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.

As 2017 Ends, Jobless Claims Remain Low and Sentiment Eases: December 25 – 29

Employers issued relatively few pink slips during the final days of the year. Here are the five things we learned from U.S. economic data released during the week ending December 29.

#1First-time jobless claims remained near a 40+ year low as 2017 wrapped up. The Department of Labor reports that there were a seasonally adjusted 245,000 initial claims made for unemployment insurance benefits during the week ending December 23. This was unchanged from the week before and 13,000 below the number of first-time claims from the same week a year earlier. More remarkable, the jobless count has been below 300,000 claims every week since March 21,2015, with the measure remaining for much of 2017 near levels not consistently seen since 1973(!). The four-week average of first-time claims inched up by 1,750 to 237,750 claims. This was 7.2 percent below the moving average from a year ago. During the week ending December 9, 2.004 million people were receiving some form of unemployment insurance benefits, 6.4 percent below that a year earlier.First-Time Jobless Claims-2007-2017-122917

#2Another second measure of consumer sentiment eased during December. The Conference Board’s Consumer Confidence Index lost 6.5 points during the month to a seasonally adjusted 122.1 (1985=100). This was up from the 113.3 reading from December 2016. The decline occurred despite survey respondents growing slightly more confident about current business conditions—the present conditions index added 1.7 points during the month to 156.6. The expected conditions index, however, plummeted by 11.9 points to 99.1. 35.7 percent of survey respondents report that jobs are “plentiful” while 15.2 percent report them being “hard to get,” with the latter being a 16-year low. The press release noted that “consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.” During the previous week, we learned that the University of Michigan’s Index of Consumer Sentiment had lost 2.6 points to a seasonally adjusted reading of 95.9 (1966Q1=100).

#3Home purchase contract signings inched up during November. The Pending Home Sales Index (PHSI) from the National Association of Realtors added 2/10ths of a point during the month to a seasonally adjusted reading of 109.5. This was the PHSI’s highest point since June. The index jumped 4.1 percent in the Northeast and edged up 0.4 percent in the Midwest while pulling back modestly in both the West (-1.8 percent) and South (-0.4 percent). The PHSI has grown 0.8 percent over the past year, with positive 12-month comparables in the South (+2.0 percent), Northeast (+1.1 percent), and Midwest (+0.8 percent). Meanwhile, contract signings to purchase a previously owned home in the West were 2.3 percent below that of a year earlier. While the press release notes that the “housing market is closing the year on a stronger note,” it warned that potential buyers were being “stifled by tight supply and higher prices.”

#4Home prices continued to rise in October. The 20-city Case-Shiller Home Price Index grew 0.2 percent without seasonal adjusted and jumped 0.7 percent after adjustments for seasonal variation. The measure of home prices has risen 6.4 percent over the past year, putting the index just 1.3 percent below its pre-recession peak back in 2006. The index gained on a seasonally adjusted basis in all 20-tracked markets with increases greater than 1.0 percent in Las Vegas (+1.4 percent) and San Francisco (+1.2 percent). The press release states that rising home prices have been the result of “low interest rates, low unemployment and continuing economic growth” but also notes that higher prices are making renting “more attractive than buying.” 

#5Agricultural prices jumped in November. The Department of Agriculture reports that the prices received by farmers swelled 4.2 percent during the month, its first monthly gain since May. The measure has increased 9.1 percent since November 2016. The prices received for livestock production surged 8.1 percent (and was up 18.0 percent from the same month a year earlier), as poultry & egg prices jumped 15.0 percent and that of metal animals grew 7.2 percent. Dairy product prices increased 1.0 percent. Meanwhile, prices received for crop production slumped 1.0 percent during November but was still 1.1 percent above the prices received a year earlier. Prices fell for vegetables/melons (-6.1 percent) and grain/oilseed (-3.5 percent) but gained 1.4 percent for fruit/tree nuts.

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

Q4 GDP Revised Upward, Consumer Confidence Further Firms. What We Learned During the Week of March 27 – 31

The U.S. economy ended 2016 a bit stronger than previously thought, while consumer sentiment continued to brighten for many Americans during March. Here are the 5 things we learned from U.S. economic data released during the week ending March 31.

#1The “final” revision to Q4 2016 GDP indicates a slightly healthier economy that previously believed. The Bureau of Economic Analysis now places the seasonally adjusted annualized growth rate of the Gross Domestic Product (GDP) at a solid, if not particularly great, +2.1 percent. This was an improvement from the 1.9 percent increase previously reported over the past two months, mainly the result of higher estimates for personal spending and private inventory accumulation. What did not change was that the GDP components that positively contributed to economic growth during the quarter were personal consumption expenditures (adding 240-basis points to GDP growth), the change in private inventories (+101-basis points), residential fixed investment (+35-basis points), nonresidential fixed investment (+11-basis points), and government expenditures (+3-basis points). Holding back GDP growth were a rise in imports (costing 127-basis points in GDP growth) and a decline in exports (costing 55-basis points in GDP growth). Meanwhile, corporate profits inched up 0.5 percent during Q4 to a seasonally adjusted annualized rate of $2.150 trillion (+9.3 percent vs. Q4 2015). We will get the first estimate of Q1 2017 GDP on April 28.

