Housing Rebound, Feeble Economic Activity: What We Learned During the Week of October 19-23

While housing rebounded in September, 2 measures suggest overall economic activity was weak during the month.  Here are the 5 things we learned from U.S. economic data released during the week ending October 23.

#1Existing home sales rebounded in September following a slowdown in August. The National Association of Realtors estimates sales of previously owned homes gained 4.7% during the month to a seasonally adjusted annualized rate (SAAR) of 5.55 million units, near its post-recession high and up 8.8% from a year earlier. Sales were up in all 4 Census regions on both a month-to-month and year-to-year basis. NAR’s press release speaks of “persistent inventory shortages,” which the data bear out. There were 2.21 million homes available for sale at the end of September, down 2.6% from August and 3.1% from September 2014. This was equivalent to a tight 4.8 month supply, which leads to price pressure in the sector. The median sales price of $221,900 was up 6.1% from the same month a year earlier.

#2Housing starts also rebounded in September. The Census Bureau reports housing starts grew 6.5% during the month to a seasonally adjusted annualized rate (SAAR) of 1.132 million units. This was up 17.5% from a year earlier. Starts of single-family homes edged up 0.3% to 740,000 units (SAAR) while starts of multi-family units surged 18.3% to 466,000 units (note that the multi-family unit data series is more volatile in comparison to the single-family home data series). Looking forward, the number of issued building permits fell 5.0% to 1.161 million permits (SAAR). Even with the drop, this was 4.7% above the count of issued permits from a year earlier. Meanwhile, completions grew 7.5% during September to 1.028 million units (SAAR), its highest reading since November 2007.

#3The U.S. economy grew at a slower than normal pace during September. The Chicago Fed National Activity Index (CFNAI) improved by 2-basis points during the month but remained negative for a 2nd consecutive month at -0.37. Only 26 of the 85 index components made a positive contribution to the CFNAI while 59 other components made a negative contribution. Among the 4 major categories of index components, those associatedgraphic102315 with production/income and sales/orders/inventories improved slightly while those associated with consumption and employment deteriorated by a slow margin. The 3-month moving average shed 10-basis points to -0.09, its lowest reading since May and consistent with “below average” economic growth.

#4A forward looking measure of economic activity pulled back in September. The Conference Board’s Leading Economic Index shed 2/10ths of a point to 123.5 (2010 = 100). 6 of 10 index components made a positive contribution to the LEI, led by the interest rate spread and jobless claims, while the other 4 components pulled down the index (including stock prices and building permits). The coincident index added 2/10ths of a point to 112.8 (with 3 of 4 index components making a positive contribution) while the lagging index gained 6/10ths of a point to 119.0 (with 5 of 7 components making a positive contribution). The press release indicated that one should not be too concerned about the report’s weakness, saying that the leading index “still suggests economic expansion will continue” at a “moderate” pace.

#5Jobless claims inched up but remained at a 42 year low. According to the Department of Labor, there were 259,000 first-time claims made for unemployment insurance benefits on a seasonally adjusted basis during the week ending October 17. This was up 3,000 claims from the previous week but below the 287,000 count from the same week a year earlier. The 4-week moving average contracted by 2,000 to 263,250, its lowest point since December 15, 1973(!). A year ago, the moving average was at 285,000. The count of people receiving some form of unemployment insurance benefits during the week of October 10 was 2.170 million, up 6,000 from the previous week. The 4-week moving average of 2.185 million was down 9.1% from the same week a year earlier.

Other data released over the past week that you might find of interest:                       
FHFA House Price Index (August 2015, seasonally adjusted): +0.3% vs. July, +5.5% vs. August 2014.
Regional & State Employment (September 2015):  Nonfarm payrolls grew in 20 states and the District of Columbia, fell in 27 and remained the same in 3 others vs. August 2015.

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

Manufacturing Slowing, Weak Retail Sales, Fewer Job Openings: What We Learned During the Week of October 12-16

Continued weakness in manufacturing and retail, along with a drop in job openings, were last week’s highlights.  Here are the 5 things we learned from U.S. economic data released during the week ending October 16.

#1Manufacturing production eased for the 3rd time in 4 months in September. The Federal Reserve indicates manufacturing output slipped 0.1% during the month and was only 1.4% above year ago levels. This was the worst 12-month comparable in terms of manufacturing output since February 2014. Production of durable goods slowed 0.2% during September even though motor vehicle output had edged up 0.2%. Falling by at least 1% were the production of electrical equipment/appliances, nonmetallic mineral products and wood products. Durable goods production was only 1.2% above year ago levels, its smallest year-to-year comparable since January 2014. Nondurable goods output was unchanged for the month and was up 2.0% vs. September 2014 levels.

