Leading Indicators Suggest Modest Growth: August 19 – 23

Leading economic measures rebounded in July. Here are the five things we learned from U.S. economic data released during the week ending August 23.

#1Forward-looking economic indicators brightened a bit in July. The Conference Board’s Leading Economic Index (LEI) jumped by a half-point to a reading of 112.2. This followed two monthly declines and left the LEI up a somewhat modest 1.6 percent over the past year. Only five of the LEI’s ten components made positive contributions to the index, led by housing building permits and jobless claims. A warning sign: manufacturing-related components pulled down the LEI. The coincident index added 2/10ths of a point to 106.2, up 1.8 percent from July 2018. Three of four coincident index components made positive contributions, led by nonfarm payrolls. The lagging index jumped by 7/10ths of a point to 108.5, leaving the measure up 3.5 percent over the past year. Four of seven lagging index components made positive contributions, led by the average duration of unemployment. The press release said the U.S. economy would likely expand “at a moderate pace” during the second half of 2019.

#2Existing sales improved in July. Sales of previously owned homes gained 2.5 percent during the month to a seasonally adjusted annualized rate of 5.42 million units. The National Association of Realtors’ measure was 0.6 percent ahead of its year-ago mark. Sales improved in three Census regions—the West, South, and Midwest—when compared to June but were only up in the South and Midwest when compared to a year earlier. Inventories tightened in July as the count of homes on the market slipped 1.6 percent to 1.89 million units. This was the equivalent to a 4.2 month supply. The median sales price of homes sold has risen 4.3 percent over the past year to $280,800.

#3But sales of new homes fell during the same month. The Census Bureau estimates new home sales slumped 12.8 percent in July to a seasonally adjusted annualized rate of 635,000 units. This placed the annualized sales pace 4.3 percent below that of July 2018. New home sales fell in three of four Census regions during the month, with Northeast being the exception. Compared to a year earlier, however, sales have grown in the West, South, and Northeast. There was a 6.4 month supply of new homes on the market at the end of July with an inventory of 337,000 units (+1.2 percent versus June 2019 and +7.3 percent versus July 2018).

#4Jobless claims remained near multidecade lows in mid-August. The Department of Labor reports that the seasonally adjusted count of first-time claims made for unemployment insurance benefits dropped by 15,000 to 209,000. This was 2.3 percent below that of a year earlier and continued a remarkable streak for the proxy of layoff activity of sub-300,000 claims going back five years (except for a handful of weeks). The 4-week moving average of first-time claims edged up by 500 to 214,500 (-0.7 percent versus the same week a year earlier). 1,704,365 people were receiving some form of unemployment insurance during the week ending August 3rd, essentially matching the count from the same week a year earlier.

#5Internet retailers continued to grab market share during Q2. The Census Bureau indicates that sales at U.S. e-commerce retailers grew 4.2 percent during the three months from April to June to a seasonally adjusted $146.2 billion. Total retail sales were $1.362 trillion over the same period (up only 1.6 percent from the prior quarter), meaning internet retailers owned 10.7 percent of all sales during the quarter. E-commerce sales have risen 13.3 percent over the past year with the four-quarter comparable for all retail sales at 3.2 percent.

Other U.S. economic data released over the past week:
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Trade, Business Investment Weigh on Q2 GDP: July 22 – 26

Economic growth slowed during the spring. Here are the five things we learned from U.S. economic data released during the week ending July 26.

#1Economic expansion softened during Q2. The Bureau of Economic Analysis’ first estimate of second-quarter 2019 Gross Domestic Product (GDP) has the U.S. economy expanding at a seasonally adjusted annualized rate of 2.1 percent. This was below Q1’s 3.1 percent growth rate but ahead of the 1.1 percent pace of expansion during the final three months of 2018. Only two of the major components of GDP made positive contributions to Q2’s economic expansion: personal consumption and government expenditures. Drags on the economy were the change in private inventories, net exports, nonresidential fixed investment, and residential fixed investment. Other takeaways include exports falling an annualized 5.2 percent during the quarter while imports edged up 0.1 percent and that business investment slumped 0.6 percent (its first pullback since the first three months of 2016). The BEA will revise its Q2 GDP estimate twice over the next two months.GDP 2015-9 072619

#2Economic data finds economic growth during June was just below its historical pace. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators, added one-basis point during the month to a reading of -0.02. A reading of 0.00 for the CFNAI is indicative of the U.S. economy expanding at its historical average, so June’s reading suggests a slightly below-average economic growth. (A reading of -0.70 would indicate a recession.) Forty of the 85 CFNAI components made a positive contribution to the headline index. Among the four major categories of indicators, only those linked to employment made a positive contribution to the index (adding six-basis points). Those tied to sales/orders/inventories (negative three-basis points) and consumption/housing (negative five-basis points), while those related to production made a neutral contribution.

#3Sales of previously owned homes slipped in June. The National Association of Realtors places the seasonally adjusted annualized sales rate of existing homes at 5.27 million units, off 1.7 percent from the prior month and 2.2 percent from a year later. Sales improved during the month in the Midwest and North but eased up in the West and South. Even with a small 1.0 percent increase, inventories of unsold homes remained tight at 1.93 million homes—the equivalent to a 4.4 month supply. The median sales price of $285,700 represented a 4.3 percent gain from a year earlier. The press release noted that “the nation is in the midst of a housing shortage and much more inventory is needed.”

#4Meanwhile, new home sales improved. New single-family home sales rose 7.0 percent during June to a seasonally adjusted annualized rate of 646,000 units. This followed an 8.2 percent drop in May and left the Census Bureau measure 4.5 percent ahead of its year-ago sales pace. During the month, sales grew in the West and South but slowed in the Midwest and Northeast. Inventories of unsold homes edged higher to 338,000 units (+0.6 percent versus May 2019 and +9.4 percent versus June 2018), the equivalent to a 6.3 month supply.

