So, will the last company to leave the US for lower tax rates please turn the lights off? The merger between the hamburger king and the donut king being was announced this week. Our dysfunctional government has a congress and a president both indicating a willingness to lower the US Corporate tax rate, the highest in the industrial world and one which taxes overseas earnings, but no ability to forge a piece of legislation to do so. This trend is not over. However, investment in the US will continue as long as we are competitive. It’s just that the foreign earnings will not be taxed before the money is moved back into the US. On the positive side a major US auto manufacturer announced the move of some operations to the US from Mexico.
Stocks ended the week with little change. Treasury bond prices rose as the yield fell to 2.345% and the dollar rose. Generally good US economic numbers were overshadowed by geopolitical concerns over Ukraine and ISIS. Further sanctions are likely to hurt global growth, primarily in Europe.
- The Commerce Department reported that sales of new single-family homes declined 2.4% in July from June. For the year new single-family home sales are below 2013.
- The S&P Case Shiller report reported that home prices across the country rose 6.2% in the past 12 months. Seasonally adjusted the US index fell 0.1% in June.
- New home data was mixed as sales fell by 2.4% in July but pending sales rose 3.3%.
- The Commerce Department reported that the Second Quarter Gross Domestic Product rose faster than initially thought rising at a 4.2% annual place following the first quarters 2.1% rate of contraction. This was better than expectations for a revision to 3.8%.
- The Labor department reported that initial claims for unemployment fell in the previous week to 298,000 and the week before that was revised up to 299,000. The four week average which smooths out weekly fluctuations also fell to 299,750.
- The Commerce Department reported that Consumer Spending fell 0.1% in July after a 0.4% advance in June. Personal Income rose 0.2% in July from a revised 0.5% rise in June. The Personal Consumption Expenditures Price Index in July was 1.6% from a year ago. This is important as it is the measure of inflation used by the Federal Reserve.
- The Commerce Department reported that Durable Goods Orders rose 22.6% in July, the biggest increase on record largely due to aircraft. Excluding aircraft and other transportation equipment, orders fell by 0.8% in July but were up 6.6% from a year earlier.
- Consumer Prices in the 18 nation Eurozone rose only 0.3% in August from a year ago indication a need for further stimulus to prevent deflation. Spain and Italy are already seeing falling prices.