Housing Starts Rebound in June, Leading Economic Indicators Gain: July 17 – 21

Housing construction rebounded in June while leading economic indicators point towards accelerated economic activity during the latter half of this year. Here are the five things we learned from U.S. economic data released during the week ending July 21.

#1Housing construction jumped in June. Per the Census Bureau, housing starts were at a seasonally adjusted annualized rate (SAAR) of 1.215 million units, up 8.3 percent from May, 2.1 percent from a year earlier and its highest point since February. This had followed three consecutive monthly declines in starts. The annualized rate of single-family home starts grew 6.3 percent during the month to 849,000 units (+10.3 percent) while that for multifamily units surged 15.4 percent to 359,000 (off 10.7 percent from the year ago pace). Looking towards the future, the number of issued building permits jumped 7.4 percent during the month to 1.168 million permits (5.1 percent above the June 2016 rate). Housing completions increased 5.2 percent during June to an annualized rate of 1.144 million units. This was 8.1 percent ahead of the completions rate of a year earlier.Housing Starts-2006-2017-072117

#2Homebuilders were (slightly) less confident in July. The Housing Market Index (HMI) from the National Association of Home Builders shed two points to a seasonally adjusted reading of 64. While this was the HMI’s lowest mark since last November, it was still up six points from a year earlier and the 37th straight month in the measure was above a reading of 50, indicating more builders described housing conditions as “good” rather than “poor.” The HMI fell in two of four Census regions—South (down five points to 68) and Midwest (down four points to 64) but gained in the West (up three points to 74) and the Northeast (up two points to 48). Shedding two points were indices for both current and expected sales (to 70 and 73, respectively) while the measure of prospective buyers traffic slipped a point to 48. The press release described overall confidence as “solid,” but noted that homebuilders were “growing increasingly concerned over rising material prices, particularly lumber” that was “hurting housing affordability even as consumer interest in the new-home market remains strong.”

#3Forward looking economic indicators suggests greater economic growth for the rest of this year. The Conference Board’s Leading Economic Index (LEI) jumped by 8/10ths of a point during June to a seasonally adjusted 127.8 (2010=100). This represented nearly a four percent increase over the past year. Eight of the LEI’s ten component made a positive contribution to the index, led by housing building permits, manufacturing new orders, and the interest rate spread. Both the coincident index and the lagging index added 2/10ths of a point to 115.5 and 124.4, respectively. All four components of the coincident index made positive contributions, including nonfarm payrolls and industrial production. Four of seven components to the lagging index made positive contributions, led by the average prime rate charged by banks. The press release said the Conference Board expects “continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year.”

#4Employers added workers in 14 states during June. Detailed state-level employment data from June released by the Bureau of Labor Statistics finds nonfarm payrolls grew by a statistically significant amount in 14 states but were “essentially” unchanged in the other 36 states and the District of Columbia. States with the largest payroll gains during June were Texas (+40,200), Georgia (+27,400), New York (+26,000), and Maryland (+13,300). Thirty-nine states enjoyed significant employment gains over the past year but held steady in the other 11 states and in the District of Columbia. The states with the largest year-to-year percentage gains in nonfarm payrolls were Nevada (+3.8 percent), Utah (+3.0 percent), and Florida (+2.9 percent).

#5Bankruptcy filings continue to decline. The Administrative Office of the U.S. Courts reports that there were 796,037 bankruptcy filings during the 12 month period through June 30, 2017. This was off 2.8 percent from the same 12-month period a year earlier and down 30.0 percent from the 12-month count of four years earlier. There were 23,443 business bankruptcy filings during the 12-month period ending June 30, 2017 (down 7.1 percent from a year ago) and 772,594 non-business filings (down 2.7 percent from a year earlier). 

