The Decline Continued in April: May 18 – 22

Like just about everything else, the housing market slammed on the brakes in April. Here are the five things we learned from U.S. economic data released during the week ending May 22.

#1

Forward-looking economic indicators show business activity fell sharply again in April (but not as drastically as March). The Conference Board’s Leading Economic Index (LEI) shed 4.6 points in April to a reading of 98.8 (2016=100), down 11.7 percent from a year earlier. Four of ten LEI components made positive contributions to the measure, including stock prices and the interest rate spread. The other six components pulled down the LEI, led by average manufacturing hours, jobless claims, and building permits. The coincident index nosedived by 9.4 points to 96.6, down 9.4 percent from April 2019. Of the index’s four components, the two tied to nonfarm payrolls and industrial production pulled the index down. The lagging index, however, advanced by 4.5 points to 115.3 that left the measure up 7.3 percent over the past year. The press release said the broad-based drop in the LEI “suggests that an imminent re-opening of some sectors does not imply a fast rebound for the economy at large.”

#2

Sales of previously owned homes were not immune to the pandemic in April. The National Association of Realtors reports that existing home sales sank 17.8 percent during the month to a seasonally adjusted annualized rate (SAAR) 4.330 million units. This was the biggest single-month percentage drop in home sales in a decade, leaving the measure at its lowest mark since July 2010. Sales were down in all four Census regions on both a month-to-month and year-to-year basis. Beyond softer demand, holding back sales was the number of homes on the market. There were 1.470 million homes on the market at the end of April, down 1.3 percent from March and 19.7 percent from April 2019, and the equivalent to a 4.1 month supply. The median sales price of $286,800 was up 7.4 percent from a year earlier.

#3

…neither were housing starts. The Census Bureau estimates privately-owned housing starts plummeted 30.2 percent during April to a seasonally adjusted annualized rate (SAAR) of 891,000 units. This was the data series’ largest single-month decline (going back to 1959) and left starts at its lowest level since 2015. Single-family home starts were down 25.4 percent from March while the multi-family home (5+ units) starts were off 40.3 percent. Starts fell sharply in all four Census regions on both a month-to-month and year-to-year basis. Looking towards the future, annualized count of issued building permits slumped 20.8 percent to 1.074 million units (also a five-year low). Home completions slowed 8.1 percent to an annualized 1.176 million units. 

#4

Homebuilder confidence rebounded a smidge in May. The National Association of Home Builders’ Housing Market Index added seven points during the month to a seasonally adjusted reading of 37, after plummeting 42 points in April. (An HMI reading below 50 means that more homebuilders see the housing market as “poor” versus being “good.”). The HMI recovered some of its April losses in three of four Census regions: West (+12 points to 44), South (up eight points to 42), and Midwest (adding seven points to 32). The HMI shed another two points in the Northeast, however. The present sales index added six points to 52 while the expected sales index advanced by ten points to 46 and prospective traffic measure moved forward by eight points to 21. The press release noted that “[l]ow interest rates are helping to sustain demand.”

#5

Payrolls shriveled as the unemployment rate rose in all 50 states and the District of Columbia in April. The Bureau of Labor Statistics indicates that the unemployment rate hit new data series highs (going back to 1976) in 43 states, with the highest rates reported in Nevada (28.2 percent), Michigan (22.7 percent), Hawaii (22.3 percent). Only four states had unemployment rates below ten percent: Nebraska (8.3 percent), North Dakota (8.5 percent), Utah (9.7 percent), and Maryland (9.9 percent). States reporting the largest payroll declines were California (-2,344,700), New York (-1,827,300), and Texas (-1,298,900). Payrolls also were below their year-ago levels in all 50 states and the District of Columbia. 

Other U.S. economic data released over the past week:
Jobless Claims (Week ending May 16, First-Time Claims, seasonally adjusted): 2,438,000 (-249,000 vs. the previous week, +2,225,000 vs. the same week a year earlier). 4-week moving average: 3,042,000 (+1,274.9% vs. the same week a year earlier).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

One Word About the Latest Economic Data: Oof. April 13 – 17

The COVID-19 pandemic led to many broken economic data records…none of them good. Here are the five things we learned from U.S. economic data released during the week ending April 17.

