Home Sales Slow, the Federal Budget Deficit Widens: October 21 – 25

Home sales and durable goods orders each mellowed in September. Here are the five things we learned from U.S. economic data released during the week ending October 25.

#1Existing home sales pulled back in September. The National Association of Realtors reports that sales of previously owned homes slowed 2.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.38 million units. Sales declined in all four Census regions: Midwest (-3.1 percent), Northeast (-2.8 percent), South (-2.1 percent), and West (-0.9 percent). Even with the drop, existing home sales were up 3.9 percent from a year earlier, with positive 12-month comparables in three of four Census regions (sales in the Midwest matched that of a year earlier). Holding steady were inventories of unsold homes, with the 1.83 million available homes translating into a tight 4.1 month supply. The median sales price of $272,100 was up 5.9 percent from a year earlier. The press release says home prices are “rising too rapidly” because of “the housing shortage.”

#2…As had transactions of new homes. Sales of newly constructed single-family homes decreased 0.7 percent during September to a seasonally adjusted annualized rate of 701,000 units. The Census Bureau metric fell in three of four regions—West, Northeast, and South—but grew in the Midwest. Despite September’s decline, new home sales were 15.5 percent ahead of year-ago levels, with only the Midwest experiencing a negative year-to-year comparable. There was a 5.5 month supply of new homes on the market at the end of the month, equaling 321,000 units.

#3Durable goods orders fell in September. The Census Bureau estimates new orders fell 1.1 percent to a seasonally adjusted $248.2 billion. Transportation orders plummeted 2.7 percent, pulled down by slumps for civilian aircraft (-11.8 percent) and motor vehicles (-1.6 percent). Net of transportation goods, core durable goods fell 0.3 percent. Orders improved for electrical equipment/appliances (+0.9 percent), primary metals (+0.3 percent), and machinery (+0.2 percent). Declining were orders for fabricated metal orders (-1.5 percent), computer/electronics (-0.9 percent), and civilian non-aircraft capital goods (-0.5 percent).

#4Consumer sentiment stabilized in October. The Index for Consumer Sentiment, from the University of Michigan, added 3.3 points during the month to a seasonally adjusted 95.5 (1966Q1=100). This was the measure’s best reading since July, although it was a half-point below the preliminary October reading reported a few weeks ago. The advance during the month was primarily the product of an improved view of current conditions, adding 4.7 points to 113.2. The expectations index grew by a smaller 8/10ths of a point to 84.2. The press release noted fewer survey respondents included tariffs in their comments (27 percent of October survey respondents versus 36 percent in September).

#5The federal budget deficit soared in FY2019. The Bureau of the Fiscal Service reports that the U.S. government raised $3.462 trillion in revenue during the just-completed fiscal year, up 4.0 percent from FY2018. But expenses rose 8.2 percent during the same 12-month period to $4.447 trillion. The resulting budget deficit of -$984.4 billion was up 26.4 percent from a year earlier and its highest point in seven years. On the revenue side, personal tax receipts increased 2.0 percent, corporate tax collections grew 12.5 percent, and tariff duties jumped 71.4 percent. On the expense side, substantially growing line items included those tied to the military, education, health and human services, and debt service.deficits 2005-2019 102519

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 19, 2019, First-Time Claims, seasonally adjusted): 212,000 (-6,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 215,000 (-0.1% vs. the same week a year earlier).
FHFA House Price Index (August 2019, Purchase-Only Index, seasonally adjusted): +0.2% vs. July 2019, +4.6% vs. August 2018.

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

Hitting More Speed Bumps: October 14 – 18

Last week’s data characterize an economy without much forward momentum. Here are the five things we learned from U.S. economic data released during the week ending October 18.

#1Retail sales sputtered in September. The Census Bureau places U.S. retail and food services at a seasonally adjusted $525.6 billion down 0.3 percent for the month but 4.1 percent ahead from a year earlier. This followed sales jumping 0.6 percent during August. Sales fell 0.9 percent at auto dealers and parts stores and decreased 0.7 percent at gas stations (as gas prices mellowed). Net of auto dealers/parts stores and gas stations, core retail sales held steady in September and were up 4.5 percent from a year earlier. Sales grew during the month at stores focused on apparel (+1.3 percent), health/personal care (+0.6 percent), and furniture (+0.6 percent). Sales declined at department stores (-1.4 percent), building materials/garden retailers (-1.0 percent), grocery stores (-0.1 percent), and sporting goods/hobby retailers (-0.1 percent).

