Home Sales and Durable Goods Orders Take Steps Backward: August 20 – 24

Home sales continued to mellow this summer. Here are the five things we learned from U.S. economic data released during the week ending August 24.

#1Existing home sales slipped for a fourth consecutive month in July. The National Association of Realtors reports that sales of previously owned homes inched down 0.7 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.34 million units, its slowest sales pace since February 2016. During the four-month losing streak, home sales have declined 4.6 percent. Sales dropped during July in three of four Census regions: Northeast (-8.3 percent), Midwest, (-1.6 percent), and South (-0.4 percent). Sales gained 4.4 percent in West. Sales were 1.5 percent below that of a year earlier, with negative 12-month comparables in all four Census regions. The number of homes available for sale held relatively stable versus both June and a year earlier at 1.92 million units, the equivalent to a tight 4.3 month supply. The median sales price of $269,600 represented a 4.5 percent increase from a year earlier. The press release stressed that the supply of homes is “still not at a healthy level, and new home construction is not keeping up to meet demand.”Existing and New Home Sales July 2018 082418

#2New homes slumped for a second straight month. The Census Bureau estimates new home sales were at a seasonally adjusted annualized rate (SAAR) of 627,000 units during July, down 1.7 percent from June but still 12.7 percent ahead of the July 2017 sales pace. New home sales improved in the West (+10.9 percent) and Midwest (+9.9 percent) but fell in the Northeast (-52.3 percent) and South (-3.3 percent). There were 309,000 new homes available for sale at the end of July (+2.0 percent versus June 2018 and +12.0 percent versus July 2017), the equivalent to a 5.9 month supply. The median sales price of $328,700 was up 1.8 percent from a year earlier.

#3Volatility in aircraft purchasing led to a slowdown in durable goods orders. New orders for durable manufactured goods slumped 1.7 percent to a seasonally adjusted $246.9 billion, per the Census Bureau. Transportation goods orders fell 5.3 percent thanks to huge drops in orders for both civilian (-35.4 percent) and defense (-34.6 percent) aircraft (orders of both tend to swing widely month-to-month). Motor vehicle orders gained 3.5 percent. Orders for durable goods other than transportation orders grew 0.2 percent, with increases for computers/electronics (+1.1 percent), machinery (+0.6 percent), and primary metals (+0.3 percent). Electrical equipment/appliances orders slipped 0.2 percent. New orders for civilian capital goods net of aircraft—a measure of business investment—jumped 1.4 percent. Durable goods shipments slipped 0.2 percent during the month to $250.8 billion, with the measure gaining 0.6 percent after removing the shipments of transportation goods.

#4Employers laid off relatively few workers during the late summer. There were 210,000 first-time claims made for unemployment insurance benefits during the week ending August 18, down 2,000 claims from the week earlier and 27,000 claims from the same week a year ago. Only twice has the Department of Labor’s estimate of initial jobless claims been this low since 1969—and both times have been within the past four months. The four-week moving average of first-time claims dropped to 213,750, down 10.8 percent from a year earlier and (also) just above its 49-year low. 1.704 million people (not seasonally adjusted) were receiving some form of unemployment insurance benefits during the week ending August 4, down 11.3 percent from a year earlier

#5House prices grew at a slower rate in June. The Federal Housing Finance Agency (FHFA) indicates that its purchase-only House Price Index (HPI) grew 0.2 percent on a seasonally adjusted basis during the month. (This measure tracks sales prices of homes purchased using mortgages that were sold to or guaranteed by Fannie Mae and Freddie Mac.) The HPI increased in seven of nine Census regions, led by a 0.7 percent gain in the Mountain region, a 0.6 percent rise in the East North Central region, and a 0.5 percent bump in the Middle Atlantic. Prices declined 0.4 percent in both New England and the South Atlantic. Home prices have risen 6.5 percent over the past year, with positive 12-month comparables in all nine Census regions. The largest year-to-year percentage price gains were in the Mountain (+9.6 percent), Pacific (+7.0 percent) and South Atlantic (+6.7 percent) regions.

Other U.S. economic data released over the past week:
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Cash Registers Rang Louder in July: August 13 – 17

Retail sales expanded while growth in manufacturing slowed. Here are the five things we learned from U.S. economic data released during the week ending August 17.

