Home Sales Slow, the Federal Budget Deficit Widens: October 21 – 25

Home sales and durable goods orders each mellowed in September. Here are the five things we learned from U.S. economic data released during the week ending October 25.

#1Existing home sales pulled back in September. The National Association of Realtors reports that sales of previously owned homes slowed 2.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.38 million units. Sales declined in all four Census regions: Midwest (-3.1 percent), Northeast (-2.8 percent), South (-2.1 percent), and West (-0.9 percent). Even with the drop, existing home sales were up 3.9 percent from a year earlier, with positive 12-month comparables in three of four Census regions (sales in the Midwest matched that of a year earlier). Holding steady were inventories of unsold homes, with the 1.83 million available homes translating into a tight 4.1 month supply. The median sales price of $272,100 was up 5.9 percent from a year earlier. The press release says home prices are “rising too rapidly” because of “the housing shortage.”

#2…As had transactions of new homes. Sales of newly constructed single-family homes decreased 0.7 percent during September to a seasonally adjusted annualized rate of 701,000 units. The Census Bureau metric fell in three of four regions—West, Northeast, and South—but grew in the Midwest. Despite September’s decline, new home sales were 15.5 percent ahead of year-ago levels, with only the Midwest experiencing a negative year-to-year comparable. There was a 5.5 month supply of new homes on the market at the end of the month, equaling 321,000 units.

#3Durable goods orders fell in September. The Census Bureau estimates new orders fell 1.1 percent to a seasonally adjusted $248.2 billion. Transportation orders plummeted 2.7 percent, pulled down by slumps for civilian aircraft (-11.8 percent) and motor vehicles (-1.6 percent). Net of transportation goods, core durable goods fell 0.3 percent. Orders improved for electrical equipment/appliances (+0.9 percent), primary metals (+0.3 percent), and machinery (+0.2 percent). Declining were orders for fabricated metal orders (-1.5 percent), computer/electronics (-0.9 percent), and civilian non-aircraft capital goods (-0.5 percent).

#4Consumer sentiment stabilized in October. The Index for Consumer Sentiment, from the University of Michigan, added 3.3 points during the month to a seasonally adjusted 95.5 (1966Q1=100). This was the measure’s best reading since July, although it was a half-point below the preliminary October reading reported a few weeks ago. The advance during the month was primarily the product of an improved view of current conditions, adding 4.7 points to 113.2. The expectations index grew by a smaller 8/10ths of a point to 84.2. The press release noted fewer survey respondents included tariffs in their comments (27 percent of October survey respondents versus 36 percent in September).

#5The federal budget deficit soared in FY2019. The Bureau of the Fiscal Service reports that the U.S. government raised $3.462 trillion in revenue during the just-completed fiscal year, up 4.0 percent from FY2018. But expenses rose 8.2 percent during the same 12-month period to $4.447 trillion. The resulting budget deficit of -$984.4 billion was up 26.4 percent from a year earlier and its highest point in seven years. On the revenue side, personal tax receipts increased 2.0 percent, corporate tax collections grew 12.5 percent, and tariff duties jumped 71.4 percent. On the expense side, substantially growing line items included those tied to the military, education, health and human services, and debt service.deficits 2005-2019 102519

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 19, 2019, First-Time Claims, seasonally adjusted): 212,000 (-6,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 215,000 (-0.1% vs. the same week a year earlier).
FHFA House Price Index (August 2019, Purchase-Only Index, seasonally adjusted): +0.2% vs. July 2019, +4.6% vs. August 2018.

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

Autos Fuel Retail Sales, Prices Firm: September 9 – 13

Consumers were buying vehicles in August. Here are the five things we learned from U.S. economic data released during the week ending September 13.

#1Auto sales outpaced an otherwise modest retail sales report for August. The Census Bureau reports that retail and food services sales totaled $526.1 billion, up 0.4 percent from July and 4.1 percent from a year earlier. Sales at auto dealers and parts stores jumped 1.8 percent while those at gas stations fell 0.9 percent (due to lower prices at the pump). Net of both, core retail sales grew a tepid 0.1 percent following a 0.9 percent surge in July (12-month comparable: +4.2 percent). Sales rose during the month at building material/garden stores (+1.4 percent), sporting goods/hobby retailers (+0.9 percent), and health/personal care stores (+0.7 percent). Sales slumped, however, at department stores (-1.1 percent), furniture retailers (-0.5 percent), and grocery stores (-0.3 percent).