#1Forward-looking economic indicators suffered its biggest decline ever in March. The Conference Board’s Leading Economic Index (LEI) shed 6.7 percent during the month to a seasonally adjusted reading of 104.2 (2016=100). This was the LEI’s largest single-month decline in the measure’s 60-year history. Seven of ten LEI components pulled down the headline index, led by jobless claims, stock prices, and building permits. The coincident index lost a full point to a reading of 106.6, hurt by components tied to industrial production and nonfarm payrolls. The lagging index jumped 1.2 percent to a reading of 110.2 (but then, it is a backward-looking measure). In noting a “halting in business activity,” the press release states the “sharp drop” in the LEI “suggests the U.S. economy will be facing a very deep contraction.”

#2Jobless claims fell but remained hugely inflated. The Department of Labor reports there were a seasonally adjusted 5.245 million first-time claims made for unemployment insurance benefits during the week ending April 11, down 1.37 million from the prior week but still the third most ever and up 2,484 percent from a year ago. There were 11.976 million continuing jobless claims during the week ending April 4 (+618 percent versus a year earlier). This translated into an insured unemployment rate 8.2 percent, well above the 1.2 percent reported for the same week one year ago. 

#3Sales plunged at most retailers in March. Retail and food services sales hemorrhaged 8.7 percent during the month to a seasonally adjusted $483.1 billion (itself 6.2 percent below its year-ago pace). (This was the biggest decline for the Census Bureau measure going back to its inception in 1992.) Among the retail categories seeing large declines were auto dealers/parts stores (-25.6 percent) and gas stations (17.2 percent, partially due to sharply lower prices at the pump). Net of both autos and gas, core retail sales fell 3.1 percent. Among the big decliners were retailers focused on apparel (-50.5 percent), furniture (-26.8 percent), sporting goods/hobbies (-23.3 percent), and electronics/appliances (-15.1 percent). Restaurants/bars reported a 26.5 percent drop in sales. On the flip side, other segments reported sales gains; including, grocery stores (+26.9 percent), general merchandisers (+6.4 percent), health/personal care retailers (+4.3 percent), and building materials/garden stores (+1.3 percent). Nonstore (e.g., online) retailers saw sales jump 3.1 percent. 

#4Industrial production hit a wall in March. The Federal Reserve finds industrial production slowed a seasonally adjusted 5.4 percent during the month, its largest decline since January 1946(!). Manufacturing output sank 6.3 percent (the most significant decline since February 1946), with reductions for durable and nondurable goods of 9.1 percent and 3.2 percent, respectively. Automobile production fell 28.0 percent. Utilities output dropped 3.9 percent in March (electric utilities: -3.8 percent; natural gas utilities: -4.5 percent). Mining output declined 2.0 percent, with significant decreases seen for crude oil, natural gas liquids, and coal. Industrial production was 5.5 percent below that of a year earlier with manufacturing’s 12-month comparable at -6.6 percent.

#5Housing starts plummeted in March. The Census Bureau estimates that housing starts fell 22.3 percent during the month to a seasonally adjusted annualized rate of 1.216 million units. Despite being the measure’s largest drop in 36 years, starts were still 1.4 percent ahead of their year-ago pace. Single-family homes starts slumped 17.5 percent in March while those for multi-family units plunged 32.1 percent. Looking towards the future, the annualized count of issued building permits dropped 6.8 percent to 1.353 million, including a 12.0 percent fall for single-family home permits. Housing completions declined 6.1 percent to 1.227 million (9.0 percent vs. March 2019). 

Other U.S. economic data released over the past week:
Import Prices (March 2020, All Imports): -2.3% vs. February 2020, -4.1% vs. March 2019. Nonfuel Imports: Unchanged vs. February 2020, -0.5% vs. March 2019.
Export Prices (March 2020, All Exports): -1.6% vs. February 2020, -3.6% vs. March 2019. Nonagricultural Exports: -1.5% vs. February 2020, -3.7% vs. March 2019.
Housing Market Index (April 2020, Index(>50= More Homebuilders View Conditions as “Good” than “Poor,” seasonally adjusted): 30 (vs. March 2020: 72, vs. April 2019: 62).
State Employment (March 2020, Nonfarm Payrolls, seasonally adjusted): vs. February 2020: Decreased in 31 states and was essentially unchanged in 19 states and the District of Columbia. Vs. March 2019: Increased in 13 states, decreased in 2 states, and was essentially unchanged in 35 states and the District of Columbia.
Business Inventories (February 2020, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.013 trillion (-0.4% vs. January 2020, -0.1% vs. February 2019).
Treasury International Capital Flows (February 2020, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$35.3 billion (vs. January 2020: +$28.9 billion, February 2019: +$35.4 billion).
Beige Book (April 2020): “Economic activity contracted sharply and abruptly across all regions in the United States as a result of the COVID-19 pandemic. The hardest-hit industries…were leisure and hospitality, and retail aside from essential goods.”

