Housing Paused in April: May 20 – 24

Home sales—and overall economic activity—were sluggish in April.  Here are the five things we learned from U.S. economic data released during the week ending May 24.

#1Existing home sales slowed in April. The National Association of Realtors tells us that sales of previously owned homes slipped 0.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.190 million units. Sales grew 1.8 percent in the West but had slowed 4.5 percent in the Northeast and 0.4 percent in the South while holding even in the Midwest. Existing home sales were 4.4 percent below their year-ago sales pace, with negative 12-month comparables in all four Census regions. Home supplies improved a bit (but remained tight) as the count of unsold homes grew 9.6 percent to 1.830 million units. This was up 1.7 percent from a year earlier and the equivalent to a 4.2 month supply of homes. The median sales price of $267,300 represented a 3.6 percent increase over the past year. NAR’s press release noted that “job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales.”

#2…As did new home sales. Sales of new single-family homes dropped 6.9 percent in April to a seasonally adjusted annualized rate (SAAR) of 673,000 homes, per the Census Bureau. Even with the drop, new home sales were up 7.0 percent versus a year earlier and were near a post-recession high. Sales slumped in three of four Census regions during the month: West (-8.3 percent), Midwest (-7.4 percent), and South (-7.3 percent). All four regions enjoyed positive 12-month sales comparables. There were 332,000 unsold new homes available for sale at the end of April, down 0.9 percent from March, up 11.0 percent from a year earlier, and the equivalent to a 5.9 month supply.

#3Economic activity pulled back in April. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators indexed such that a reading 0.00 signals the U.S. economy was growing at its historical average—lost 50-basis points during the month to a reading of -0.45. Only 33 of the 85 indicators made positive contributions to the CFNAI while the other 52 made negative contributions. The contributions from three of four major categories of indicators declined during the month: production (down 40-basis points to -0.44), consumption/housing (down five basis points to a neutral contribution), and sales/orders/production (down five basis points to +0.01). Indicators tied to employment improved slightly with a one-basis point gain to +0.04. The CFNAI’s three-month moving average shed 38-basis points to -0.22, suggesting the U.S. economy was expanding at a below average rate.

#4Transportation goods—and in particular civilian craft—led to a drop in durable goods orders. The Census Bureau estimates the value of new orders of manufactured new goods slumped 2.1 percent in April to a seasonally adjusted $248.5 billion New orders for transportation goods fell 5.9 percent as civilian aircraft orders slowed 25.1 percent and motor vehicle orders declined 3.4 percent. Net of transportation goods, new orders were unchanged for the month at $163.0 billion. Rising during the month were orders for computers (+4.0 percent), electrical equipment/appliances (+0.9 percent), fabricated metal products (+0.4 percent), and machinery (+0.1 percent). New orders contracted for communications equipment (-5.5 percent) and primary metals (-0.8 percent). Also slumping was a proxy for business investment—civilian non-aircraft capital goods—as it dropped 0.9 percent.

#5Jobless claims remained relatively sparse in mid-May. The Department of Labor reports that there were a seasonally adjusted 211,000 first-time claims made for unemployment insurance benefits during the week ending May 18, down 1,000 from the prior week and 16,000 from the same week a year earlier. The four-week moving average of initial jobless claims shrank by 4,750 during the week to 220,250. While up 1.0 percent from the same week a year earlier, the measure remains close to its nearly five-decade low. 1.565 million people were receiving some form of unemployment insurance benefits during the week ending May 4, off 3.6 percent from the same week a year earlier.

Other U.S. economic data released over the past week:
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Retail and Manufacturing Fail to Impress: May 13 – 17

Retail and manufacturing each stumbled in April.  Here are the five things we learned from U.S. economic data released during the week ending May 17. 

#1Retail sales wobbled in April. The Census Bureau values retail and food services sales at a seasonally adjusted $513.4 billion, down 0.2 percent from March. Sales at auto dealers/parts stores slowed 1.1 percent but grew 1.8 percent at gas stations (thanks to higher prices at the pump). Net of both of these categories, core retail sales declined 0.2 percent in April and have risen a not particularly vigorous 3.2 percent over the past 12 months. During April, sales gained at department stores (+0.7 percent), restaurants/bars (+0.2 percent), sporting goods/hobby retailers (+0.2 percent), and grocery stores (+0.2 percent), but fell at retailers focused on building materials (-1.9 percent), electronics/appliances (-1.3 percent), apparel (-0.2 percent), and health/personal care (-0.2 percent).

