Home Sales Chilled (Again) in January: February 18 – 22

Home sales faltered again in early 2019. Here are the five things we learned from U.S. economic data released during the week ending February 22.  

#1Sales of previously owned homes fell for the ninth time in ten months in January. The National Association of Realtors’ estimate of existing home sales dropped 1.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 4.94 million units. This left the count of transactions 8.5 percent below that of a year earlier to its lowest point since November 2015. Sales fell in three of four Census regions: West (-2.9 percent), Midwest (-2.5 percent), and South (-1.0 percent). Only the Northeast enjoyed a sales increase during the month (+2.9 percent). While still tight, the number of homes on the market rose 3.9 percent to 1.59 million units (+4.6 percent vs. January 2018), the equivalent to a 3.9 month supply. The median sales price of $247,500 represented a 2.8 percent increase from January 2018. The press release states NAR’s belief that home sales “have reached a cyclical low.”

#2Meanwhile, homebuilders’ sentiment rebounded in February. The Housing Market Index (HMI) from the National Association of Homebuilders added four points during the month to a seasonally adjusted 62. The HMI has been above a reading of 50—meaning a higher percentage of homebuilders view the housing market as “good” rather than “poor”—for 56 straight months. The HMI improved in the Midwest (55) and South (66) but lost traction in the Northeast (45) and West (67). Also moving forward in February were indices for sales of single-family homes (up three points to 67), expected sales over the next six months (up five points to 68), and traffic of prospective buyers (up four points to 48). The press release stated that “many builders are reporting positive expectations for the spring selling season.

#3Forward-looking economic indicators slipped in January. The Conference Board’s Leading Economic Index (LEI) lost 1/10th of a point to a 111.3 (2016=100), as the measure has stayed within 1/10th of a point range over the past four months. Even with the recent stagnation, the LEI has risen 3.5 percent over the past year. The coincident economic index added 1/10th of a point, placing it 2.3 percent ahead of its year-ago mark. The lagging economic index grew by a half point to 106.7. The measure has risen 2.6 percent since January 2018. The Conference Board, in noting that the LEI “has now been flat essentially since October 2018, indicates economic growth “will likely decelerate to about 2 percent by the end of 2019.” (The press release also noted that the recently ended partial federal government shutdown resulted in three of the ten components to the LEI being unavailable for analysis).

#4Durable goods orders expanded in December. The Census Bureau estimates new orders for manufactured durable goods totaled $254.4 billion, up 1.2 percent for the month. As normal, aircraft orders were a major driver to the headline number—a 28.4 percent increase in orders for civilian aircraft resulted in a 3.3 percent gain in transportation goods (motor vehicle orders increased 2.1 percent). Net of transportation goods, core durable goods orders inched up by a mere 0.1 percent. Losing ground in December were orders for computers/electronics (-8.3 percent), communications equipment (-5.0 percent), machinery (-0.4 percent), and electrical equipment/appliances (-0.1 percent). Rising during the month were orders for fabricated metal products (+0.3 percent). Orders for civilian capital goods net of aircraft—a proxy of business investment—fell 0.7 percent during the month.

#5Agricultural prices grew in December. The Department of Agriculture reports that its index for prices received by farmers grew by 1.8 percent during the month to a reading of 89.9 (2011=100). Despite the increase during the month, the measure remained 2.4 percent below its year-ago mark. Crop prices jumped 4.2 percent, led by higher prices for vegetables/melons, feed grains, and grains/oilseed. Livestock prices slipped 0.4 percent in December, with dairy prices slumping 3.5 percent but poultry/egg prices surging 3.4 percent.

Other U.S. economic data released over the past week:Jobless Claims (week ending February 16, 2019, First-Time Claims, seasonally adjusted): 216,000 (-23,000 vs. previous week; -2,000 vs. the same week a year earlier). 4-week moving average: 235,750 (+3.7% vs. the same week a year earlier)- FOMC Minutes

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

Factories Slowed in January: February 11 – 15

Factories pumped out less output in January. Here are the five things we learned from U.S. economic data released during the week ending February 15.  