More broadly, overall industrial production declined for a 2nd straight month with a 0.2% drop. Production at utilities grew 1.3% (thanks to warm weather in parts of the U.S. that drove up demand for air conditioning) but slowed 2.0% in the mining sector (with “sizable cuts” in the extraction of crude oil and the drilling of oil and gas). Capacity utilization at manufacturing plants eased during the month, slipping 2/10ths of a percentage point to 75.9%. The same measure was at 75.7% a year earlier.

#2The number of job openings fell but hiring activity held steady in August. The Bureau of Labor Statistics estimates there were a seasonally adjusted 5.370 million job openings at the end of August, down 298,000 job openings from July but still up 9.0% from a year earlier. Private sector job openings were 8.9% above year ago levels at 4.878 million, led by strong year-to-year percentage gains in professional/business services (+20.1%), health care/social assistance (+12.5%), trade/transportation/utilities (+9.3%), manufacturing (+8.8%) and construction (+8.7%). Government sector job openings totaled 493,000, up 10.3% from a year earlier.

There were a seasonally adjusted 5.078 million hires made during August, essentially unchanged from July but up 6.0% from August 2014 levels. The biggest year-to-year percentage gains in hiring were seen in health care/social assistance (+16.8%), leisure/hospitality (+13.6%), retail (+10.2%) and manufacturing (+9.5%). Separations totaled 4.846 million, up 50,000 for the month and 6.1% from a year earlier. Voluntary quits were essentially unchanged for the month at 2.741 million (+8.9% vs. August 2014) while layoff activity grew by 42,000 to 1.688 million (+1.5% vs. August 2014).

#3Retail sales were weak in September. The Census Bureau estimates retail sales were at a seasonally adjusted $447.7 billion during the month, up 0.1% from September and 2.4% from a year earlier. The story deteriorates after removing the 1.7% gain in sales at auto dealers & parts stores—net of sales at auto dealers and gas stations (where lower prices pushed down sales 3.2%), core retail sales were unchanged for the month. Growing during the month were sales at retailers focused on101615 sporting goods/hobbies (+0.9%), apparel (+0.9%) and furniture (+0.6%), along with a 0.7% gain in sales at restaurants/bars. But sales cooled at grocery stores (-0.3%), building materials retailers (-0.3%), electronics/appliance stores (-0.2%) and general merchandisers (-0.1%).

#4A drop in gasoline prices weighed on consumer and wholesale prices in September. The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) dropped for a 2nd straight month during September (-0.2%) and was unchanged versus a year earlier. Energy CPI dropped 4.7% during September and was 18.4% below year ago levels. Yes, gasoline prices slumped 9.0% during the month, but the energy index also was pulled down by drops in prices for fuel oil (-2.4%), electricity (-0.5%) and utility delivered natural gas (-0.3%). Meanwhile, food CPI grew at its fastest pace since May 2014 (+0.4%), with gains seen in prices for dairy products, fresh fruit and fresh vegetables. Net of energy and food, core CPI grew 0.2% for the month and was 1.9% above year ago levels. Rising during the month were prices for shelter, medical care services and transportation services.

Meanwhile, disinflation was more widespread with wholesale prices. The Producer Price Index (PPI) for final demand fell 0.5%, its largest drop since January. The price index for final demand goods declined for a 3rd straight month with a 1.2% drop. Falling were wholesale prices for both energy (-5.9%, including a 16.6% drop in gasoline prices) and food (-0.8%). Net of both energy and food, core final demand PPI was unchanged for the month and was up a mere 0.2% from a year earlier. Wholesale prices for final demand services declined 0.4% during the month and were 1.0% above year ago levels.

#5The Federal Government’s budget deficit contracted to its smallest level since 2007. According to the Bureau of the Fiscal Service, the unified budget deficit totaled $438.9 billion for the recently completed FY2015, down 13.9% from the previous fiscal year. The deficit represented 2.4% of GDP, its smallest relation to GDP since FY2007. Receipts totaled $3.249 trillion, up 7.6% from the prior fiscal year. Individual income tax receipts paced 10.5% above those of FY2014 while corporate tax receipts jumped 7.2%. Outlays totaled $3.688 trillion, up 5.2% from the prior year.

Other data released over the past week that you might find of interest:                       
Jobless Claims (week ending October 10, 2015, seasonally adjusted): 255,000 (-7,000 vs. previous week), 4-week moving average = 265,000 (-2,250 vs. previous week & the lowest reading since December 1973).
University of Michigan Index of Consumer Sentiment (October 2015, preliminary, 1966 Q1 = 100, seasonally adjusted):  92.1 (+4.9 vs. September 2015, +5.2 vs. October 2014).
NFIB Small Business Optimism Survey (September 2015, 1986 = 100, seasonally adjusted): 96.1 (+0.2 vs. August 2015, +0.8 vs. September 2014).
Business Inventories  (August 2014, seasonally adjusted): $1.811 trillion, 0.0% vs. July, +2.4% vs. August 2014.
Beige Book October 14, 2015 release

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

A Widening Trade Deficit: What We Learned During the Week of October 5 – 9

In a rather light week for economic data, we saw the trade deficit zoom up but jobless claims fall to a 42-year low.  Here are the 5 things we learned from U.S. economic data released during the week ending October 9.