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 15, 2017, First-Time Claims, seasonally adjusted): 233,000 (-15,000 vs. previous week; -25,000 vs. the same week a year earlier). 4-week moving average: 2435,750 (-6.1% vs. the same week a year earlier).
Import Prices (June 2017, not seasonally adjusted):  -0.2% vs. May 2017, +1.5% vs. June 2016. Nonfuel imports: +0.1% vs. May 2017, +1.0% vs. June 2016.
Export Prices (June 2017, not seasonally adjusted):  -0.2% vs. May 2017, +0.6% vs. June 2016. Nonagricultural exports: unchanged vs. May 2017, +1.1% vs. June 2016.
Treasury International Capital Flows (May 2017, Net Foreigner Purchases of Domestic Securities, not seasonally adjusted): +$95.5 billion (vs. April 2017: +$3.8 billion, vs. May 2016: +$16.3 billion).

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

Manufacturing Rebounds in April, Leading Indicators Point Up: May 15 – 19

Manufacturing output bounced up in April, led by a boost in automobile production. Leading indicators suggest economic growth in the coming months. Here are the 5 things we learned from U.S. economic data released during the week ending May 19.

#1Manufacturing output jumped in April. The Industrial Production report from the Federal Reserve tells us that manufacturing output gained 1.0 percent during the month, following a 0.4 percent decline in March. This was the measure’s biggest single-month increase since February 2014. Production of durable and nondurable goods each grew at a 1.0 percent rate during April. The former was led by a 5.0 percent bump in motor vehicles output and 1.8 percent gain in the production of electrical equipment and appliances. Nondurables production benefited from higher output of food/beverage/tobacco products, textiles, and printing. Manufacturing output has risen 1.7 percent over the past year. Overall industrial production also gained 1.0 percent during April and has grown by 2.2 percent over the past year. Mining output rose 1.2 percent during the month, thanks to increased coal mining. Increased air conditioning usage boosted utility production 0.7 percent. Overall factory capacity utilization jumped by 6/10ths of a percentage point to 76.7 percent (its highest reading since August 2015). Manufacturing sector capacity utilization grew by 7/10ths of a percentage point to 75.9 percent, its best reading since December 2014.Increased Manufacturing Output-April2017-051917

#2Forward-looking indicators point to economic expansion over the coming months. The Conference Board’s Leading Economic Indicators grew by 4/10ths of a point during April to a seasonally adjusted 126.9. This was 3.2 percent above its year-ago reading. Eight of the ten components of the leading index made positive contributions to the leading index, led by the interest rate spread, jobless claims, and consumers’ expectations for the economy. The coincident index added 3/10ths of a point to 115.2 (+2.0 percent versus April 2016) as all four index components made positive contributions (including, industrial production and nonfarm payrolls). The lagging economic index increased by 4/10ths of a point to 124.1 (+2.5 percent versus April 2016) as five of seven components improved during the month (including the average length of unemployment and the prime interest rate charged by banks). The press release said that the data suggest that Q1 weak GDP report was “temporary hiccup as the economy returns to its long-term trend of about [a] 2 percent” growth rate.

#3Housing starts cooled slightly during April. The Census Bureau reports that starts of new housing construction fell 2.6 percent during the month to a seasonally adjusted annualized rate of 1.172 million units. Even with the decline, this was 0.7 percent above its year-ago pace and the 25th straight month in which the measure was above an annualized rate of 1 million units. Starts of single-family homes sped up slightly during the month (0.9 percent) and were 8.9 percent above their pace of starts in April 2016. Starts of multifamily residences (those with at least five units) dropped 9.6 percent during the month and were 14.6 percent below the starts rate of a year earlier. Looking towards the future, the annualized rate of issued building permits was at 1.172 million. While this was off 2.5 percent from March, it remained 5.7 percent above April 2016’ SAAR of issued permits. Finally, the annualized rate of housing completions dropped 8.6 percent during April to 1.106 million homes. This was 15.1 percent above the April 2016 pace.

