Economic Growth Continued, Housing Slowed a Bit. What We Learned During the Week of May 21 – 25

Economic Growth Continued, Housing Slowed a Bit. What We Learned During the Week of May 21 – 25

Kevin Roth

Home sales edged down in April. Here are the five things we learned from U.S. economic data released during the week ending May 25.

#1Sales of previously owned homes slowed in April. The National Association of Realtors reports that existing home sales declined 2.5 percent to a seasonally adjusted annualized rate of 5.46 million units. This was 1.4 percent below the year-ago sales pace. Sales failed to grow in any of the four Census regions, with declines in three of the regions: Northeast (-4.4 percent), West (-3.3 percent), and South (-2.9 percent). Over the past year, sales increased only in the South (+2.2 percent). Tight inventories remained the primary culprit, although the number of homes available for sales expanded 9.8 percent during April to 1.80 million units. This was nevertheless 6.3 percent fewer than the number of homes available for sale a year ago and translated into a mere 4.0 month supply. As a result, the median price of homes sold has risen 5.3 percent over the past year to $257,900. The press release warns that “[t]he current pace of price appreciation far above incomes is not sustainable in the long run.”

#2…As did those of new homes. Sales of new single-family homes slipped 1.5 percent during April to 662,000 on a seasonally adjusted annualized basis, per the Census Bureau. Even with April’s drop, new home sales tracked 11.6 percent ahead of its year-ago pace. Much of the decline occurred in the West, where new home sales slumped 7.9 percent during the month. Sales improved 11.1 percent in the Northeast and 0.3 percent in the South. All four Census regions enjoyed positive year-to-year new home sales gains. There were 300,000 new homes available for sale at the end of April, up 0.7 percent for the month and 12.4 percent from a year earlier. This was the equivalent to a 5.4 month supply. 

#3Economic growth appears to have been solid in April. The Chicago Fed National Activity Index (CFNAI) added two-basis points during the month to a seasonally adjusted +0.34. The CFNAI is a weighted index of 85 economic indicators adjusted such that a reading of 0.00 is indicative of the U.S. economy expanding at its historical rate. Fifty of the 85 indicators made positive contributions to the CFNAI. Among the four major categories of CFNAI components, two made positive contributions: those related to production (up eight basis points to +0.27) and employment (up six basis points to +0.10). The other two major groupings of components made smaller contributions: sales/orders/inventories (down six basis points to +0.02) and personal consumption/housing (down seven basis points to -0.05). The CFNAI’s three-month moving average rose by 23 basis points to +0.46, its best reading since last November.

#4Outside of civilian aircraft, durable goods orders rose in April. The Census Bureau reports that new orders for manufactured durable goods were at a seasonally adjusted $248.5 billion, down 1.7 percent from March. Much of the decline can be tied to the 29.0 percent drop in new orders for civilian aircraft, which had pulled down transportation goods orders 6.1 percent during the month. Net of transportation goods, new orders jumped 0.9 percent to $161.4 billion. Rising during the month were new orders for electrical equipment/appliances (+2.6 percent), fabricated metals (+2.0 percent), motor vehicles (+1.8 percent), primary metals (+1.3 percent), and computers/electronics (+1.1 percent). Durable goods shipments slipped 0.1 percent during March to $246.7 billion but jumped 1.0 percent after netting out transportation goods.

#5Consumer sentiment slightly eased in May. The University of Michigan Index of Consumer Sentiment lost 8/10ths of a point to 98.0. The same measure of consumer confidence was at 97.1 a year earlier. The current conditions index pulled back by 3.1 points to 111.8 (May 2017: 111.7) while the expectations index moved up by 7/10ths of a point to 89.1 (May 2017: 87.7). The press release stated that the survey results suggest real personal consumption will rise 2.6 percent over the next year. The Conference Board will publish its May consumer confidence survey results during the upcoming week.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending May 12, 2018, First-Time Claims, seasonally adjusted): 234,000 (+11,000 vs. previous week; -3,000 vs. the same week a year earlier). 4-week moving average: 219,750 (-7.9% vs. the same week a year earlier).
– FHFA House Price Index (March 2018, Purchase-Only Index, seasonally adjusted): +0.1% vs. February 2018, +6.7% vs. March 2017.
– FOMC Minutes

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

Factories and Consumers Were Active in April: May 14 – 18

Factories and Consumers Were Active in April: May 14 – 18

Kevin Roth

Manufacturing rebounded while retail held firm in April. Here are the five things we learned from U.S. economic data released during the week ending May 18.

