Existing home sales edge up, new home sales slip down, and consumer sentiment improves following the election. Here are the 5 things we learned from U.S. economic data released during the week ending November 25.
Sales of existing homes hit a nearly 10-year high in October. The National Association of Realtors estimates sales of previously owned homes grew 2.0% during the month to a seasonally adjusted annualized sales rate (SAAR) of 5.60 million units. This was 5.9% above the year ago pace and the highest SAAR of home sales since February 2007. Sales grew versus both their September 2016 and October 2015 paces in all 4 Census regions. There were fewer homes on the market—at the end of October, there were 2.020 million homes available for sale, down 0.5% from September and 4.3% from a year earlier. The resulting 4.3 month supply resulted in a 4.4% year-to-year gain in the median sales price to $274,300. The press release links higher worker wages, improved economic activity, and low mortgage rates for the improvement in home sales activity this year.
New home sales have cooled slightly this fall. The Census Bureau places October new home sales at a seasonally adjusted annualized rate of 563,000 units. While this was down 1.9% from the September pace, it was still a robust 17.8% above that from October 2015. Among the 4 Census regions, new homes sales grew during October only in the West (+8.8%). Sales fell during the month in the Midwest (-13.7%), Northeast (-9.1%), and the South (-3.0%). 3 of 4 Census regions had positive 12-month comparables: West, South, and Midwest. As they have been for all of the economic recovery, the inventory of unsold homes remained tight. The 246,000 homes available for sale (+2.9% vs. September 2016, +9.3% vs. October 2015) represented on a 5.2 month supply.
Chicago Fed data shows that economic activity picked up in October. The Chicago Fed National Activity Index improved by 15-basis points to a reading of -0.08, its best reading since July. The CFNAI is an index of 85-economic measures set so that a reading of 0.00 indicates an economy that is expanding at its historic average. 34 of the 85 measures made a positive contribution to the CFNAI while the remaining 51 indicators made negative contributions. Despite that, all 4 major categories of indicators improved from their September readings: production/income (6-basis point gain to a contribution of -0.04), consumption/housing (6-basis point gain to a contribution to -0.03), sales/orders (2-basis point gain to a contribution to -0.01), and employment (a basis point gain to a neutral contribution of 0.00). But not everything in the report indicated improving conditions. The CFNAI’s 3-month moving average of -0.27 deteriorated by 7-basis points to -0.27, its worst reading since May. This reading was indicative of there being below average economic growth over the past 3 months.
Durable orders increased during October, with gains spreading beyond a bounce in aircraft orders. The Census Bureau reports new orders for manufactured durable goods jumped 4.8% during October to a seasonally adjusted $239.4 billion, its 4th straight monthly increase. These figures included a 12.0% increase in new orders for transportation goods, led by sharply higher orders for civilian (+94.1%) and defense (+33.1%) aircraft. New orders for automobile slipped 0.6%. Net of transportation goods, new orders grew 1.0% to $151.2 billion, led by gains in electrical equipment/appliances (+2.3%), fabricated metal products (+2.2%), computers/electronics (+0.9%), and machinery (+0.2%). Civilian capital goods orders net of aircraft—a proxy for business investment—grew 0.4% during the month. Shipments of durable goods grew for the 4th time in 5 months (+0.1% to $234.6 billion). Unfilled orders grew for the 4th straight month with a 0.7% increase to $1.129 trillion) while inventories expanded by less than 0.1% to $383.7 billion.
Consumer sentiment bounces up following the election. The final November reading of the Index of Consumer Sentiment from the University of Michigan was at 93.8, up 6.6 points from October 2016 and 2.5 points from November 2015. The reading also was up 8.2 from the preliminary November reading released a few weeks earlier and based solely on data collected before the election. The current conditions index added 4.1 points to 107.3 (November 2015: 104.3) while the expectations index surged 8.4 points to 85.2 (November 2015: 82.9). The press release noted that consumer sentiment improved across all income and age groupings. The press release also suggested the improvement in the index was reflective of a “presidential honeymoon [that] represent[s] a period in which the promise of gains holds sway over actual economic conditions.”
Other data released over the past week that you might find of interest:
– Jobless Claims (week ending November 19, 2016, First-Time Claims, seasonally adjusted): 251,000 (+18,000 vs. previous week; -13,000 vs. the same week a year earlier). 4-week moving average: 251,000 (-8.1% vs. the same week a year earlier).
– FOMC Minutes
– FHFA House Price Index (September 2016, Purchase-Only Index, seasonally adjusted): +0.6% vs. August 2016, +6.1% vs. September 2015.
The opinions expressed here are not necessarily those of Kevin’s current and previous employers. No endorsements are implied.