#2“Real” personal spending slipped for a second straight month. The Bureau of Economic Analysis reports that personal consumption expenditures (PCE) adjusted for inflation (using 2009 chained dollars) inched down 0.1 percent during February, leaving the measure of consumer spending 2.6 percent above that of a year earlier. Real spending on goods increased 0.1 percent during the month, with expenditures on durable goods off 0.1 percent and that on nondurables up 0.1 percent. Moderate winter weather lowered demand for utilities, which led to a 0.1 percent decline in spending on services. Over the past year, real spending on goods has grown 4.4 percent while that on services was up 1.8 percent. Without price adjustments, personal spending increased 0.1 percent during the month, funded by a 0.4 percent increase in nominal personal income. Disposable personal income grew 0.3 percent, with the gain shrinking to 0.2 percent after adjustments for inflation. Real disposable income was 2.3 percent above that of February 2016. The saving rate grew by 2/10ths of a percentage point to +5.6 percent. Finally, inflation moves ever slowly closer to the Federal Reserve’s two percent target rate. The PCE deflator, a measure of inflation, grew 0.1 percent during February and was up 2.1 percent from a year earlier. Net of energy and food, the PCE deflator increased 0.2 percent during February with a 12-month comparable of +1.8 percent.GDP-Growth-2013-2016-033117

#3Consumers grew more confident during March. The Conference Board’s Consumer Confidence Index surged 9.5 points during the month to a seasonally adjusted reading of 125.6 (1985 = 100). This was measure’s best reading in more than 16 years. Survey respondents’ views of both current and future business conditions improved significantly from February, with the present conditions index adding 9.7 points to 143.1 and the expectations index rising by 9.9 points to 143.1. A closer glance at the data finds 32.2 percent of respondents characterizing current business conditions as “good” (versus 12.9 percent saying they were “bad”) while 31.7 percent claimed that jobs were “plentiful” (versus 19.5 percent saying they were “hard to get”). The press release noted that “consumers feel current economic conditions have improved over the recent period, and their renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months.”

While the University of Michigan’s Index of Consumer Sentiment added 6/10ths of a point to a seasonally adjusted reading of 96.9 (1966Q1 = 100), the press release noted a sharp partisan divide in views of economic conditions. “Democrats expect an imminent recession, higher unemployment, lower income gains, and more rapid inflation, while Republicans anticipate a new era of robust growth in incomes, job prospects and lower inflation.” Only a quarter of Democrats expect their personal finances will improve over the next five years, compared to 83 percent of Republicans who are anticipating the same. Two-thirds of Democrats expect “renewed economy-wide downturns” while only 13 percent of Republicans fear of the same. During the month, the current conditions index added 1.7 points to a reading of 113.2 (+7.2 percent versus March 2016) while the expectations index held steady at 86.5 (+6.1 percent versus March 2016).

#4Pending home sales sharply increased in February. The National Association of Realtors’ Pending Home Sales Index jumped 5.5 percent during the month to a reading of 112.3 (2001 = 100). This was up 2.6 percent from a year earlier and the second-highest reading since 2006 (the highest reading having occurred last April). The index, which measures the number of contracts signed to purchase a previously owned home, grew during the month in all four Census regions: Midwest (+11.4 percent), South (+4.3 percent), Northeast (+3.4 percent), and West (+3.1 percent). The press release links the rise in the index to “[t]he stock market’s continued rise and steady hiring in most markets,” along with moderate winter weather bringing homebuyers into the market.

#5Agricultural prices rose in February. The U.S. Department of Agriculture reports that its prices received by farmers index increased 6.1 percent during the month to a reading of 91.7 (2011 = 100). This was 0.9 percent below the February 2016 reading. Crop prices jumped 10.0 percent during the month, led by significant prices increases for vegetables/melons, fruit/tree nuts, and grains/oilseed. The measure has risen 3.5 percent over the past year. Prices for livestock production slipped 0.5 percent during February and was 3.2 percent below their year ago readings. Prices fell for poultry/eggs and dairy but increased for meat animals.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 25, 2017, First-Time Claims, seasonally adjusted): 258,000 (-3,000 vs. previous week; -17,000 vs. the same week a year earlier). 4-week moving average: 254,250 (-5.1% vs. the same week a year earlier).

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