#1Manufacturing output picked up in April. The Federal Reserve estimates manufacturing production gained 0.5 percent on a seasonally adjusted basis during the month after being unchanged in March. Manufacturing output has increased 1.8 percent over the past year. Durable goods production grew 0.4 percent during the month while that for nondurables expanded 0.5 percent. Leading the former were substantial increases for machinery, aerospace equipment, electrical equipment/appliances, and computers/electronics. Boosting the latter were apparel and petroleum/coal. Overall industrial production increased 0.7 percent in April, matching March’s gain and having risen 3.5 percent over the past year. Production at utilities jumped 1.8 percent during April while mining output swelled 1.1 percent (with oil/gas extraction leading the latter).Industrial Production 2016-18 051818

#2Retail sales remained stout in April even as gas prices rise. The Census Bureau reports that retail and food services sales totaled a seasonally adjusted $497.6 billion, up 0.3 percent for the month and 4.7 percent from the April 2017 sales pace. Sales at auto dealers and parts stores inched up 0.1 percent while that as gas stations rose 0.8 percent (because of higher prices at the pump). Net of both, core retail sales increased 0.3 percent during April. Reporting higher sales during the months were retailers focused on apparel (+1.4 percent), furniture (+0.8 percent), groceries (+0.5 percent), and building materials (+0.4 percent). Sales slowed at health/personal care stores (-0.4 percent), restaurants/bars (-0.3 percent), electronics/appliance retailers (-0.1 percent), and sporting goods/hobby stores (-0.1 percent). Nonstore retailers (e.g., internet retailers) saw sales grow 0.6 percent during April and rise 9.6 percent over the past year.

#3Housing starts slowed in April, with less activity for multi-family units. The Census Bureau pegs the seasonally adjusted annualized rate (SAAR) of housing starts for April at 1.287 million units, off 3.7 percent for the month but still 10.5 percent ahead of the year-ago pace. Dragging down the measure was the 12.6 percent drop in starts of multifamily units (to an annualized 374,000 units). Single-family home starts edged up 0.1 percent to an annualized 894,000 units. Looking towards future activity, there were an annualized 1.352 million issued permits to build new homes. While this represented a 1.8 percent decrease from March, it was 7.7 percent above April 2017 levels. Single-family home permits were 0.9 percent higher than that of March. Home completions increased 2.8 percent during the month to an annualized 1.257 million units (+14.8 percent versus April 2017).

#4Homebuilders remained confident about the housing market during May. The National Association of Home Builders’ Housing Market Index (HMI) added two points during the month to a seasonally adjusted reading of 70. This was the 47th consecutive month with an HMI above a reading of 50 (indicative of a greater percentage of builders viewing the housing market as “good” as opposed to “bad”) and places the sentiment measure ahead of its 12-month average of 68.6. While the HMI improved in the Midwest, it lost ground in the both in the South and West and was unchanged in the Northeast. The index measuring current sales of single-family homes added two points (to 76) while measures of expected sales over the next six months (77) and traffic of prospective buyers (51) matched their April readings. The press release notes that demand for homes should remain strong due to “[t]ight housing inventory, employment gains and demographic tailwinds.”

#5Forward-looking indicators suggest continued economic growth for the remainder of 2018. The Conference Board’s Leading Economic Index added 4/10ths of a point in April to a reading of 109.4 (2016=100). The LEI has increased 6.4 percent over the past year. Eight of the ten components to the LEI made positive contributions, led by the interest rate spread and the average number of hours worked in manufacturing. The coincident index gained by 3/10ths of a point to 103.5 (+2.2 percent versus April 2017), with all four components of the coincident index making positive contributions in April. Also adding 3/10ths of a point was the lagging index, with the 104.7 reading being 2.5 percent ahead of that from a year earlier. The press release stated that the leading indicators data “suggest solid growth should continue in the second half of 2018.”

Other U.S. economic data released over the past week:
– Jobless Claims (week ending May 12, 2018, First-Time Claims, seasonally adjusted): 222,000 (+11,000 vs. previous week; -16,000 vs. the same week a year earlier). 4-week moving average: 213.250 (-12.0% vs. the same week a year earlier).
– State Employment (April 2018, Nonfarm Payrolls, seasonally adjusted): 3 states experienced significant increases in payrolls vs. March 2018. 28 states experienced significant payrolls increases vs. April 2017 while 1 experienced a significant decline.
– Business Inventories (March 2018, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.930 trillion (Unchanged vs. February 2018, +3.8% vs. March 2017).
– Treasury International Capital Flows (March 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$18.6 billion (vs. February 2018: -$57.7 billion, vs. March 2017: -$35.5 billion).

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

Job Openings Rise to Another Record: May 7 – 11

Job Openings Rise to Another Record: May 7 – 11

Kevin Roth

Employers continue having trouble filling open positions. Here are the five things we learned from U.S. economic data released during the week ending May 11.

