Signs Point to Sluggish Growth: January 20 – 24

Late 2019 data–except for housing–fails to impress. Here are the five things we learned from U.S. economic data released during the week ending January 24.

#1Forward-looking economic data point to soft economic growth in 2020. The Conference Board’s Leading Economic Index (LEI) shed 3/10ths of a point in December to a reading of 111.2 (2016=100). This was the LEI’s fourth drop in five months and left the measure just 0.1 percent above its December 2018 reading. Five of ten LEI components made positive contributions, led by stock market gains. The coincident index edged up 1/10th of a point to 107.2, a 1.2 percent increase from a year earlier. Three of four coincident index components gained in December, led by nonfarm payrolls. The lagging index, however, shed 1/10th of a point to 108.8, with only two of seven components advancing. The lagging index has increased 2.3 percent over the past year. The press release noted “positive” financial conditions and consumer outlook “should support growth of about two percent through early 2020.”

#2Business activity sputtered in December. The Chicago Fed National Activity Index (CFNAI) plummeted by 76-basis points during the month to a reading of -0.35. (A reading of 0.00 is indicative of the U.S. economy expanding at its historical average.) Only 25 of the 85 economic indicators that comprise of the CFNAI made a positive contribution to the measure with the other 60 pulling down the index. Among the four major categories of CFNAI components, three dragged down the measure: production (made a negative 26-basis point contribution), employment (made a six-basis point negative contribution), and sales/orders/inventories (made a negative five-basis point contribution). Personal consumption/housing components added three-basis points to the headline index. The CFNAI’s three-month moving average improved by eight-basis points to -0.23, indicative of below-average economic growth.

#3Sales of previously owned homes rose to a two-year high in December. The National Association of Realtors estimates existing home sales jumped 3.6 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.54 million units. This was 10.8 percent ahead of the year-ago sales pace and its highest level since March 2018. Sales grew in three of four Census regions—Northeast (+5.7 percent), South (+5.4 percent), and West (+4.6 percent)—but declined 1.5 percent in the Midwest. Sales were ahead of their year-ago levels in all four Census regions, including double-digit percentage gains in both the South (+12.4 percent) and West (+10.7 percent). The press released noted that “[l]ow inventory remains a problem.” In fact, the already tight inventory of homes on the market constricted even further during the month. The 1.40 million homes on the market at the end of December—a mere 3.0 month supply—represented a 14.6 percent decline from November and 8.5 percent drop from a year earlier.

#4Home price growth mellowed in November. The Federal Housing Finance Agency’s House Price Index (HPI) grew 0.2 percent during the month, its smallest single-month increase since June. The index, which measures transaction prices of previously owned homes purchased with a conforming loan, grew in eight of nine Census regions. Home prices jumped 0.8 percent in the East North Central region but slipped 0.1 percent in the Mountain region. The HPI has risen 4.9 percent over the past year, with the most significant 12-month comparables in the Mountain (+6.3 percent) and East North Central (+5.5 percent) regions.

#5Only three states enjoyed a substantial payroll gain in December. The Bureau of Labor Statistics reports that only Texas (+29,800), Washington state (+10,900), and Arkansas (+5,400) enjoyed substantial payroll increases during the month. Nonfarm payrolls mostly held steady in the other 47 states and the District of Columbia. (We learned a few weeks ago that nonfarm payrolls expanded by a seasonally adjusted 145,000 during December.) In comparison to December 2018, payrolls grew in 26 states but held steady in the other 24 states and the District of Columbia. The states with the largest year-to-year percentage payroll increases were Utah (+3.1 percent), Idaho (+2.9 percent), and Arizona (+2.8 percent). 

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 18, 2020, First-Time Claims, seasonally adjusted): 211,000 (+6,000 vs. previous week; Unchanged vs. the same week a year earlier). 4-week moving average: 213,250 -3.1% vs. the same week a year earlier).

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