#2Core consumer prices rose for a third straight month in August. The Consumer Price Index (CPI) grew 0.1 percent on a seasonally adjusted basis for the third time over the past four months, per the Bureau of Labor Statistics. Energy CPI fell 1.9 percent (pulled down by a 3.5 percent drop in gasoline prices) while food CPI held steady. Net of both, core CPI grew 0.3 percent for a third consecutive month. Rising were prices for used cars/trucks (+1.1 percent), medical care services (+0.9 percent), transportation services (+0.4 percent), medical care commodities (+0.3 percent), apparel (+2.2 percent), and shelter (+0.2 percent). Prices slipped 0.1 percent for new vehicles. While headline CPI has grown by “only” 1.7 percent over the past year, the core measure of consumer prices has climbed 2.4 percent over the same 12 months.

#3And wholesale prices firmed too. The Bureau of Labor Statistics indicates that the Producer Price Index (PPI) for final demand increased 0.1 percent on a seasonally adjusted basis in August after rising 0.2 percent in July. The core measure—PPI net of energy, food, and trade services—jumped 0.4 percent after slipping 0.1 percent during the prior month. PPI for final demand goods dropped 0.5 percent, pulled down by declines for both energy (-2.5 percent—gasoline prices plummeted 6.6 percent) and food (-0.6 percent). Core goods PPI was unchanged for the month. PPI for final demand services grew 0.3 percent—but more notable was the core measure (which nets out trade services and transportation/warehousing) growing 0.5 percent. Over the past year, headline PPI has risen 1.8 percent while the 12-month comparable for the core wholesale prices was +1.9 percent.

#4The number of job openings pulled back slightly, but workers continued to quit their jobs. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 7.217 million open jobs on the final day of July. While still near the historical high for the data series, this was off 31,000 from June and 3.0 percent from a year earlier. While both construction (+18.8 percent) and manufacturing (+7.0 percent) had sizable year-to-year percentage increases in job openings, other industries reported negative 12-month comparables: financial activities (-15.3 percent), retail trade (-15.2 percent), and accommodation/food services (-10.2 percent). Hiring picked up during July, rising by 237,000 to 5.953 million (+2.1 percent versus July 2018). 5.759 million people departed their jobs during the same month, up 246,000 from June and 1.5 percent ahead of the year-ago pace. This included 3.592 million people who voluntarily quit their jobs (up 130,000 for the month and 4.3 percent from July 2018), a signal suggesting Americans remain confident about the labor market. 1.799 million left their jobs due to a layoff, up 88,000 for the month but down 3.2 percent from a year earlier.

#5The federal budget deficit crossed the trillion dollar threshold, and the fiscal year is not even over yet. The Department of the Treasury reports that the U.S. government has collected $3.088 trillion in receipts through the first 11 months of FY2019, up 3.5 percent from the same 11-month period last year. Expenditures, however, have grown 7.0 percent over the same period to $4.155 trillion. The resulting budget deficit of $1.067 trillion was 18.9 percent ahead of that from the first 11 months of FY2018. Year-to-date individual income tax revenues were 0.9 percent ahead of that a year earlier while corporate tax receipts have expanded 4.5 percent. Among the notable gainers in expenditures were defense (+9.0 percent), debt service (+9.0 percent), and health & human services (+8.4 percent)

Other U.S. economic data released over the past week:
Jobless Claims (week ending September 7, 2019, First-Time Claims, seasonally adjusted): 204,000 (-15,000 vs. previous week; -4,000 vs. the same week a year earlier). 4-week moving average: 212,500 (+0.3% vs. the same week a year earlier).
Import Prices (August 2019, All Imports, not seasonally adjusted): -0.5% vs. July 2019, -2.0% vs. August 2018; Nonfuel Imports: Unchanged vs. July 2019, -1.0% vs. August 2018.
– Export Prices (August 2019, All Exports, not seasonally adjusted): -0.6% vs. July 2019, -1.4% vs. August 2018; Nonagricultural Exports: -0.4% vs.
NFIB Small Business Optimism (August 2019, Index (1986=100), seasonally adjusted): 103.1 (vs. July 2019: 104.7, August 2018: 108.8).
University Surveys of Consumers (September 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 92.0 (vs. August 2019: 89.8, vs. September 2018: 100.1).
Business Inventories (July 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.043 trillion (+0.4% vs. June 2019, +4.8% vs. July 2018).
Consumer Credit (July 2019, Outstanding Consumer (non-real estate-backed) Loan Balances, seasonally adjusted): $4.123 trillion (+$23.3 billion vs. June 2019, +5.2% vs. July 2018).