#1Manufacturing production fell in January. The Federal Reserve reports manufacturing fell a seasonally adjusted 0.9 percent during the month following a 0.8 percent gain in December. Durable goods production slumped 1.7 percent as motor vehicle output plummeted 8.8 percent. Nondurable goods output was unchanged for the month. Compared to a year earlier, manufacturing output has risen 2.9 percent. Overall industrial production fell 0.6 percent in January after having eked out a 0.1 percent increase in December. Industrial production has grown 3.6 percent over the past year. The rise in mining output slowed to a 0.1 percent gain in January after a 1.5 percent jump in December while output at utilities increased 0.4 percent. Factories were slightly less busy in January as capacity utilization dropped by 6/10ths of a percentage point to 78.2 percent. Manufacturing sector capacity utilization fell by 7/10ths of a point to 75.8 percent.Capacity Utilization 021519

#2Retail sales slumped in December (or at least the seasonally adjusted data had). The Census Bureau estimates retail and food services sales were at a seasonally adjusted $505.8 billion during the final month of 2018, down an unexpectedly sharp 1.2 percent from November. The drop appears, at least at first glance, to be a bit of an outlier to the negative side and may be the result of data issues tied to the recent partial federal government shutdown or other factors. A part of the drop was due to declining prices at the pump as sales at gas stations plummeted 5.1 percent. On the flip side, sales at auto dealers/parts stores grew 1.0 percent. Net of sales at both gas stations and auto dealers/parts stores, core retail sales fell 1.4 percent with sales off at most retail categories. Falling were sales at retailers focused on sporting goods/hobbies (-4.9 percent), health/personal care (-2.0 percent), furniture (-1.3 percent), apparel (-0.7 percent), groceries (-0.5 percent), and electronics/appliances (-0.1 percent), along with department stores (-3.3 percent) and restaurants/bars (-0.7 percent). One thing that also makes this report a bit suspect is the reported 3.9 percent slowdown at nonstore retailers (i.e., online retailers)

#32019 starts with little headline inflation, with core measures staying on target. The Consumer Price Index (CPI) was unchanged on a seasonally adjusted basis for a third consecutive month in January, per the Bureau of Labor Statistics. Energy CPI fell 3.1 percent, pulled down by gasoline prices slumping 5.5 percent. Food prices, however, gained 0.2 percent. Core CPI, which removes both energy and food, increased 0.2 percent for the fifth straight month. Rising were prices for apparel (+1.1 percent), shelter (+0.3 percent), medical care services (+0.3 percent), new vehicles (+0.2 percent), used cars/trucks (+0.1 percent), and medical care commodities (+0.1 percent). Transportation services prices slipped 0.2 percent. Over the past year, CPI has risen 1.6 percent while core inflation has grown 2.2 percent.

Meanwhile, wholesale prices slipped for a second straight month as final demand Producer Price Index (PPI) declined 0.1 percent on a seasonally adjusted basis. The core final demand measure of wholesale prices, which removes the impact of energy, food, and trade services, gained 0.2 percent. Falling were producer prices for both energy (-3.8 percent) and food (-1.7 percent). Rising was PPI for services, half of which resulted from wider margins at apparel/jewelry/footwear apparel retailers. Over the past year, headline PPI has risen 2.0 percent while the core wholesale price measure has a 12-month comparable of +2.5 percent

#4The number of job openings bloomed again to record levels as 2018 wrapped up. There were a seasonally adjusted 7.335 million job openings on the final day of 2018, up 166,000 for the month and a whopping 29.4 percent from a year earlier. The Bureau of Labor Statistics also indicates that private sector job openings totaled 6.707 million, up 30.4 percent from the end of 2017, with virtually every industry reporting double-digit percentage increases. Hiring also increased, although not at the same fast pace as employers continue to experience difficulty to find new employees. There were 5.907 million workers hired in December, up 95,000 for the month and 7.1 percent from December 2017. Private sector employers added 5.555 million workers, a 7.4 percent gain from a year earlier. 5.545 million people left their job during the month, off 18,000 from November but up 4.3 percent over the previous year. Voluntarily quits had risen 4.6 percent over the past year to 3.482 million while layoff activity was up 2.5 percent from December 2017 to 1.697 million.

#5Small business owner optimism fell for a fifth straight month in January. The Small Business Optimism Index from the National Federation of Independent Business shed 3.2 points during the month to a seasonally adjusted 101.2 (1986=100). This was the measure’s lowest mark since November 2016 when it was at 98.4. Seven of the index’s ten components declined in January, including sharp drops for indices tracking expected economic conditions, expected real sales, plans to increase inventories, plans to increase employment, and whether it is a good time to expand. The press release uses the word “shaky” to describe business owners expectations for business conditions, noting that “the political climate is affecting how they view the future.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 9, 2019, First-Time Claims, seasonally adjusted): 239,000 (+4,000 vs. previous week; +5,000 vs. the same week a year earlier). 4-week moving average: 231,750 (+0.8% vs. the same week a year earlier).
Import Prices (January 2019, All Imports, not seasonally adjusted): -0.5% vs. December 2018, -1.7% vs. January 2018. Nonfuel Imports: -0.2% vs. December 2018, -0.2% vs. January 2018.
Export Prices (January 2019, All Exports, not seasonally adjusted): -0.6% vs. December 2018, -0.2% vs. January 2018, Nonagricultural Exports: -0.3% vs. December 2018, -0.2% vs. January 2018.
University of Michigan Consumer Sentiment (February 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 95.5 (vs. January 2019: 91.2, vs. February 2018: 99.7).
Monthly Treasury Statement (December 2018, Deficit for first 3 months of FY19): -$318.9 billion (vs. first 3 months of FY18: -$225.0 billion).
Business Inventories (November 2018, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.981 trillion (-0.1% vs. October 2018, +4.6% vs. November 2017).