#4Homebuilders remain optimistic. The Housing Market Index (HMI) grew by two points during May to a seasonally adjusted reading of 70, according to the National Association of Home Builders. The measure of homebuilder sentiment has remained above a reading of 50—indicative of a greater percentage of builders characterizing the housing market as “good” as opposed to being “poor—ever since July 2013. This also was the HMI’s second best reading since before the last recession (the best being only two months earlier). The HMI grew in three of four Census regions: Northeast (up five points to 50), West (up three points to 80), and South (up two points to 72). The measure slipped by two points in the Midwest to 65. Also growing was the indices for single-family home sales (up two points to 76) and the expected sales index (up four points to 79, its best reading since 2005). Meanwhile, the measure of the traffic of prospective buyers slipped by a point to a reading of 51. The press release noted the results indicated a housing market that was “solidifying.”

#5Nonfarm payrolls grew in nine states during April . Per state-level employment data released by the Bureau of Labor Statistics, nonfarm payrolls increased significantly in nine states during April, led by increases in Texas (+30,400), Minnesota (+15,100), and Wisconsin (+14,800). Only one state—Indiana—had suffered a significant decrease in nonfarm payrolls (-11,300). Versus a year earlier, 28 states enjoyed significant payrolls gains, with the largest year-to-year percentage gains in Utah (+3.3 percent), Florida (+2.6 percent), Georgia (+2.6 percent), and Idaho (+2.6 percent each). Similarly, 19 states saw significant declines in their unemployment rates, with the biggest declines occurring in Illinois, Oregon, West Virginia, and Wyoming. No state had a significantly higher employment rate in April versus what it had a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 13, 2017, First-Time Claims, seasonally adjusted): 232,000 (-4,000 vs. previous week; -45,000 vs. the same week a year earlier). 4-week moving average: 243,500 (-12.5% vs. the same week a year earlier).
Treasury International Capital Flows (March 2017, Net Purchase of Domestic Securities by Foreign Investors, not seasonally adjusted): +$30.8 billion (vs. February 2017: +$35.7 billion, March 2016: +$65.3 billion).

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

Inflation Perking Up, Retail Sales Firm: What We Learned During the Week of February 13 – 17

Inflation made its presence felt in January while manufacturing output grew despite a decline in automobile production. Here are the 5 things we learned from U.S. economic data released during the week ending February 17.

#1Both consumer and wholesale prices jumped during January. Per the Bureau of Labor Statistics, the Consumer Price Index (CPI) surged 0.6% on a seasonally adjusted basis during the month, its biggest 1-month gain since February 2013. Energy prices grew for a 5th straight month with a 4.0% increase as gasoline prices swelled 7.8% on a seasonally adjusted basis (without adjustments for seasonal variation, gas prices grew 5.3%). Other energy goods experiencing price increases during January included utility delivered natural gas (+1.5%) and fuel oil (+3.5%). Food prices grew for the 1st time since last April albeit with a tepid 0.1% gain. Net of energy and food, core CPI grew 0.3% during the month and had a 12-month comparable of +2.3%, which was above the Federal Reserve’s 2% inflation target rate. Rising during the month were prices for apparel (+1.4%), new vehicles (+0.9%), transportation services (+0.6%), and medical commodities (+0.3%).

Meanwhile, the Producer Price Index (PPI) for final demand goods and services jumped 0.6% on a seasonally adjusted basis during January. This was the wholesale price measure’s largest single-month increase since March 2011, leaving PPI 1.6% above its January 2016 reading. Net of the typically volatile prices for energy, food, and trade services, core PPI grew 0.2% during the month with a 12-month comparable of +1.6%. Wholesale prices for final demand goods rose 1.0% (its biggest single-month gain since last June), with 3/4ths of the gain attributed to a 4.7% surge in energy goods PPI (gasoline: +12.9%). Food prices were flat for the month. Net of energy and food, the core PPI measure for final demand gained 0.4% during January, led by price increases for pharmaceutical preparations and iron & steel scrap. Prices for final demand services jumped 0.3% as trade prices (i.e., retailer and wholesaler margins) increased 0.9%.consumer-producer-prices-021717