#2Both manufacturing and overall industrial production faltered in April. The Federal Reserve estimates industrial production dropped for the third time in four months with a seasonally adjusted 0.5 percent decline in April that left the measure up a paltry 0.9 percent over the past year. Manufacturing output also contracted by 0.5 percent during the month (also its third decrease in four months) and off 0.2 percent from a year earlier. Durable goods production slumped 0.9 percent, with drops of at least two percent for motor vehicles, machinery, and electrical equipment/appliances. The output of nondurables slowed 0.1 percent. Warmer than average April weather led to a 3.5 percent reduction in utilities’ output while mining output rose 1.6 percent, thanks to increased oil and natural gas extraction and more coal mining. 

#3Housing starts had their best month in April since last summer. The Census Bureau places housing starts at a seasonally adjusted annualized rate of 1.205 million units, up 5.7 percent from March but still 2.5 percent under from the pace of April 2018. Starts of single-family homes rose 6.2 percent to an annualized 854,000 units (its best month since January) while multi-family unit home starts edged up 2.3 percent to 359,000 (its best since last November). Permit data suggest modest growth over the near-term, as the rate of issued housing permits eked out a 0.6 percent gain to 1.96 million permits (which was 5.0 percent below the year-ago pace). Housing completions slowed 1.4 percent during the month to an annualized 1.312 million homes (+5.5 percent versus April 2018).

#4Homebuilders grew more optimistic about the housing market in May. The National Association of Home Builders’ Housing Market Index (HMI) increased by three points to a seasonally adjusted 66. This was the 59th consecutive month in which the HMI was above a reading of 50, indicating that a higher percentage of homebuilders saw the housing market as being “good” rather than being “poor.” The index improved in three of four Census regions while holding steady in the Midwest. Also moving forward during the month were indices tracking single-family home sales (up three points to 72), expected sales of single-family homes (up a point to 72), and traffic of prospective buyers (up two points to 49). The press release noted that survey respondents had “characterize[d] sales as solid, driven by improved demand and ongoing low overall supply.”

#5Small business owner sentiment firmed in April. The National Federation of Independent Business’s Small Business Optimism Index grew for the third consecutive month with a 1.7 point gain to a seasonally adjusted 103.5 (1986=100). While off from the 104.8 reading a year earlier, the index has been above 100.0 for 29 straight months. Eight of the ten index components improved from their March readings, led by earnings trends, expected credit conditions, and plans to increase inventories. The press release noted that “[t]he ‘real’ economy is doing very well versus what we see in financial market volatility.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 11, 2019, First-Time Claims, seasonally adjusted): 212,000 -16,000 vs. previous week; -9,000 vs. the same week a year earlier). 4-week moving average: 225,000 (+5.2% vs. the same week a year earlier).
Import Prices (April 2019, All Imports, not seasonally adjusted): +0.2% vs. March 2019, -0.2% vs. April 2018. Nonfuel Imports: -0.1% vs. March 2019, -0.9% vs. April 2018.
Export Prices (April 2019, All Exports, not seasonally adjusted): +0.2% vs. March 2019, +0.3% vs. April 2018.  Nonagricultural Exports: +0.4% vs. March 2019, +0.7% vs. April 2018.
Leading Indicators (April 2019, Index (2016=100)):  112.1 (vs. March 2019: 111.9, vs. April 2018: 109.1).
University of Michigan Consumer Sentiment (May 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 102.4 (vs. April 2019: 97.2, May 2018: 98.0).
State Employment (April 2019, Nonfarm Payrolls, seasonally adjusted): Vs. March 2019: Up in 10 states, down in 1 state, and essentially unchanged in 39 states and the District of Columbia. Vs. April 2018: Up in 29 states and essentially unchanged in 21 states and the District of Columbia.
Business Inventories (March 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.018 trillion (Unchanged vs. February 2019, +5.0% vs. March 2018).
Treasury International Capital Flows (March 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$20.6 billion (vs. February 2019: +$52.8 billion, vs. March 2018: -$14.8 billion).

