Market News

MADISON, Wis. (8/3/07)

• Vehicle sales geared down last month and domestic automakers' market share fell below 50% for the first time in history. Vehicles sold at a seasonally-adjusted annual pace of 15.54 million units in July--down from 15.6 million in June and 17.2 million in July 2006. Sales had averaged about 16.7 million during the first half of this year. The housing slump has dampened demand for new vehicles because consumers are having a harder time extracting equity from their homes. The domestic brand share of the vehicle market declined to 48.9% in July. At the same time, the combined market share of the Big Three Japanese automakers rose to 34.6%--from 33% in June and 32.1% a year earlier. Despite a slight decline in sales for July, Toyota Motor topped Ford as the nation's 2nd-largest automaker (Economy.com and Reuters Aug. 2) ...
• Both domestic and foreign automakers ramped up their incentive spending in July, according to Edmunds.com. The average new-vehicle incentive was $2,524 last month--4% higher than a year earlier. U.S. automakers offered the biggest incentives--led by Chrysler at $4,082. Japanese automakers also boosted their incentive spending. Toyota increased its average incentive 28% from a year ago to $1,492 per vehicle. Honda boosted its average incentive by 28% to $1,146. Incentive spending helped accelerate sales of light trucks in July, despite high gasoline prices. Light truck sales rose to 8.2 million from 8 million, while auto sales declined to 7.4 million from 7.6 million (Economy.com and Reuters Aug. 2) ...
• Mortgage rates eased for a second consecutive week, according to Freddie Mac. The average 30-year, fixed-rate mortgage (FRM) edged down 1 basis point to 6.68% this week, while the 15-year FRM fell 5 basis points to 6.32%, and the one-year, adjustable-rate mortgage (ARM) dropped 10 basis points to 5.59%. "Market investors seeking safety from the subprime fallout bought Treasury securities, pushing bond yields down and allowing mortgage rates to drift a bit lower," said Freddie Mac Chief Economist Frank Nothaft. He noted that home sales and prices continue to weaken, but said there are some tentative signs "that the market is stabilizing." A year ago, the average 30-year FRM stood at 6.63%, while the 15-year FRM was at 6.27%, and the one-year ARM averaged 5.69% (CNNMoney.com Aug. 2) ...
• First-time claims for unemployment insurance increased by 4,000 during the week ending July 28 to 307,000, the Labor Department reported Thursday. The four-week moving average, which smoothes out weekly volatility, declined by 3,500 to 309,000. In another hopeful sign, continuing claims (the number of people still on the benefit rolls after an initial week of aid) fell by 16,000 during the week ended July 21 to 2.525 million. So far this year, weekly unemployment claims have averaged 318,600--about steady with last year's 313,000 average. Analysts say the job market has helped sustain consumer spending even as the housing recession has made it tougher for consumers to obtain extra cash by borrowing against the value of their homes (Bloomberg.com Aug. 2) ...
• More older Americans are staying in the workforce today because they are concerned about having affordable health insurance and adequate retirement savings, according to a report by the Employee Benefit Research Institute. The percentage of people aged 55 and older who are in the labor force surged to 45% in 2006--from 38% in 1993. Increased participation in the labor force occurred among both men and women and for all race and ethnicity groups. The study also found that the percentage of people aged 65 to 69 who are in the workforce jumped to 29% last year, from 18% in 1985. The study said participation rates have increased for older Americans because employers are phasing out or ending their retiree health-insurance plans and because employers are shifting to defined-contribution retirement plans from defined-benefit plans (The Kansas City Star via Yahoo! News Aug. 2) ...
• The average account balance of U.S. workers who held 401(k) accounts from 1999 through 2006 saw an average 8.7% annual increase in their balance--to $121,202 at the end of last year, according to a study by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute. The median account balance rose at an annual rate of 15.1%, to $66,650. "The most telling numbers are the consistent participants because that gives you a picture of what happens if a person stays in a plan," said EBRI President Dallas Salisbury. In other findings, most 401(k) assets are in stock. And last year, 18% of 401(k) participants who are eligible for loans had taken one against their accounts (The Wall Street Journal Online and American Banker Aug. 1) ...

courtesy of cuna.org