The Time Bomb Ticks Louder
- Oct 17, 2013
There was more uncertainty and inconclusiveness on Capitol Hill on Tuesday as the putative date of default (Thursday) got very close indeed. The eyes of the nation, and the world, are now on Washington, and they mostly don’t like what they see. Meanwhile, the rest of the economy rolls on despite this completely artificial crisis, and presumably won’t be disrupted until—if and when—a default actually occurs.
Meager amounts of economic data are still being generated. For example, the first of the monthly regional surveys by the Federal Reserve came out on Tuesday, on schedule. The October 2013 Empire State Manufacturing Survey indicates that business conditions held steady for New York manufacturers last month. The general business conditions index fell five points to 1.5, with the new orders index rising five points to 7.8.
N.Y. labor market conditions were also more-or-less steady, with the index for number of employees falling four points to 3.6, while the average workweek index inched up to 3.6. Indexes for the six-month outlook continued to convey a strong degree of optimism about future business conditions. The future general business conditions index held near last month’s year-and-a-half high, at 40.8.
Home prices still going up
The latest FNC Residential Price Index, also released on Tuesday, shows continued growth of home prices in August. The index moved 0.6 percent higher from the previous the month, making August the 18th consecutive month of rising home prices, according to FNC. August home prices have climbed to the levels last seen in December 2009, when they were still sliding the other direction. On a year-over-year basis, home prices were up 5.3 percent from a year ago.
The narrower FNC 100-MSA composite index, which is based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metro areas, also shows that August home prices increased month-over-month by 0.6 percent. In a sign of moderating month-over-month price momentum, August’s price increase is smaller than June or July’s.
As a gauge of underlying home values, FNC’s indexes exclude sales of foreclosed homes, which are usually sold at a large discount. The company did report, however, that foreclosure sales nationwide for the month accounted for 12.4 percent of total home sales, down slightly from July’s 12.7 percent and 4.5 percentage points lower than a year ago.
Fitch puts U.S. on negative watch
Chicago-based Fitch, one of the big three debt-rating agencies (along with Standard & Poor’s and Moody’s Investors Service), put U.S. Treasury bonds on Rating Watch Negative on Tuesday. That sometimes—but not always—means that a downgrade is ahead. Currently Fitch rates U.S. debt at AAA.
“The prolonged negotiations over raising the debt ceiling… risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S.,” the company noted in a statement.
All the hubbub between the House and Senate apparently unnerved investors on Tuesday. The Dow Jones Industrial Average lost 133.25 points, or 0.87 percent, while the S&P 500 and the Nasdaq were down 0.71 percent and 0.56 percent, respectively.