#2Manufacturing output dropped in September. The Federal Reserve reports that manufacturing production slowed by a half-percentage point on a seasonally adjusted basis during the month, taking back most of August’s 0.6 percent gain. Production of durable goods fell 0.7 percent (hurt by the now tentatively settled GM strike) while nondurables output suffered a smaller 0.2 percent drop. Manufacturing production was 0.9 percent below year-ago levels. Overall industrial production fell 0.4 percent during the month and was 0.1 percent under that of a year earlier. Mining output slumped 1.3 percent as crude oil extraction and well drilling slowed. Production at utilities bloomed 1.4 percent as warm weather increased electricity demand. 

#3Forward-looking economic indicators suggest weakness in the U.S. economy. The Conference Board’s Leading Economic Index (LEI) shed 1/10th of a point during September to a reading of 111.9 (2016=100). This left the LEI up a mere 0.4 percent for the past 12 months. Five of ten LEI improved during the month, led by stock prices, but measures tied to manufacturing orders, building permits, and the interest rate spread weighed on the measure. The coincident index held steady during the month at 106.4, up 1.5 percent from September 2018. Three of four coincident index components improved during the month, led by nonfarm payrolls. The lagging index added 1/10th of a point to 108.3, leaving the measure 3.2 percent ahead of its year-ago mark, as three of seven components advanced in September. The press release noted that “[t]he LEI reflects uncertainty in the outlook and falling business expectations” and predicts slow growth into 2020.

#4 Housing starts slowed in September. The Census Bureau estimates housing starts dropped 9.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.256 million. Even with the decline, starts remained 1.6 percent ahead of the year-ago pace. The slump was on the multi-family unit side, where starts plummeted 28.3 percent. Single-family home starts grew 0.3 percent in September for its fourth straight monthly increase. Looking towards the future, the annualized count of issued housing permits fell 2.7 percent during the month to 1.387 million, although permits for single-family homes inched up 0.8 percent. Housing completions slumped 9.7 percent during the month to an annualized 1.139 million units.

#5…But homebuilders grew more confident in October. The National Association of Homebuilder’s Housing Market Index (HMI) added three points in October to a seasonally adjusted reading of 71, its highest mark since February 2018. The HMI has remained above a reading of 50—indicative of more homebuilders seeing the housing market as “good” versus being “poor”—for 64 consecutive months. The HMI rose in the South and West, but lost ground in the Northeast and Midwest. Rising during October were HMI components for current sales of single-family homes (up three points to 78), expected sales (up six points to 76), and traffic of prospective buyers (up four points to 54). The press release linked recent improvements in sentiment to “low mortgage rates, solid job growth and a reduction in new home inventory.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 12, 2019, First-Time Claims, seasonally adjusted): 214,000 (+4,000 vs. previous week; -1,000 vs. the same week a year earlier). 4-week moving average: 214,750 (+0.2% vs. the same week a year earlier).
State Employment (September 2019, Nonfarm Payrolls, seasonally adjusted): Vs. August 2019: Payrolls grew in 3 states, decreased in 2 states, and essentially remained the same in 45 states and the District of Columbia. Vs. September 2018: Payrolls grew in 27 states and essentially remained the same in 23 states and the District of Columbia.
Business Inventories (August 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.042 trillion (unchanged vs. July 2019, +4.2% vs. August 2018).
Treasury International Capital Flows (August 2019, Net Foreign Purchases of Domestic Securities, not seasonally adjusted): -$41.9 billion (vs. July 2019: +$72.2 billion, vs. August 2018: +$77.1 billion).
Beige Book

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

Tame Inflation in September: October 7 – 11

The running theme of last week’s economic data was softness. Here are the five things we learned from U.S. economic data released during the week ending October 11.