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

A Bright Outlook for 2020 (At Least So Far): February 17 – 21

Signs indicate the economic expansion should continue this year. Here are the five things we learned from U.S. economic data released during the week ending February 21.

#1Forward-looking economic data improved in January. The Leading Economic Indicators (LEI) rose by 9/10ths of a point during the month to a reading 112.1 (2016=100). This left the Conference Board measure up 0.9 percent from a year earlier (reflecting the general weakness in the LEI over most of the past year). Eight of ten LEI components made positive contributions, led by jobless claims, building permits, and stock prices. The coincident index added 1/10th of a point to a reading of 107.3 (+1.1 percent versus January 2019), with three of four components making positive contributions (led by nonfarm payrolls). The lagging index held steady at 108.7 (+1.7 percent versus January 2019), with three of seven components making a positive contribution. The press release said the results were consistent with a two percent GDP growth rate, although “the COVID-19 outbreak may impact manufacturing supply chains in the U.S. in the coming months.”

#2Tight supplies continued to constrain home sales. The National Association of Realtors tells us that existing home sales declined 1.3 percent in January to a seasonally adjusted annualized rate (SAAR) of 5.46 million units. Home sales were 9.6 percent above their year-ago sales pace. Sales grew during the month in the Midwest (+2.4 percent) and South (+0.4 percent), held steady in the Northeast, and slumped in the West (-9.4 percent). While inventories of unsold homes increased 2.2 percent to 1.42 million units, they were 10.7 percent below year-ago levels and represented a mere 3.1 month supply. As a result, the median sales price of $266,300 was up 6.8 percent from a year earlier. 

#3Housing starts slowed in January while permitting activity rose. The Census Bureau finds starts of privately-owned homes declined 3.6 percent during the month to a seasonally adjusted rate of 1.567 million units. Even with the drop, starts were a robust 21.4 percent ahead of their year-ago pace. Starts of single-family homes fell 5.9 percent while those for buildings of at least five units gained 3.0 percent. Looking towards the future, the annualized rate of issued building permits grew to an almost 13-year high at 1.551 million permits, up 9.2 percent for the month, and 17.9 percent from a year earlier. Versus a year earlier, permitting for single-family and multi-family units were up 20.2 percent and 16.0 percent, respectively. Completions slowed 3.3 percent to an annualized 1.280 million homes (+1.5 percent versus January 2019). 

#4Homebuilder sentiment slipped in February. The National Association of Home Builders’ Housing Market Index (HMI) lost a point during the month to a seasonally adjusted reading of 74. This was the 68th straight month in which the HMI was above a reading of 50, indicative of more homebuilders’ viewing the housing market as being “good” versus being “poor.” The HMI grew in the Northeast and South but lost ground in both the Midwest and West. Shedding a single point each were measures for single-family home sales (80), expected sales (79), and traffic of prospective buyers (57). The press release noted that “[s]teady job growth, rising wages, and low-interest rates are fueling demand” but that higher costs were weighing on builders.

#5Trade services led to a rise in wholesale prices in January. The Producer Price Index (PPI) for final demand rose a seasonally adjusted 0.5 percent during the month, its largest single-month increase in 15 months. The Bureau of Labor Statistics notes that 90 percent of the rise came from the 0.7 percent jump in services prices, with much of the increase from higher margins at retailers focused on apparel, jewelry, footwear, and accessories. Trade services, reflecting retailer and wholesaler margins, jumped 1.2 percent. PPI for final demand goods grew by a more modest 0.1 percent. This reflects a 0.2 percent increase in foods PPI, a 0.7 percent decline energy wholesale prices, and a 0.3 percent bounce in core PPI. Wholesale prices have grown 2.1 percent over the past year, while the core measure (net of food, energy, and trade services) has advanced 1.5 percent.

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 15, 2020, First-Time Claims, seasonally adjusted): 210,000 (+4,000 vs. previous week; -3,000 vs. the same week a year earlier). 4-week moving average: 209,000, -8.9% vs. the same week a year earlier).
Treasury International Capital (December 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$60.7 billion (vs. November 2019: +$8.1 billion, vs. December 2018: -$87.7 billion).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.