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Core Prices Chill, Job Openings Grow: May 6 – 10

Core inflation was on spring break in April, except at the gas pump.  Here are the five things we learned from U.S. economic data released during the week ending May 10.

#1Core consumer inflation was restrained (again) in April. The Bureau of Labor Statistics tells us that the Consumer Price Index (CPI) grew 0.3 percent on a seasonally adjusted basis during the month, following a 0.4 percent bounce in March. Energy prices jumped 2.9 percent, led by a 5.7 percent surge in gasoline prices. Food CPI, however, slipped 0.1 percent (including a 0.5 percent drop in the prices for food consumed at home). Core CPI, which nets out energy and food, edged up 0.1 percent for the third consecutive month. Rising were prices for medical care commodities (+0.9 percent), shelter (+0.4 percent), medical care services (+0.2 percent), transportation services (+0.1 percent), and new vehicles (-0.1 percent). Prices slumped for used cars/trucks (-1.3 percent) and apparel (-0.8 percent). CPI has risen 2.0 percent over the past year while the core price measure has a 12-month comparable of +2.1 percent.

#2Wholesale prices also moderated. Final demand Producer Price Index (PPI) grew at a seasonally adjusted 0.2 percent during April, down from the 0.6 percent burst a month earlier. The Bureau of Labor Statistics’ core wholesale price measure, which removes the impact of energy, food and trade services, jumped 0.4 percent. Both the headline and core PPI measures have risen 2.2 percent over the past year. During April, wholesale energy prices rose 1.8 percent (PPI for gasoline surged 5.9 percent) while food PPI slipped 0.2 percent. Net of energy and food, PPI for core goods was unchanged for the month (the first time it failed to increase since last December).

#3 Job openings rebounded in March. The Bureau of Labor Statistics reports that there were 7.488 million job openings on the final day of March (on a seasonally adjusted basis), up 346,000 from February, reversing January’s 483,000 contraction, up 8.6 percent from a year earlier, and well ahead of the 6.211 unemployed people during the month. Industries with large percentage year-to-year increases in job openings included construction (+53.8 percent), wholesale trade (+20.9 percent), professional/business services (+18.3 percent), and manufacturing (+11.7 percent). Hiring continued to lag, however, slipping by 35,000 jobs during the month to 5.660 million (up a measly 0.6 percent from a year earlier). Job separations fell by 142,000 to 5.434 million (essentially matching the March 2018 count). Voluntarily quits were 3.3 percent ahead of their year-ago pace (to 3.409 million) while layoffs slowed 4.0 percent over the same period to 1.700 million workers.

#4The trade deficit widened slightly in March. The Census Bureau and the Bureau of Economic Analysis indicates the U.S. trade deficit expanded by $0.7 billion to a seasonally adjusted -$50.0 billion as exports grew by $2.1 billion and imports expanded by $2.8 billion. Over the past year, exports have increased by 1.3 percent while imports have risen 2.1 percent. The goods deficit grew by $0.5 billion to -$72.4 billion while the services surplus narrowed by $0.2 billion to +$22.4 billion. The U.S. had its largest goods deficits with China, the European Union, and Mexico.

#5Consumer put away their credit cards in March. The Federal Reserve estimates consumer revolving credit balances shrank by $2.2 billion during the month to a seasonally adjusted $1.057 trillion. Over the past year, revolving credit balances have grown 3.2 percent. Non-revolving credit balances, which includes college and auto loans, increased by $12.4 billion during March (and 5.6 percent over the past year) to $2.995 trillion. In total, outstanding consumer credit balances (not including mortgages and other real estate backed loans) expanded by $10.3 billion during the month to $4.052 trillion, representing a 4.9 percent since March 2018.

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 4, 2019, First-Time Claims, seasonally adjusted): 228,000 -2,000 vs. previous week; +17,000 vs. the same week a year earlier). 4-week moving average: 220,250 (+2.3% vs. the same week a year earlier).
Wholesale Trade (March 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $669.8 billion (-0.1% vs. February 2019, +6.7% vs. March 2018).
Monthly Treasury Statement (First 7 Months of FY2019, Federal Government Budget Deficit): -$530.9 billion (+37.8% vs. First 7 Months of FY2018).
Senior Loan Officers Opinion Survey

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.