Home Sales and Durable Goods Orders Take Steps Backward: August 20 – 24

Home sales continued to mellow this summer. Here are the five things we learned from U.S. economic data released during the week ending August 24.

#1Existing home sales slipped for a fourth consecutive month in July. The National Association of Realtors reports that sales of previously owned homes inched down 0.7 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.34 million units, its slowest sales pace since February 2016. During the four-month losing streak, home sales have declined 4.6 percent. Sales dropped during July in three of four Census regions: Northeast (-8.3 percent), Midwest, (-1.6 percent), and South (-0.4 percent). Sales gained 4.4 percent in West. Sales were 1.5 percent below that of a year earlier, with negative 12-month comparables in all four Census regions. The number of homes available for sale held relatively stable versus both June and a year earlier at 1.92 million units, the equivalent to a tight 4.3 month supply. The median sales price of $269,600 represented a 4.5 percent increase from a year earlier. The press release stressed that the supply of homes is “still not at a healthy level, and new home construction is not keeping up to meet demand.”Existing and New Home Sales July 2018 082418

#2New homes slumped for a second straight month. The Census Bureau estimates new home sales were at a seasonally adjusted annualized rate (SAAR) of 627,000 units during July, down 1.7 percent from June but still 12.7 percent ahead of the July 2017 sales pace. New home sales improved in the West (+10.9 percent) and Midwest (+9.9 percent) but fell in the Northeast (-52.3 percent) and South (-3.3 percent). There were 309,000 new homes available for sale at the end of July (+2.0 percent versus June 2018 and +12.0 percent versus July 2017), the equivalent to a 5.9 month supply. The median sales price of $328,700 was up 1.8 percent from a year earlier.

#3Volatility in aircraft purchasing led to a slowdown in durable goods orders. New orders for durable manufactured goods slumped 1.7 percent to a seasonally adjusted $246.9 billion, per the Census Bureau. Transportation goods orders fell 5.3 percent thanks to huge drops in orders for both civilian (-35.4 percent) and defense (-34.6 percent) aircraft (orders of both tend to swing widely month-to-month). Motor vehicle orders gained 3.5 percent. Orders for durable goods other than transportation orders grew 0.2 percent, with increases for computers/electronics (+1.1 percent), machinery (+0.6 percent), and primary metals (+0.3 percent). Electrical equipment/appliances orders slipped 0.2 percent. New orders for civilian capital goods net of aircraft—a measure of business investment—jumped 1.4 percent. Durable goods shipments slipped 0.2 percent during the month to $250.8 billion, with the measure gaining 0.6 percent after removing the shipments of transportation goods.

#4Employers laid off relatively few workers during the late summer. There were 210,000 first-time claims made for unemployment insurance benefits during the week ending August 18, down 2,000 claims from the week earlier and 27,000 claims from the same week a year ago. Only twice has the Department of Labor’s estimate of initial jobless claims been this low since 1969—and both times have been within the past four months. The four-week moving average of first-time claims dropped to 213,750, down 10.8 percent from a year earlier and (also) just above its 49-year low. 1.704 million people (not seasonally adjusted) were receiving some form of unemployment insurance benefits during the week ending August 4, down 11.3 percent from a year earlier

#5House prices grew at a slower rate in June. The Federal Housing Finance Agency (FHFA) indicates that its purchase-only House Price Index (HPI) grew 0.2 percent on a seasonally adjusted basis during the month. (This measure tracks sales prices of homes purchased using mortgages that were sold to or guaranteed by Fannie Mae and Freddie Mac.) The HPI increased in seven of nine Census regions, led by a 0.7 percent gain in the Mountain region, a 0.6 percent rise in the East North Central region, and a 0.5 percent bump in the Middle Atlantic. Prices declined 0.4 percent in both New England and the South Atlantic. Home prices have risen 6.5 percent over the past year, with positive 12-month comparables in all nine Census regions. The largest year-to-year percentage price gains were in the Mountain (+9.6 percent), Pacific (+7.0 percent) and South Atlantic (+6.7 percent) regions.