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

The Trade Deficit Narrowed in November as Exports and Imports Both Fell: Week of February 4 – 8

The trade deficit shrank in November, as had factory orders. Here are the five things we learned from U.S. economic data released during the week ending February 8.  

#1The trade deficit narrowed in November. The Census Bureau and the Bureau of Economic Analysis estimates export activity slowed $1.3 billion to $209.9 billion (+3.7 percent versus November 2017) while imports fell by $7.7 billion to $259.2 billion (+3.2 percent). The resulting trade deficit of -$49.3 billion was down $6.4 billion from October but 0.7 percent larger than that of a year earlier. The goods deficit contracted by $6.7 billion to -$71.6 billion while the services surplus shrank by $0.3 billion to +$22.3 billion. The former was the result a $7.9 billion drop in imported goods, including steep declines for consumer goods (including cell phones) and industrial supplies/oil. The U.S. had its biggest goods deficits in November with China (-$35.4 billion, down $2.8 billion from October), the European Union (-$13.8 billion), Mexico (-$6.8 billion), and Japan (-$5.7 billion).

#2Factory orders slowed for a second consecutive month in November. The Census Bureau estimates new orders for manufactured goods declined by $3.1 billion during the month to a seasonally adjusted $499.2 billion. This was 4.1 percent greater than the value of November 2017 factory orders. Transportation goods orders grew 3.0 percent, boosted by strong gains for ships/boats (+72.6 percent), defense aircraft (+31.2 percent), and civilian aircraft (+6.9 percent). Net of transportation goods, core factory orders dropped 1.3 percent following a 0.2 percent gain in October. While orders grew for fabricated and primary metals (+0.9 percent and +0.8 percent, respectively), they slowed for nondurable goods (-1.9 percent), machinery (-1.7 percent), electrical equipment/appliances (-1.1 percent), and computers/electronics (-0.3 percent). New orders for civilian capital goods orders net of aircraft (a proxy for business investment) slumped 0 6 percent in November. 

#3Service sector activity remained strong, but softened, in January. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business slipped by 1.3 points during the month to a reading of 56.7. Even with the pullback, the NMI has been above a reading of 50.0 for 108 consecutive months, indicative of an expanding service sector. Only one of the NMI’s four components grew during the month, with employment adding 1.2 points to 57.8. Shedding points from December were components for new orders (down 5.0 points to 57.7) and business activity/production (down 1.5 points to 59.7. Holding firm was the measure for supplier deliveries at a reading of 51.5. Only 11 of 18 tracked nonmanufacturing industries expanded during the month, however, with the most robust expansion reported in transportation/warehousing, health care/social assistance, and mining. The press released noted continued optimism but also stated that “[r]espondents are concerned about the impacts of the government shutdown.

#4Manufacturing sector productivity edged up during Q4 2018. The Bureau of Labor Statistics tells us that manufacturing productivity grew 1.3 percent on a seasonally adjusted annualized basis during the final three months of 2018, an improvement from Q3’s 1.1 percent gain. Manufacturing output had expanded 2.3 percent, supported by a 1.0 percent advance in hours worked. The productivity gain for the past year was much softer, with a 0.7 percent increase. During Q4, durable manufacturing productivity increased 2.6 percent while the productivity improvement for nondurable manufactured goods was 1.2 percent. (The BLS was unable to report on overall productivity for the U.S. economy due to the partial government shutdown.)

#5Consumers took on credit at a marginally slower pace in December. American households had $4.010 trillion in outstanding consumer debt (not including mortgages and other real estate-backed loans) in December, according to the Federal Reserve. This was up $16.5 billion from November (smaller than the prior month’s $22.4 billion gain) and a 12-month increase of 4.7 percent. Consumers had $1.045 trillion in outstanding revolving credit balances at the end of December, up $1.7 billion for the month and 2.0 percent from a year earlier. Nonrevolving credit balances expanded $14.9 billion to $2.966 trillion (+5.6 percent versus December 2017).

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 2, 2019, First-Time Claims, seasonally adjusted): 234,000 (-19,000 vs. previous week; +11,000 vs. the same week a year earlier). 4-week moving average: 224,750 (-1.4% vs. the same week a year earlier).
Senior Loan Officers Survey (January 2019)

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