Increased Economic Activity, Decreased Durable Goods Orders: December 23 – 27

The U.S. economy expanded more quickly in November, but durable goods orders faltered. Here are the five things we learned from U.S. economic data released during the week ending December 27.

#1Economic activity accelerated in November. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators, soared by 132-basis points during the month to its best reading since February 2018: +0.56. Fifty of the 85 indicators made positive contributions to the CFNAI, with 64 measures improving from their October marks. All four major categories of indicators grew in November. Still, the most significant gains came from indicators tied to production (making a +0.49 contribution to the CFNAI) and employment (making a +0.12 contribution). The three-month moving average of the CFNAI improved by ten basis points to a reading of -0.25. (A moving average ranging between 0.00 and -0.70 is indicative of below-average economic growth.)

#2Durable goods orders fell hard in November. The Census Bureau reports that new orders for manufactured goods slumped 2.0 percent during the month to a seasonally adjusted $242.6 billion, its second decline in three months. A primary culprit was the sharp 72.7 percent drop in orders for defense aircraft. Net of defense goods, durable goods orders rose 0.8 percent. Among major industries segments, orders increased for electrical equipment/appliances (+2.0 percent), motor vehicles (+1.9 percent), fabricated metal products (+0.4 percent), computers/electronics (+0.2 percent). Orders declined for civilian aircraft (-1.8 percent), machinery (-1.6 percent), and primary metals (-0.3 percent). 

#3New home sales gained in November. The Census Bureau finds new single-family home sales grew 1.3 percent during the month to a seasonally adjusted annualized rate (SAAR) of 719,000 units. New home sales have risen 16.9 percent over the past year. Sales grew in the Northeast (+52.4 percent), and West (+7.5 percent), held steady in the Midwest, slowed 4.1 percent in the South. Three of four Census regions enjoyed positive 12-month comparables, with only the Midwest experiencing a year-to-year sales decline. There were 323,000 new homes for sale at the end of November (a 5.4 month supply), matching the October count but 3.3 percent below November 2018 levels. The median sales price of $330,800 was up 7.2 percent from a year earlier (it is worth noting that price comparisons are difficult because the mix of homes sold likely differ month-to-month).

#4Jobless claims remained well in check during the final days of 2019. The Department of Labor estimates there were a seasonally adjusted 222,000 first-time claims made for unemployment insurance benefits during the week ending December 21. This was down 13,000 from the prior week and 30,000 from two weeks ago (when the late Thanksgiving holiday had messed with seasonal adjustments), but essentially matched the year-ago count of 223,000 first-time claims. The four-week moving average of first-time claims edged up by 2,250 to 228,000. This represented a 3.1 percent increase from a year earlier.

#5Agricultural prices rose in November. The U.S. Department of Agriculture’s index of the prices received by farmers increased by 4.6 percent to a reading of 88.6 (2011=100). This left the measure 0.2 percent ahead of its year-ago mark. Prices rose for eggs (+176.9 percent from the prior month), lettuce (+66.6 percent), cattle (+5.6 percent), and milk (+4.8 percent) but fell for corn, broilers, apples, and hogs. Meanwhile, cost pressures were held in relative check as the prices paid by farmers index inched up 0.3 percent to 110.4 (November 2018: 109.8). 

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

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.