#1Consumer prices held steady in September. The Consumer Price Index (CPI) failed to increase for the first time since January and was up by “only” 1.7 percent over the past year, per the Bureau of Labor Statistics. Food prices edged up 0.1 percent while energy prices fell 1.4 percent (gasoline prices: -2.4 percent versus September 2018). Net of food and energy, core CPI grew 0.1 percent, its smallest increase since May. Despite the softness, the core measure has risen 2.4 percent over the past year. Prices jumped 0.4 percent for health care services and 0.3 percent for shelter and transportation services. Prices slumped for used trucks/cars (-1.6 percent), health care commodities (-0.6 percent), apparel (-0.4 percent), and new vehicles (-0.1 percent).

#2…While wholesale prices slid. The Producer Price Index (PPI) for final demand fell 0.3 percent on a seasonally adjusted basis in September, its biggest decline since January. The Bureau of Labor Statistics’ core measure—which removes food, energy, and trade services—held steady during the month after rising 0.4 percent in August. Wholesale energy prices fell 2.5 percent versus August (gasoline: -7.2 percent), while food prices increased (boosted in part by higher meat prices). Core goods prices slipped 0.1 percent. Over the past year, PPI has risen 1.4 percent while the core measure also remained below the two percent target at +1.7 percent.

#3The number of available jobs fell to a 1.5-year low in August. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 7.051 million open jobs at the end of the month, down 123,000 from July and 4.0 percent from a year earlier. (Some context: even with the drop, the number of openings remained quite strong by historical standards.) The private sector was responsible for 6.320 million job openings, off 4.4 percent from August 2018 levels. Weighing down the number of job openings were year-to-year drops in wholesale trade (-17.9 percent), financial activities (-16.3 percent), accommodation/food services (-10.7 percent), professional/business services (-8.4 percent), retail (-8.2 percent), and manufacturing (-3.4 percent). Hiring also slowed—falling by 199,000 jobs to 5.779 million (-0.8 percent versus August 2018)—as did separations, with 228,000 fewer people departing their jobs in August (and off 2.4 percent from a year earlier). The count of people leaving their jobs—a proxy for workers’ confidence in the labor market—slowed by 142,000 during the month (but still 1.5 percent ahead of the year-ago pace) to 3.526 million. Layoffs, however, were essentially unchanged for the month at 1.787 million (-1.2 percent versus August 2018).

#4Small business owner sentiment moderated slightly in September. The Small Business Optimism Index, from the National Federation of Independent Business, shed 1.3 points during the month (after losing 1.8 points in August) to a seasonally adjusted 104.7 (1986=100). The measure was 6.1 points below its year-ago mark. Seven of the ten index’s components fell during the month, led by declines on whether it is a good time to expand, plans to increase employment, and expectations for the economy to improve. The press release noted that the index remained at high levels but that the tariffs were “adversely affecting many small firms.”

#5Growth in consumer credit slowed as summer ended. The Federal Reserve reports that consumer had a seasonally adjusted $4.141 trillion in outstanding debt balances at the end of August, up $17.9 billion for the month and 5.0 percent over the past year. This was down from the $23.0 billion increase in July. (These figures do not include mortgages and other real estate-backed debt). Outstanding balances of nonrevolving credit (e.g., auto and student loans) expanded by $19.9 billion to $3.062 trillion (+5.5 percent versus August 2018). Contracting, however, were revolving credit balances (e.g., credit cards), which shrank by $2.0 billion to $1.079 trillion (+3.8 percent versus August 2018).

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 5, 2019, First-Time Claims, seasonally adjusted): 210,000 (-10,000 vs. previous week; -2,000 vs. the same week a year earlier). 4-week moving average: 213,750 (+0.1% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (October 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 96.0 (vs. September 2019: 93.2, vs. October 2018: 98.6).
Import Prices (September 2019, All Imports, not seasonally adjusted): +0.2% vs. August 2019, -1.6% vs. September 2018. Nonfuel Imports: -0.1% vs. August 2019, -1.1% vs. September 2018.
Export Prices (September 2019, All Exports, not seasonally adjusted): -0.2% vs. August 2019, -1.6% vs. September 2018. Nonagricultural Exports: -0.1% vs. August 2019, -1.9% vs. September 2018.
Wholesale Trade (August 2019, Merchant Wholesalers Inventories, seasonally adjusted): +0.2% vs. July 2019, +6.2% vs. August 2018.
FOMC Minutes

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