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.

Economic Data Sends Mixed Messages: November 18 – 22

While leading indicators suggest economic weakness, both housing and sentiment gained momentum. Here are the five things we learned from U.S. economic data released during the week ending November 22.

#1Forward-looking economic indicators remained sluggish in October. The Conference Board’s Leading Economic Index (LEI) pulled back for a third consecutive month with a 1/10th of a point decline to 111.7 (2016=100). The LEI has remained within a small range over the past year. Only five of ten LEI components made positive contributions, led by building permits while manufacturing index components dragged down the measure. The coincident index held steady at a reading of 106.5, up 1.4 percent from a year earlier. Three of four coincident index components made positive contributions, led by personal income. The lagging index inched up 1/10th of a point to a reading of 108.1, with three of seven index components making a positive contribution (led by the length of unemployment). The press release says the results suggest “the economy will end the year on a weak note, at just below two percent growth.”

#2Previously home sales bounced back in October. Existing home sales, as measured by the National Association of Realtors, increased 1.9 percent during the month to a seasonally adjusted annualized rate of 5.46 million units. Sales expanded in the South (+4.4 percent) and Midwest (+1.6 percent) but slowed in the Northeast (-1.4 percent) and West (-0.9 percent). Sales have risen 4.6 percent over the past year, with three of four Census regions enjoying positive 12-month comparables. Sales matched that of a year earlier in the Northeast. The supply of homes tightened further, falling 2.7 percent to 1.77 million units, the equivalent to a 3.9 month supply. The median sales price of $270,900 was up 6.2 percent from a year earlier. The press release attributes the improvement in sales to “[h]istorically-low interest rates, continuing job expansion, higher weekly earnings and low mortgage rates.”

#3Housing starts rebounded in October. The Census Bureau reports that housing starts gained 3.8 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.314 million units. Starts were 8.5 percent ahead of their year-ago mark. Single-family home starts grew 2.0 percent in October while those of multi-family units rose 6.5 percent. Permit activity presents a positive outlook—the number of issues permits increased 5.0 percent during the month to an annualized 1.391 million permits. This was up 14.1 percent from a year earlier. The annualized count of completed homes surged 10.3 percent in October to 1.256 million homes (+12.4 percent versus October 2019).

#4Sentiment among homebuilders remained solid in November. The National Association of Home Builders’ Housing Market Index (HMI) came in at a seasonally adjusted reading of 70. The measure was off a point from October but up ten points from a year earlier. Further, the HMI has been above a reading of 50—indicative of more homebuilders seeing the housing market as “good” as opposed to being “poor”—for 65 straight months. The HMI grew three in four Census regions: Northeast (up three points to 63), West (up two points to 85), and Midwest (up a point to Midwest). The HMI shed two points in the South to a reading of 74. The press release notes that builders report “ongoing positive conditions,” boosted by low interest rates and a robust labor market.

#5Consumer confidence rose to its highest level since the summer. The University of Michigan’s Index of Consumer Sentiment added 1.3 points in November to a seasonally adjusted reading of 96.8 (1966Q1=100). Even with the increase, the measure was off 7/10ths of a point from a year earlier. While the current conditions index shed 1.6 points during the month to 111.6 (November 2018: 111.6), the expectations index improved by 3.1 points to 87.3 (November 2018: 88.1). The press release points out that the headline index has been above a reading of 95.0 in 30 of the past 35 months, a show of strength not seen since a period between 1998 and 2000.

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 16, 2019, First-Time Claims, seasonally adjusted): 227,000 (Unchanged vs. previous week; +3,000 vs. the same week a year earlier). 4-week moving average: 221,000 (+0.1% vs. the same week a year earlier).
State Employment (October 2019, Nonfarm Payrolls, seasonally adjusted): vs. September 2019: up in 4 states, down in 1 state, and essentially unchanged in 45 states and the District of Columbia. Vs. October 2018: Up in 27 states and essentially unchanged in 23 states and the District of Columbia.
Treasury International Capital Flows (September 2019, Net Foreign Purchases of Domestic Securities, not seasonally adjusted): +15.4 billion (vs. August 2019: -$42.0 billion, vs. September 2018: +$8.5 billion.
FOMC Minutes

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

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.