#1Retail sales heated up in July. The Census Bureau estimates retail and food services sales rose 0.5 percent to a seasonally adjusted $507.5 billion. This was an improvement from the downwardly revised 0.2 percent sales gain in June. Sales grew 0.2 percent at auto dealers/parts stores and 0.8 percent at gas stations (think higher gas prices). Net of auto dealers and gas stations, core retail sales jumped 0.6 percent in July following a 0.2 percent bump in June. Sales improved during the month at apparel retailers (+1.3 percent), restaurants/bars (+1.3 percent), department stores (+1.2 percent), grocery stores (+0.8 percent), and electronics/appliance retailers (+0.1 percent). Sales lost traction at retailers focused on sporting goods/hobbies (-1.7 percent), furniture (-0.5 percent), and health/personal care (-0.4 percent). Retail sales have risen 6.4 percent over the past year while the core retail sales measure has a 12-month comparable of +5.6 percent.Retail Sales June-July 2018 081718

#2Industrial production slowed in July. The Federal Reserve reports industrial production crept up a modest 0.1 percent on a seasonally adjusted basis during the month following a 1.0 percent jump in June. Growth in manufacturing slowed to a 0.3 percent increase in July after having surged 0.8 percent during the previous month. Production of durable goods gained 0.4 percent (including increases of around 1.0 percent for motor vehicles and computers/electronics) while the output of nondurables inched up 0.2 percent (with higher output of apparel, petroleum/coal products, chemicals, and plastics/rubber products). Mining output, which has surged 12.9 percent over the past year, slipped 0.3 percent during July (even as oil and gas extraction continued to rise). Utility output slowed for the third straight month with a 0.5 percent decline.

#3Forward-looking economic indicators further strengthened in July. The Conference Board’s Leading Economic Indicators (LEI) jumped by 7/10ths of a point to 110.7 (2016=100). This was an improvement from the 6/10ths of a point gain in June and leaves the LEI 5.1 percent ahead of its year-ago reading. July’s increase was broad-based as nine of the LEI’s ten components made positive contributions, led by the count of jobless claims staying near multi-decade lows. The coincident index grew by 2/10ths of a point to 104.2, a 2.4 percent increase from a year earlier as all four components made positive contributions. The lagging index slipped by 2/10ths of a point to 105.2 with only two of seven components growing during the month. The backward-looking measure was still 2.3 percent above its July 2017 mark. The press release noted that the LEI’s reading indicates economic growth will be “at a solid pace for the remainder of this year.”

#4Housing starts sputtered during July. Housing starts edged up 0.9 percent to a seasonally adjusted annualized rate of 1.168 million units, per the Census Bureau. This was a weak rebound to June’s 12.9 percent drop and left housing starts 1.4 percent below the July 2017 pace. Starts of single-family home gained 1.9 percent while those of construction with more five or more units increased 3.1 percent. Starts weakened in the West (-19.6 percent) and Northeast (-4.0 percent) but improved in both the Midwest (+11.6 percent) and South (+10.4 percent). Looking towards the future, the annualized rate of issued building permits grew 1.5 percent during the month to 1.311 million permits (+4.2 percent versus July 2017). Issued permits increased for both single-family (+1.9 percent) and multi-family (+1.7 percent). Fewer homes were completed during the month—the annualized count of homes completed slumped 1.7 percent to 1.188 million units (-0.8 percent versus July 2017). Single-family home completions plummeted 5.2 percent during the month while multi-family completions gained 8.2 percent.

#5Small business owner optimism inches ever so close to a 35-year high. The Small Business Optimism Index added 7/10ths of a point in July to a seasonally adjusted reading of 107.9 (1986=100). This was not only a 2.7 point gain from a year earlier, it was the measure’s best reading since July 1983 (which itself was the best reading for the National Federation of Independent Business index in its 45-year history). Six of the ten index components improved from their June readings, including three-point gains for indices tracking expected real sales, plans to increase employment, and whether it is a good time to expand. Only two measures—current inventories and plans to increase inventories—declined from their June readings. The press release notes that business owners “anticipate more sales and better business conditions.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 11, 2018, First-Time Claims, seasonally adjusted): 212,000 (-2,000 vs. previous week; -24,000 vs. the same week a year earlier). 4-week moving average: 215,500 (-10.5% vs. the same week a year earlier).
Import Prices (July 2018, All Imports, not seasonally adjusted): Unchanged vs. June 2018, +4.8% vs. July 2017. Nonfuel imports:  -0.3% vs. June 2018, +1.3% vs. July 2017.
Export Prices (July 2018, All Exports, not seasonally adjusted): -0.5% vs. June 2018, +4.3% vs. July 2017. Nonagricultural imports: Unchanged vs. June 2018, +5.0% vs. July2017.
Housing Market Index (August 2018, Index (>50=”Good” housing market, seasonally adjusted): 67 (vs. July 2018: 68, vs. August 2017: 67).
Productivity (2018 Q2-preliminary, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): +2.9% vs. 2018Q1 +1.3% vs. 2017Q2.
State Employment (July 2018, Change in Nonfarm Payrolls, seasonally adjusted): Vs. June 2018: Increased in 6 states, decreased in 1, and essentially unchanged 43 states and the District of Columbia. Vs. July 2017: Increased in 34 states and essentially unchanged in 16 states and the District of Columbia
University of Michigan Surveys of Consumers (August 2018-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 95.3 (July 2018: 97.9 August 2017: 96.8).
Treasury International Capital Flows (June 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$45.5 billion (vs. May 2018: +$20.3 billion, vs. June 2017: +$35.5 billion).

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

Prices and Job Openings Remain Firm: August 6 – 10

Inflation continued to take hold, albeit still at a moderate rate. Here are the five things we learned from U.S. economic data released during the week ending August 10.