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

Mixed Inflation Numbers: July 8 – 12

Core consumer prices rose, but core wholesale prices did not. Here are the five things we learned from U.S. economic data released during the week ending July 12.

#1Core inflation firmed in June. Consumer Price Index (CPI) gained 0.1 percent on a seasonally adjusted basis during the month, per the Bureau of Labor Statistics. Growth in the headline CPI measure was modest as energy prices fell 2.3 percent (including gasoline CPI dropping 3.6 percent) and food prices held steady. Core CPI, which removes the impact of energy and food, jumped 0.3 percent, its most significant single-month increase since January 2018. Rising were prices for used cars/trucks (+1.6 percent), apparel (+1.1 percent), medical care services (+0.4 percent), shelter (+0.3 percent), and new vehicles (+0.1 percent). Over the past year, CPI has risen 1.6 percent while the core measure of consumer prices has a 12-month comparable of +2.1 percent.Consumer Prices 2017-9 071319

#2…While wholesale prices did not. The Producer Price Index (PPI) for final demand inched up by a seasonally adjusted 1/10th of a percentage point during June, matching its May increase. The core wholesale price measure, which nets out foods, energy, and trade services, was unchanged after having jumped 0.4 percent during the two prior months. PPI for final demand goods dropped for a second consecutive month with a 0.2 percent decline. Energy PPI plummeted 3.1 percent, pulled down by plunging wholesale gasoline prices (-5.0 percent), while food PPI grew 0.6 percent (corn prices: +19.9 percent). PPI for final demand services increased 0.4 percent, boosted by trade services PPI (i.e., margins at retailers and wholesalers) jumping 1.3 percent. Over the past year, final demand PPI has grown 1.7 percent (its smallest 12-month comparable since January 2017) while the year-to-year change in core wholesale prices was +2.1 percent.

#3Job openings softened (slightly) in May, hiring more so. The Bureau of Labor Statistics estimates there were a seasonally adjusted 7.323 million job openings at the end of May, off 49,000 from the previous month but up 2.8 percent from a year earlier and keeping it very near the data series high. Industries with sizeable year-to-year percentage increases in job openings included construction (+32.3 percent), accommodation/food services (+8.6 percent), manufacturing (+8.3 percent), and professional/business services (+7.1 percent). Hiring slowed 4.4 percent during May to 5.725 million workers (-2.3 percent vs. May 2018). Also falling were the number of people leaving their job as separations decreased by 192,000 to 5.495 million (May 2018: 5.495 million). The number of people quitting their job—3.425 million—was up 2.5 percent from a year earlier while those affected by a layoff—1.760 million—was down 2.8 percent from May 2018.

#4Small business owner sentiment took a step back in June. The Small Business Optimism Index from the National Federation of Independent Business lost 1.7 points during the month to a seasonally adjusted reading of 103.3. This followed a 1.5 point gain during the prior month. Only three of the index’s ten components advanced during the month: current inventories, expected credit conditions, and plans to increase inventories. Falling during June were index components linked to earnings trends, whether it was a good time to expand, real sales expectations, plans to make capital outlays, plans to increase employment, and current job openings. The press release noted increased “uncertainty” on weighing on business owner sentiment.

#5The U.S. budget deficit continued to track well ahead of last year’s pace. The Bureau of the Fiscal Service reports that the U.S. government had collected $2.609 trillion over the first nine months of FY2019, a 2.7 percent increase over the comparable nine months during the prior fiscal year. Meanwhile, outlays totaled $3.356 trillion during those same nine months, 6.7 percent ahead of the previous year’s total. As a result, the U.S. government has run up a budget deficit totaling -$747.1 billion from the period of October 2018 to June 2019, well ahead of the year-to-date deficit for the first nine months of FY18 of -$607.1 billion. The Bureau currently forecasts a budget deficit for FY19 of -$1.092 trillion

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 6, 2019, First-Time Claims, seasonally adjusted): 209,000 (-13,000 vs. previous week; -3,000 vs. the same week a year earlier). 4-week moving average: 219,250 (-0.7% vs. the same week a year earlier).
FOMC MinutesConsumer Credit (May 2019, Outstanding Consumer Credit (not mortgages) Balances, seasonally adjusted): $4.088 trillion (+$17.1 billion vs. April 2019, +5.2% vs. May 2018).
Wholesale Trade (May 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $679.1 billion (+0.4% vs. April 2019, +7.7% vs. May 2018).

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