#5Durable goods grew for the first time in three months in June. The Census Bureau reports that new orders for durable manufactured goods jumped 2.0 percent during the month to a seasonally adjusted $246.0 billion. This was a far better than the 2.3 percent and 2.8 percent declines of the two previous months. Transportation goods orders jumped 3.8 percent, pulled up by a sharp 75.5 percent surge in civilian aircraft orders and a 3.1 percent gain in motor vehicle orders. Net of transportation goods, core durable goods orders increased a still robust 1.2 percent. Growing during the month were new orders for machinery (+2.4 percent), fabricated metals (+2.1 percent), primary metals (+0.8 percent), computers/electronics (+0.4 percent), and electrical equipment/appliances (+0.1 percent).

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 20, 2019, First-Time Claims, seasonally adjusted): 206,000 (-10,000 vs. previous week; -11,000 vs. the same week a year earlier). 4-week moving average: 213,000 (-2.1% vs. the same week a year earlier).
FHFA House Price Index (May 2019, Purchase-Only Index, seasonally adjusted): +0.1% vs. April 2019, +5.0% vs. May 2018.

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

Consumer Spending Wobbled Again: May 27 – 31

Real consumer spending failed to grow in April. Here are the five things we learned from U.S. economic data released during the week ending May 31.

#1Personal spending growth matched price gains in April. Real personal consumption expenditures (PCE) were unchanged on a seasonally adjusted basis during the month, down from a 0.9 percent jump in March. Real spending on goods grew 0.1 percent, as a 0.3 percent bounce in spending of nondurables outweighed a 0.4 percent drop for durables expenditures. Real spending on services slipped 0.1 percent. The same Bureau of Economic Analysis report has the PCE deflator, a measure of inflation, growing by 0.3 percent during the month, which means nominal (not price adjusted) personal spending rose 0.3 percent during the month. The increase in spending was funded by gains in nominal personal and disposable income of 0.5 percent and 0.4 percent, respectively. Real disposable income advanced 0.1 percent. The savings rate edged up by 1/10th of a percentage point to +6.2 percent. Over the past year, real disposable income has grown 2.2 percent, while real spending expanded 2.7 percent.Personal Spending 2018-9 053119

#2A revision finds Q1 economic expansion was slightly less robust than previously believed. The Bureau of Economic Analysis lowered its growth estimate of first quarter 2019 Gross Domestic Product (GDP) from a seasonally adjusted annualized rate (SAAR) of +3.2 percent to +3.1 percent. The downward revision was the result of lower than previously believed levels of business investment and private inventory accumulation. Q1 GDP growth outpaced that of the final three months of 2018 (+2.2 percent) but was slower than that of Q2 (+4.2 percent) and Q3 (+3.4 percent). Contributors to Q1 economic growth were (in declining order) personal spending (adding 90-basis points to the increase in GDP), the change in private inventories (+60-basis points), exports (+58-basis points), imports (+39-basis points), government expenditures (+42-basis points), and fixed nonresidential investment (+31-basis points). Residential fixed investment—i.e., housing—subtracted 13-basis points from Q1 GDP growth. The same report included the BEA’s first estimate of Q1 corporate profits, which sank 2.8 percent from the prior quarter. 

#3Consumer sentiment firmed in May. The Conference Board’s Consumer Confidence Index added 4.9 points during the month to a seasonally adjusted reading of 134.1 (1985=100), near its 18-year high. The present conditions index added 6.2 points to 175.2 while the expectations index grew by 3.9 points to 106.6. 38.3 percent of survey respondents described current business conditions as “good” while only 10.2 percent seeing them as “bad.” Similarly, 47.2 percent of survey respondents viewed jobs as being “plentiful” versus only 10.9 percent sensing jobs were “hard to get.” The press release stated the results “suggest no significant pullback in consumer spending in the months ahead.

#4…But one survey hints that confidence softened towards the end of the month. The Index of Consumer Sentiment from the University of Michigan came in at 100.0 (100=1966Q1), up 2.8 points from April 2019 and 2.0 points from May 2018. All of the increase came from a brighter outlook for the future as the expectations index surged by 5.9 points to 93.5 (May 2018: 89.1). The current conditions slipped 2.3 points to 110.0, which also was 1.8 points below its year-ago mark. The press release noted that even though the index had gained from April, “confidence significantly eroded in the last two weeks of May.”

#5Home purchase contract activity slowed in April. The National Association of Realtors’ Pending Home Sales Index (PHSI) pulled back 1.5 percent during the month to a seasonally adjusted reading of 104.3 (2001=100). This left the measure of contract signings of previously owned homes 2.0 percent below from its year-ago reading. The PHSI grew 1.3 percent in the Midwest but lost ground in the South (-2.5 percent), Northeast (-1.8 percent), and West (-1.8 percent). The measure had negative 12-month comparables in all four Census regions. The press release said that despite the pullback in the PHSI, “it’s inevitable for sales to turn higher in a few months.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 25, 2019, First-Time Claims, seasonally adjusted): 215,000 (+3,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 216,750 (-1.5% vs. the same week a year earlier).
FHFA House Price Index (March 2019, Purchase-Only Index, seasonally adjusted): +0.1% vs. February 2019, +4.9% vs. March 2018.
Case-Shiller Home Price Index (March 2019, 20-City Index, seasonally adjusted): +0.1% vs. February 2019, +2.7% vs. March 2018.
Agricultural Prices (April 2019, Prices Received by Farmers): +1.1% vs. March 2019, +0.1% vs. April 2018. 

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