More data, including from the housing sector, point towards a slowdown. Here are the five things we learned from U.S. economic data released during the week ending October 21.
Forward-looking economic measures portend a contraction. The Conference Board’s Leading Economic Index (LEI) dropped 0.4 percent in September to a reading of 115.9 (2016=100). The LEI has fallen 2.8 percent over the past six months. Only five of ten LEI components made positive contributions to the measure, led by jobless claims and the interest rate spread. The coincident index advanced 0.2 percent in September (and 0.9 percent over the past six months) to 108.9. All four coincident index components made positive contributions. The lagging index grew 0.6 percent to a reading of 116.2 (+4.1 percent over the past six months). The press release said the data “suggests a recession is increasingly likely before yearend.”
Sales of previously owned homes slumped for the eighth straight month. Existing home sales declined 1.5 percent in September to a seasonally adjusted annualized rate (SAAR) of 4.71 million units. The National Association of Realtors measure was 23.8 percent below year-ago levels. Sales fell in three of four Census regions, with transactions steady in the West. Inventories remained tight, declining 2.3 percent to 1.25 million homes (the equivalent to a 3.2-month supply). The median sales price of $384,800 was up 8.4 percent from a year earlier.
Housing starts also slowed in September. The Census Bureau estimates starts of privately-owned homes dropped 8.1 percent to a seasonally adjusted annualized rate (SAAR) of 1.439 million units. Starts were 7.7 percent below year-ago levels. Single-family home starts declined 4.7 percent, while those for multi-family units plummeted 13.1 percent. Looking towards the future, issued building permits increased 1.4 percent during the month to an annualized 1.564 million units (-3.2 percent versus September 2021). Permits for single-family homes dropped 3.1 percent and those for multi-family units jumped 8.2 percent. New home completions rose 6.1 percent to an annualized 1.427 million units (+1.57 percent versus September 2021).
Homebuilder confidence deteriorated further in October. The National Association of Homebuilders’ Housing Market Index (HMI) shed eight points to a seasonally adjusted reading of 38. A reading below 50 indicates that more homebuilders see the market as “poor” than “good.” The HMI has not been this lowest since the early months of the pandemic (May 2020). The HMI fell in the Midwest (38), South (41), and West) but inched up in the Northeast (48). Also declining were measures for present sales (down nine points to 45), expected sales (down 11 points to 35), and traffic of prospective buyers (down six points to 25). The press release claimed that 2022 “will be the first year since 2011 to see a decline for single-family starts.”
Manufacturing activity edged up in September. The Federal Reserve estimates manufacturing production grew a seasonally adjusted 0.4 percent, matching its August increase. Durable and nondurable goods production increased by 0.5 percent and 0.3 percent, respectively. Manufacturing output has risen 4.7 percent over the past year. Overall industrial production gained 0.4 percent in September and was 5.3 percent ahead of year-ago levels. Mining output increased 0.6 percent during the month, while the same at utilities slipped 0.3 percent. Manufacturing factory utilization of 80.0 percent was above the 1972-2021 average of 78.2 percent.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending October 15, 2022, First-Time Claims, seasonally adjusted): 214,000, -12,000 vs. the previous week, -89,000 vs. the same week a year earlier). 4-week moving average: 212,250 (-36.7% vs. the same week a year earlier).
- State Employment (September 2022, Nonfarm Employment, seasonally adjusted): Vs. Increased in 9 states, decreased in 1 state, and unchanged in 40 states and the District of Columbia. Vs. September 2021: Increased in 49 states and the District of Columbia and unchanged in 1 state.
- Monthly Treasury Statement (September 2022, FY2022 Budget Deficit): -$1.375 trillion (-50.4% vs. FY2021).
- Treasury International Capital (August 2022, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$185.0 billion (July 2022: -$11.9 billion; August 2021: +$82.3 billion).
- Beige Book
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What We Learned About the U.S. Economy Last Week 