#2Manufacturing output grew modestly in January. The Federal Reserve reports that manufacturing production increased 0.2% during the month and was 0.3% above its January 2016 pace. The increase in manufacturing output was held down by a 2.9% slowdown in automobile production—net of autos, manufacturing output rose 0.5% during the month. Outside of motor vehicles, most other categories of durable goods production increased during January with machinery manufacturing growing the most. Production of nondurables rose 0.6%, with gains exceeding 1.0% for textiles, petroleum/coal products, and chemicals. Overall industrial production slowed 0.3% during January as warm winter weather pulled down output at utilities by 5.7%. Mining output grew 2.8%. Factory utilization in manufacturing edged up 1/10th of a percentage point to 75.1%. Overall industrial capacity utilization, however, slipped 3/10ths of a percentage point to 75.3%.

#3Retail sales started the new year on a strong note. The Census Bureau estimates retail and food services sales were at a seasonally adjusted $472.1 billion in January, up 0.4% from the prior month and 5.6% from a year earlier. (Note that the year-to-year comparable were helped a bit by a relatively weak sales report back in January 2016). Sales at auto dealers & parts stores fell 1.4% while those at gas stations surged 2.3% due to higher prices at the pump. Net of those two retailer classes, core retail sales grew 0.7% during January. Sales grew by at least 1% at sporting goods/hobby retailers (+1.8%), electronics/appliance stores (+1.6%), restaurants/bars (+1.4%), department stores (+1.2%), and apparel retailers (+1.0%). While sales at nonstore retailers (e.g., internet retailers) were unchanged for the month, they were a robust 12.0% above the January 2016 sales pace.

#4Housing starts slowed during January. The Census Bureau estimates housing starts were at a seasonally adjusted annualized rate of 1.246 million units, down 2.6% from the December pace. Starts activity slowed sharply in both the West (-41.3%) and Midwest (-17.9%) but grew healthily in both the Northeast (+55.4%) and South (+20.0%). Even with January’s decline, housing starts were 10.5% ahead of their January 2016 pace, indicative of a still solid construction market. Starts of single-family units were at a SAAR of 823,000 units, up 1.9% for the month and 6.2% from a year earlier. Looking towards the future, there were 1.285 million issued residential construction permits (SAAR), +4.6% vs. December 2016 and +8.2% vs. January 2016. Housing completions slowed 5.6% during the month to 1.047 million units. This was off 0.9% from the January 2016 completions pace.

#5Leading indicators signal economic expansion for the coming months. The Leading Economic Index from the Conference Board added 8/10ths of a point during January to a reading of 125.5 (2010 = 100). This was up 2.5% from a year earlier. 8 of the measure’s 10 components made positive contributions, led by the interest rate spread, building permits, and jobless claims. The coincident index edged up 1/10th of a point to 114.4 (+1.6 vs. January 2016). 3 of 4 coincident index components made positive contributions, including nonfarm payrolls and personal income net of transfer payments. The lagging index added 4/10ths of a point to 123.7 (+3.3% vs. January 2016), with 4 of 7 index components making a positive contribution. The press release noted should the indices’ trends continue, “the U.S. economy may accelerate in the near term.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 11, 2017, First-Time Claims, seasonally adjusted): 239,000 (+5,000 vs. previous week; -21,000 vs. the same week a year earlier). 4-week moving average: 244,250 (-9.2% vs. the same week a year earlier).
Housing Market Index (February 2017, Index (Greater than 50 = “Good” Housing Market, seasonally adjusted): 65 (vs. January 2017: 67, vs. February 2016: 58).
Small Business Optimism Index (January 2017, Index (1986 = 100), seasonally adjusted): 105.9 (vs. December 2016: 105.8, vs. January 2016: 93.9).
Business Inventories (December 2016, Manufacturing & Trade Inventories, seasonally adjusted): $ 1.836 trillion (+0.4% vs. November 2016, +2.0% vs. December 2015).
Treasury International Capital Data (December 2015, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$13.9 billion (vs. November 2016: +$15.9 billion, vs. December 2015: -$43.4 billion).

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