#1A jump in imports and a drop in exports in August led to the largest trade deficit since March. The Census Bureau and the Bureau of Economic Analysis estimate exports declined by $3.7 billion to $185.1 billion (-6.2% vs. August 2014) and that imports increased by $2.8% billion to $233.4 billion (-2.2% vs. August 2014). The resulting seasonally adjusted trade deficit of -$48.3 billion was 17.1% larger than the deficit in August 2014. The goods deficit zoomed up $6.6 billion to -$67.9 billion while the services surplus inched up $0.1 billion to +$19.6 billion. Exports of industrial supplies and materials (including fuel, plastic materials and crude oil) declined by $2.2 billion while imports of consumer goods grew by $2.1 billion. The average price of imported crude oil—$49.33—was down $4.87 a barrel from July and 46.7% 100915from a year earlier.  The U.S. had its largest goods deficits with China (-$32.9 billion), European Union (-$14.5 billion), Germany (-$6.8 billion), Mexico     (-$5.3 billion) and Japan (-$5.2 billion). Using 2009 dollars, the “real” deficit expanded by $7.3 billion to -$63.4 billion, its largest since March.

#2There were fewer first-time jobless claims made during early October than seen in any week since 1973. The seasonally adjusted estimate of first-time claims for unemployment insurance benefits of 263,000 for the week ending October 3rd was the 31st consecutive week in which the Department of Labor data series has been below 300,000. The 4-week moving average for the week dropped by 3,000 to 267,500 claims. A year earlier, the moving average was at 291,250. There were 2.204 million people receiving some form of unemployment insurance benefits during the week ending September 26, up 9,000 from the previous week. The 4-week moving average for the continuing claims measure of 2.222 million was down 8.7% from the same week a year earlier.

#3The service sector grew at a slower pace during September. The headline index from the Non-Manufacturing Report on Business from the Institute for Supply Management shed 2.1 points during the month to a seasonally adjusted 56.9. This was the 68th straight month in which the measure was above a reading of 50.0, the threshold between an expanding and contracting service sector. Two index components fell during the month (business activity, new orders), 1 was unchanged (supplier deliveries) and 1 improved (employment). Thirteen of 18 tracked service sector industries improved during the month, led by education, construction, finance/insurance and health care/social assistance. The press release noted that survey “respondents continue to remain positive about current business conditions.”

#4Import prices fell for the 11th time in 13 months during September. The Bureau of Labor Statistics estimates import prices slipped 0.1% during the month and were 10.7% below prices of a year earlier. (Note that unlike the BLS reports on consumer and wholesale prices, this data series is not adjusted for typical seasonal variations.) The price of imported fuel grew for the 1st time in 3 months with a 1.4% gain (but nevertheless was 44.7% below year ago levels). Prices for imported natural gas blossomed 9.3% while those for imported petroleum increased 1.1%. Net of fuel, import prices contracted 0.3%, which was the 15th straight month the nonfuel metric did not increase and resulted in a 12-month comparable of -3.1%. Among the product categories pushing down nonfuel import prices were nonfuel industrial supplies, foods/feeds/beverages and capital goods.

Meanwhile, export prices declined 0.7% for the month and were 7.4% below that of a year earlier. Falling during the month were prices for exported agricultural goods, nonagricultural industrial supplies, consumer goods and automotive vehicles.

#5Consumer debt grew in August at its slowest pace since January. The Federal Reserve’s estimate of outstanding non-real estate backed consumer debt grew by $16.0 billion during the month to $3.470 trillion. This was up 6.8% from a year earlier. Slowing has been the growth rate of outstanding nonrevolving debt (e.g., college loans, car loans), with outstanding balances growing $12.0 billion to $2.551 trillion (+$12.0 for the month and +7.7% vs. August 2014 levels). The latter was the smallest 12-month comparable since March 2014. Meanwhile, consumers are slowly using their credit cards more. Revolving credit balances expanded by $4.0 billion to $918.5 billion (+4.2% vs. August 2014, its biggest 12-month comparable since August 2008).

Other data released over the past week that you might find of interest:
Wholesale Inventories  (August 2014, seasonally adjusted): $583.7 billion, +0.1% vs. July, +4.1% vs. August 2014.
Minutes from the September meeting of the Federal Open Market Committee

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