#1Job openings hit an (at least) 17-year high during March while growth in hiring lagged. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 6.550 million available jobs at the end of March, up 472,000 for the month, 16.8 percent above the year-ago count, and the most since the launch of the data series back in December 2000. Private sector employers had 5.928 million job openings, up 16.5 percent from a year earlier. Some of the largest year-to-year percentage increases in job openings were in construction (+38.5 percent), trade/transportation/utilities (+26.4 percent), retail (+24.0 percent), state/local government (+23.9 percent), professional/business services (+20.6 percent), financial activities (+17.2 percent), and leisure/hospitality (+17.0 percent). Employers had difficulty finding people to fill these positions as the 5.425 million hired workers during the month was down 86,000 from February and up a more modest 2.4 percent from a year earlier. Industries with strong year-to-year percentage gains in hiring included arts/entertainment/recreation (+26.0 percent), professional/business services (+13.5 percent), manufacturing (+12.7 percent), transportation/warehousing (+7.0 percent), and wholesale trade (+6.9 percent). 5.291 million people left their jobs during March, up 118,000 from February and 2.3 percent from a year earlier. This included 3.344 million people who quit their jobs (+6.4 percent from a year earlier) and 1.278 million people who were subject to a layoff (down 7.1 percent from March 2017).Job Openings and Hiring 2008-2018 051118

#2Consumer prices grew at a moderate rate in April. The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) increased 0.2 percent on a seasonally adjusted basis during the month, up from a 0.1 percent decline in March and leaving the measure 2.5 percent ahead of its year-ago mark. Energy prices rebounded 1.4 percent during April following a 2.8 percent pullback in March (gasoline prices increased 3.0 percent). Food prices grew at their fastest rate in 13 months with a 0.3 percent advance (fruits/vegetables, eggs, beer, and dairy products leading the way). Net of energy and food, core CPI saw its smallest gain since last November with a 0.1 percent increase. Helping keep the core measure in check were declining prices for used cars/trucks (-1.6 percent), new vehicles (-0.5 percent), transportation services (-0.4 percent), and medical care commodities (-0.2 percent). Rising were prices for shelter (+0.3 percent), apparel (+0.3 percent) and medical care services (+0.2 percent).

#3Lower food prices lead to the smallest increase in wholesale prices of the year. The final demand measure of the Producer Price Index (PPI) grew a seasonally adjusted 0.1 percent during April following a 0.3 percent increase in March, per the Bureau of Labor Statistics. The core measure of wholesale prices—final demand PPI net of energy, food, and trade services—increased 0.1 percent following three monthly 0.4 percent gains. Final demand prices were unchanged during April as energy prices edge up 0.1 percent and food prices fell 1.1 percent (including a 17.8 percent drop in vegetable prices). Core final demand goods prices (net of energy and food) grew 0.3 percent for the third time in four months. Final demand PPI for services gained 0.2 percent, reflecting a 0.2 percent gain in trade services PPI and a 0.6 percent jump in transportation/warehousing prices. Over the past year, final demand PPI has grown 2.6 percent while the core measure (net of energy, food, and trade services) has increased 2.5 percent.

#4Small business owner confidence held firm in April. The Small Business Optimism Index eked out a 1/10th of a point gain to a seasonally adjusted reading of 104.8 (1986=100). This was the 17th consecutive month in which the National Federation of Independent Business’s measure was above a reading of 100. Four of ten index components gained during the month: earnings trends (up three points), plans to make capital outlays (up three points), current inventories (up two points), and expected real sales. Three measures declined from their March readings: plans to increase employment (down four points), expected economic conditions (down two points), and whether it is a good time to expand (off a single point). The press release claims that “[n]ever in the history of this survey have we seen profit trends so high.”

#5Consumers took on debt at a slower pace in March. The Federal Reserve reports that outstanding consumer credit balances (net of mortgages and other real estate backed debt) grew by $11.7 billion during the month to a seasonally adjusted $3.875 trillion. This was smaller than the $13.6 billion advance during February and left outstanding debt balances up 5.0 percent over the past year. Revolving credit balances (e.g., credit cards) contracted by $2.6 billion to $1.027 trillion (+4.8 percent versus March 2017). Nonrevolving credit balances (including college and auto loans) increased by $14.2 billion to $2.848 trillion. This represented a 5.1 increase from the same month a year earlier.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending May 5, 2018, First-Time Claims, seasonally adjusted): 211,000 (Unchanged vs. previous week; -26,000 vs. the same week a year earlier). 4-week moving average: 216,000 (-11.7% vs. the same week a year earlier).
– Import Prices (April 2018, All Imports, not seasonally adjusted): +0.3% vs. March 2018, +3.3% vs. April 2017. Nonfuel Imports: +0.2% vs. March 2018, +1.8% vs. April 2017.
– Export Prices (April 2018, All Exports, not seasonally adjusted): +0.6% vs. March 2018, +3.8% vs. April 2017. Nonagricultural Exports: +0.7% vs. March 2018, +4.0% vs. April 2017.
– U. of Michigan Consumer Sentiment (May 2018-preliminary, Index of Consumer Sentiment, seasonally adjusted): 98.8 (vs. April 2018: 98.8, vs. May 2017: 97.1).
– Wholesale Inventories (March 2018, Inventories of Merchant Inventories, seasonally adjusted): $627.4 billion (+0.3% vs. February 2018, +5.5% vs. March 2017).
– Monthly Treasury Statement (April 2018, Federal Government Budget Surplus/Deficit): +$214.3  Billion (vs. April 2017: +$176.3 billion).  The deficit over 1st 7 months of FY2018: -$385.4 billion (vs. 1st 7 months of FY2017: -$344.4 billion).
– Senior Loan Officer Opinion Survey (April 2018).

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