Home Sales Remain Firm, Moderate Economic Growth on Target for 2017: June 19 – 23

Home sales improved during May while forward-looking economic indicators suggest moderate economic growth during the rest of this year. Here are the 5 things we learned from U.S. economic data released during the week ending June 23.

#1Existing home sales crept up during May. The National Association of Realtors reports that sales of previously owned homes grew 1.1 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.62 million homes. This was 2.7 percent above the year ago annualized sales pace and just below its post-recession sales peak. Sales grew in three of four Census regions during May: Northeast (+6.8 percent), West (+3.4 percent), and South (+2.2 percent). Sales fell 5.9 percent in the Midwest. The 12-month comparables followed the same pattern, with sales growing in the Northeast, South, and West, but falling in the Midwest. There remained a dearth of homes on the market. A mere 4.2 month supply of homes were available for sale at the end of May, with the 1.96 million homes on the market representing 8.4 percent decline from a year earlier. As a result, the median sales price of existing home sales jumped 5.8 percent from a year earlier to $252,800. The press release noted that “[t]he job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level.”

#2New home sales also bounced up during May. The Census Bureau estimates the seasonally adjusted annualized sales rate for new homes was at 610,000 units, up 2.9 percent for the month and 8.9 percent from a year earlier. Sales surged in both the West and South by 13.3 percent and 6.2 percent, respectively, but cooled in both the Midwest (-25.7 percent) and Northeast (-10.8 percent). Homebuilders had 268,000 new homes available for sale at the end of May, up 1.5 percent from the previous month and 11.2 percent from a year earlier. This translated into a still tight 5.3 month supply of new homes. The median sales price for new homes jumped 16.8 percent over the past year, although some of the “increase” reflects larger (and therefore more expensive) homes sold.

#3Leading economic indicators point to 2017 economic growth of two percent or more. The Conference Board’s Leading Economic Index grew 0.3 percent during May to a seasonally adjusted reading of 127.0 (2010 = 100). This was up 3.5 percent from a year earlier. Eight of the leading index’s components made positive contributions to the measure during May, led by the interest rate spread, new orders for manufactured goods, and consumers’ expectations for business conditions. The coincident economic index edged up 1/10th of a point to 115.3 (+2.2 percent vs. May 2016) as three of four index components making positive contributions (personal income net of transfer payments, nonfarm payrolls, and manufacturing/trade sales). The lagging economic index also added 1/10th of a point to 124.2 (+2.1 percent vs. May 2016) with only three of seven index components making a positive contribution during the month. The press release noted that the leading indicators suggest “the economy is likely to remain on, or perhaps even moderately above, its long-term trend of about 2 percent growth for the remainder of the year.”

#4Layoff activity remained light during mid-June. Per the Department of Labor, there were a seasonally adjusted 241,000 first-time claims made for unemployment insurance benefits during the week ending June 17, up 3,000 for the week but 21,000 below the number of claims from the same week a year earlier. The jobless claims count has been below 300,000 for 120 consecutive weeks, a feat not seen since 1970(!). The four-week moving average of first-time claims of 244,750 was 8.3 percent below that of a year earlier. 1.817 million people were receiving some form of unemployment insurance benefits during the week ending June 3, 10.2 percent below the count of a year ago.

#5Americans’ household debt service remained relatively low in early 2017. The Federal Reserve indicates that financial obligations represent 15.47 percent of households’ disposable personal income during the first quarter of 2017. The financial obligations ratio was down one basis point from the previous quarter but up a basis point from a year earlier. This ratio has been consistently below 16 percent since 2011 (contrasting with ten years ago when the percentage was consistently nearly 18 percent) and has stayed near 30-year lows. The debt service ratio held steady at 10.04 during Q1 and was up two basis points from a year earlier. By comparison, this measure was above 13 percent ten years ago. Nondebt financial obligations (e.g., rent, leases) represented 5.43 percent of disposable income, down 1-basis point from the previous quarter but keeping the measure near its highest levels in 30 years.Financial Obligations Ratio--06232017

Other U.S. economic data released over the past week:
FHFA House Price Index (April 2017, Purchase-only Index, seasonally adjusted): +0.7% vs. March 2017, +6.8% vs. April 2016.

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

A Widening Trade Deficit: What We Learned During the Week of October 5 – 9

In a rather light week for economic data, we saw the trade deficit zoom up but jobless claims fall to a 42-year low.  Here are the 5 things we learned from U.S. economic data released during the week ending October 9.

