHER STIMULUS?
Could we see a QE3? Maybe. While Federal Reserve Chairman Ben Bernanke made no mention of a plan to aid the economy at last week’s Fed symposium in Wyoming, he did refer to “a range of tools that could be used to provide additional monetary stimulus” and noted that the Fed “will continue to consider those and other pertinent issues… at our meeting in September.” September’s FOMC meeting has now been lengthened to 2 days; make of that what you will. Bernanke said he expects improved GDP in the second half of 2011 and core inflation under 2%.

NEW HOME SALES DECLINE, BUT HOME PRICES GO UP
The Census Bureau announced a 0.7% drop in new home sales in July; sales were up 6.8% from a year ago. The average sale price was $272,300, with 6.6 months of inventory on the market. Overall U.S. home prices rose 0.9% in June, said the Federal Housing Finance Agency (the best 1-month gain since September 2005).

SURPRISE! DURABLE GOODS ORDERS RISE 4.0%
July figures from the Commerce Department far outpaced forecasts. Economists surveyed by Bloomberg News had expected a 2.0% increase. July saw an 11.5% gain orders for autos and auto parts – the biggest 1-month jump in demand since January 2003 – and a 43.4% leap in orders for commercial aircraft. Even with transportation orders factored out, orders for hard goods rose 0.7% last month.

CONSUMERS PERCEIVE TOUGH TIMES
The final August Thomson Reuters/University of Michigan consumer sentiment survey came in at 55.7 – a bit of a rebound from the initial, abysmal 54.9 mark for the month. It is a long way from the high 80s (which is where the index routinely was before the Great Recession).

BEST WEEK FOR STOCKS SINCE JUNE
Gold futures retreated, 2Q GDP was revised down to 1.0%, and stocks rallied. The 3 major Wall Street indices snapped 4-week losing streaks as follows: DJIA, +4.32% to 11,284.54; S&P 500, +4.74% to 1,176.80; NASDAQ, +5.89% to 2,479.85.