#1Consumer prices have risen 2.9 percent over the past year. The Bureau of Labor Statistics indicates the Consumer Price Index (CPI) grew a seasonally adjusted 0.2 percent during July, up from June’s 0.1 percent bump but matching April and May gains of 0.2 percent. Energy prices pulled back for a second consecutive month (-0.5 percent), with declines reported for gasoline (-0.6 percent), utility delivered gas (-0.5 percent), and electricity (-0.4 percent). Food CPI inched up 0.1 percent. Net of energy and food, core CPI grew 0.2 percent for the fifth time in six months. Rising were prices for used cars/trucks (+1.3 percent), transportation services (+0.5 percent), new vehicles (+0.3 percent), shelter (+0.3 percent), and medical care services (+0.1 percent). Prices dropped for medical care commodities (-1.1 percent) and apparel (-0.3 percent). Over the past year, CPI has risen 2.9 percent, its largest 12-month comparable in more than six years. The core measure has jumped 2.4 percent since last July, its largest 12-month comparable since September 2008. Both increases portend the Federal Reserve raising its short-term interest rate target at its upcoming September meeting.CPI 2008-2018 081018.png

#2While pausing in July wholesale prices were 3.3 percent ahead of their year-ago levels. Final demand Producer Price Index (PPI) was unchanged during the month on a seasonally adjusted basis, according to the Bureau of Labor Statistics. This followed gains in May and June of +0.5 percent and +0.3 percent, respectively. The core measure of wholesale prices, removing the impact of energy, food, and trade services, gained 0.3 percent during July. PPI for final demand good eked out a 0.1 percent gain as prices for both energy (-0.5 percent) and food (-0.1 percent) both dropped. PPI for core goods increased 0.3 percent for the sixth time in seven months (pharmaceutical preparations jumped 0.7 percent). Losing ground during July was PPI for final demand services, slipping 0.1 percent. Trade services PPI, a measure of retailer and wholesaler margins, slumped 0.8 percent. Over the past year, final demand PPI has risen 3.3 percent (just under its biggest increase since 2011) while the core measure has a 12-month comparable of +2.8 percent (its highest mark since March).

#3There remained more job openings than people seeking work in June. Per the Bureau of Labor Statistics, employers had a seasonally adjusted 6.662 million job openings at the end of the month, essentially matching the count from the end of May and up 8.8 percent from the same month a year earlier. Further, this was greater than the 6.564 million people the BLS had estimated were unemployed during the same month. Private sector employers had 6.053 million job openings at the end of June, up 8.6 percent from June 2017. Industries with the particularly sizeable year-to-year percentage gains in job openings included construction (+30.2 percent), retail (+29.7 percent), transportation/wholesale (+25.3 percent), manufacturing (+17.3 percent), and accommodation/food services (+9.7 percent). Hiring slowed by 104,000 to 5.651 million workers, which paced 3.4 percent ahead of year-ago hiring. Private sector employers hired 5.303 million workers during June, up 3.4 percent from a year earlier. 5.502 million people left their jobs during the month, up 83,000 from May and 3.9 percent from June 2017. 3.402 million voluntarily departed their jobs during the month (+7.5 percent versus June 2017) while 1.723 million people were laid off (-2.8 percent versus June 2017).

#4Consumers slowed the rate of them taking on debt. The Federal Reserve estimates that the American public held a seasonally adjusted $3.908 trillion in outstanding debt (not counting mortgages or other real estate-backed debt) at the end of June, a $10.2 billion increase for the month and up 4.7 percent from a year earlier. As a matter of context, consumer debt holdings had grown by $24.3 billion during May. All June’s gain came in the form of nonrevolving debt (e.g., college loans, auto loans), rising by $10.4 billion to $2.869 trillion (4.7 percent versus June 2017). Revolving credit (i.e., credit card) balances essentially held steady at $1.039 trillion (+4.8 percent June 2017).

#5The federal budget deficit is more than 20 percent larger than what it was this time last year. The Bureau of the Fiscal Service, a part of the Department of the Treasury, reports that the U.S. government had a budget deficit of $76.9 billion during July. This was up $2.0 billion from June and 79.0 percent from the same month a year earlier. Tax receipts totaled $225.3 billion while outlays were at $302.1 billion.  More notable is that the budget deficit generated over the first ten months of FY2018—$684.0 billion—was 20.8 percent greater than that of the first ten months of FY2017. Receipts over this time period were up a mere 1.0 percent while expenditures rose 4.4 percent. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 4, 2018, First-Time Claims, seasonally adjusted): 213,000 (-6,000 vs. previous week; -39,000 vs. the same week a year earlier). 4-week moving average: 214,250 (-11.3% vs. the same week a year earlier).
Wholesale Trade (June 2018, Wholesale Inventories, seasonally adjusted): $632.4 billion (+0.1% vs. May 2018, +5.1% vs. June 2017).
Senior Loan Officer Opinion Survey on Bank Lending 

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