#1A jump in imports and a drop in exports in August led to the largest trade deficit since March. The Census Bureau and the Bureau of Economic Analysis estimate exports declined by $3.7 billion to $185.1 billion (-6.2% vs. August 2014) and that imports increased by $2.8% billion to $233.4 billion (-2.2% vs. August 2014). The resulting seasonally adjusted trade deficit of -$48.3 billion was 17.1% larger than the deficit in August 2014. The goods deficit zoomed up $6.6 billion to -$67.9 billion while the services surplus inched up $0.1 billion to +$19.6 billion. Exports of industrial supplies and materials (including fuel, plastic materials and crude oil) declined by $2.2 billion while imports of consumer goods grew by $2.1 billion. The average price of imported crude oil—$49.33—was down $4.87 a barrel from July and 46.7% 100915from a year earlier.  The U.S. had its largest goods deficits with China (-$32.9 billion), European Union (-$14.5 billion), Germany (-$6.8 billion), Mexico     (-$5.3 billion) and Japan (-$5.2 billion). Using 2009 dollars, the “real” deficit expanded by $7.3 billion to -$63.4 billion, its largest since March.

#2There were fewer first-time jobless claims made during early October than seen in any week since 1973. The seasonally adjusted estimate of first-time claims for unemployment insurance benefits of 263,000 for the week ending October 3rd was the 31st consecutive week in which the Department of Labor data series has been below 300,000. The 4-week moving average for the week dropped by 3,000 to 267,500 claims. A year earlier, the moving average was at 291,250. There were 2.204 million people receiving some form of unemployment insurance benefits during the week ending September 26, up 9,000 from the previous week. The 4-week moving average for the continuing claims measure of 2.222 million was down 8.7% from the same week a year earlier.

#3The service sector grew at a slower pace during September. The headline index from the Non-Manufacturing Report on Business from the Institute for Supply Management shed 2.1 points during the month to a seasonally adjusted 56.9. This was the 68th straight month in which the measure was above a reading of 50.0, the threshold between an expanding and contracting service sector. Two index components fell during the month (business activity, new orders), 1 was unchanged (supplier deliveries) and 1 improved (employment). Thirteen of 18 tracked service sector industries improved during the month, led by education, construction, finance/insurance and health care/social assistance. The press release noted that survey “respondents continue to remain positive about current business conditions.”

#4Import prices fell for the 11th time in 13 months during September. The Bureau of Labor Statistics estimates import prices slipped 0.1% during the month and were 10.7% below prices of a year earlier. (Note that unlike the BLS reports on consumer and wholesale prices, this data series is not adjusted for typical seasonal variations.) The price of imported fuel grew for the 1st time in 3 months with a 1.4% gain (but nevertheless was 44.7% below year ago levels). Prices for imported natural gas blossomed 9.3% while those for imported petroleum increased 1.1%. Net of fuel, import prices contracted 0.3%, which was the 15th straight month the nonfuel metric did not increase and resulted in a 12-month comparable of -3.1%. Among the product categories pushing down nonfuel import prices were nonfuel industrial supplies, foods/feeds/beverages and capital goods.

Meanwhile, export prices declined 0.7% for the month and were 7.4% below that of a year earlier. Falling during the month were prices for exported agricultural goods, nonagricultural industrial supplies, consumer goods and automotive vehicles.

#5Consumer debt grew in August at its slowest pace since January. The Federal Reserve’s estimate of outstanding non-real estate backed consumer debt grew by $16.0 billion during the month to $3.470 trillion. This was up 6.8% from a year earlier. Slowing has been the growth rate of outstanding nonrevolving debt (e.g., college loans, car loans), with outstanding balances growing $12.0 billion to $2.551 trillion (+$12.0 for the month and +7.7% vs. August 2014 levels). The latter was the smallest 12-month comparable since March 2014. Meanwhile, consumers are slowly using their credit cards more. Revolving credit balances expanded by $4.0 billion to $918.5 billion (+4.2% vs. August 2014, its biggest 12-month comparable since August 2008).

Other data released over the past week that you might find of interest:
Wholesale Inventories  (August 2014, seasonally adjusted): $583.7 billion, +0.1% vs. July, +4.1% vs. August 2014.
Minutes from the September meeting of the Federal Open Market Committee

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