Other U.S. economic data released over the past week:
FOMC Minutes

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

Q4 GDP Revised Up, Consumer Spending Paused: March 26 – 30

Q4 GDP was revised upward, but consumer spending has been sluggish during the first two months of 2018. Here are the five things we learned from U.S. economic data released during the week ending March 30.

#1A new estimate finds that the U.S. economy expanded during Q4 more quickly than previously reported. The Bureau of Economic Analysis’ third estimate of Gross Domestic Product (GDP) finds the U.S. economic swelled 2.9 percent on a seasonally adjusted annualized rate (SAAR) during the final three months of 2017. This was up from the 2.5 percent annualized growth rate reported a month earlier. With the upward revision, BEA now estimates the U.S. economy expanded 2.3 percent for all of 2017, which was an improvement from the 1.5 percent growth rate in 2016 but below 2015’s 2.9 percent gain. The latest revision to Q4 GDP was the result of higher than previously believed levels of personal spending and private inventory investment. Positive contributors to GDP growth during the quarter were personal spending, fixed investment, and government spending, while net exports and private inventory accumulation were both drags on economic growth. Corporate profits slipped 0.1 percent during Q4 following a 4.3 percent bump during Q3.Gross Domestic Product 2000-2017-033018

#2The U.S. economy gained momentum in February. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators, surged by 86-basis points during the month to a seasonally adjusted reading of +0.88. This was the CFNAI’s best reading since last October. Much of the gain came from production-related economic indicators, which made a +0.50 contribution to the CFNAI (a big improvement from January when the same measures had made a negative -0.15 contribution). Also making positive contributions during the month were indicators tied to employment (+0.31) and sales/orders/inventories (+0.09). Dragging down the CFNAI were indicators related to consumption/housing (-0.02). In all, 63 of the 85 economic indicators made positive contributions to the CFNAI. The CFNAI’s 3-month moving average gained by 21-basis points to +0.37. Since the CFNAI is indexed such that a reading of 0.00 means the U.S. economy is growing at its historical level, the +0.37 moving average indicates the U.S. economy is expanding at an above average rate.

#3Personal spending failed to grow for a second consecutive month. The Bureau of Economic Analysis finds real personal consumption expenditures (PCE) were unchanged during February after having contracted 0.2 percent during January. Even with the recent lack of increases, real PCE has increased 2.8 percent over the past year, matching January’s 12-month comparable. Real spending on services and goods also was steady during February, with the latter split between a 0.6 percent increase in spending on durable goods and a 0.3 percent contraction for nondurables. Over the past year, spending on goods has grown 4.3 percent while that on services was 2.1 percent ahead of year-ago levels. Real disposable personal income gained 0.2 percent during February, slower than January’s 0.6 percent advance. Over the past year, real disposable income has increased 2.1 percent. The gap between spending and income has been covered by a slowdown in savings, although this has recovered in recent months. The personal savings rate was at +3.4 percent in February, up 2/10ths of a percentage point from January. Finally, the Federal Reserve’s preferred gauge of inflation continues to gradually creep up. The PCE deflator has grown 1.8 percent over the past year while the core measure (which removes the impact of energy and food) gained 1.6 percent over the same 12 months.

#4Two measures of consumer sentiment moved in opposite directions during March, although both indicate that Americans remain optimistic. The Conference Board’s Consumer Confidence Index shed 2.3 points during the month to a seasonally adjusted reading of 127.7 (1985=100). Despite losing a step during the month, the measure remained 2.8 points ahead of its year-ago reading and stayed close to the 18-year high achieved in February. The present conditions index lost 1.3 points during March to a reading of 159.9 while the expectations index shed three full points to 106.2. 37.9 percent of survey respondents described current business conditions as “good” versus 13.4 percent seeing them as “bad.” Similarly, 39.9 percent of consumer saw the number of available jobs as “plentiful” while only 14.9 percent viewed them as “hard to get.” The press release noted that the results suggest “suggest further strong [economic] growth in the months ahead.”

The University of Michigan’s Index of Consumer Sentiment added 1.7 points during March to a seasonally adjusted 101.5 (1966Q1=100). While this was a small pullback from the preliminary March reading reported a few weeks earlier, this final reading represented a 14-year high point for the sentiment measure and a 4.5 point improvement over the previous year. The current conditions index jumped 6.3 points to a record-high of 121.2 (March 2017: 113.2) while the expectations index slipped 1.2 points to 88.8 (March 2017: 86.5). The press release indicates that the index readings suggest a real growth rate in real personal spending of 2.6 percent from mid-2018 to mid-2019.

#5Pending home sales picked up in February. The National Association of Realtors says that its measure of contract signings to purchase a previously owned home gained 3.1 percent during the month to a seasonally adjusted index reading of 107.5 (2001=100). Even with the gain, this was 4.1 percent under the year-ago contract signing pace. The index improved during February in all four Census regions, led by a 10.3 percent bounce in the Northeast. The Pending Home Sales Index also grew 3.0 percent in the South, 0.7 percent in the Midwest and 0.4 percent in the West. All four regions had negative 12-month comparables, spanning from a 9.5 percent drop in the Midwest to a 1.5 percent year-to-year slowdown in the South. The press release notes that the “minuscule” number of homes on the market and “its adverse effect on affordability” as weighing on the housing market.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 24, 2018, First-Time Claims, seasonally adjusted): 215,000 (-12,000 vs. previous week; -38,000 vs. the same week a year earlier). 4-week moving average: 224,500 (-11.1% vs. the same week a year earlier).
Case-Shiller House Price Index (January 2018, 20-City Index, seasonally adjusted): +0.8% vs. December 2017, +6.4% vs. January 2017.
Agricultural Prices (February 2018, Prices Received by Farmers (Index (2011=100)): 90.8 (+5.7% vs. January 2018, -0.2% vs. February 2017). 

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

As 2017 Ends, Jobless Claims Remain Low and Sentiment Eases: December 25 – 29

Employers issued relatively few pink slips during the final days of the year. Here are the five things we learned from U.S. economic data released during the week ending December 29.

#1First-time jobless claims remained near a 40+ year low as 2017 wrapped up. The Department of Labor reports that there were a seasonally adjusted 245,000 initial claims made for unemployment insurance benefits during the week ending December 23. This was unchanged from the week before and 13,000 below the number of first-time claims from the same week a year earlier. More remarkable, the jobless count has been below 300,000 claims every week since March 21,2015, with the measure remaining for much of 2017 near levels not consistently seen since 1973(!). The four-week average of first-time claims inched up by 1,750 to 237,750 claims. This was 7.2 percent below the moving average from a year ago. During the week ending December 9, 2.004 million people were receiving some form of unemployment insurance benefits, 6.4 percent below that a year earlier.First-Time Jobless Claims-2007-2017-122917

#2Another second measure of consumer sentiment eased during December. The Conference Board’s Consumer Confidence Index lost 6.5 points during the month to a seasonally adjusted 122.1 (1985=100). This was up from the 113.3 reading from December 2016. The decline occurred despite survey respondents growing slightly more confident about current business conditions—the present conditions index added 1.7 points during the month to 156.6. The expected conditions index, however, plummeted by 11.9 points to 99.1. 35.7 percent of survey respondents report that jobs are “plentiful” while 15.2 percent report them being “hard to get,” with the latter being a 16-year low. The press release noted that “consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.” During the previous week, we learned that the University of Michigan’s Index of Consumer Sentiment had lost 2.6 points to a seasonally adjusted reading of 95.9 (1966Q1=100).

#3Home purchase contract signings inched up during November. The Pending Home Sales Index (PHSI) from the National Association of Realtors added 2/10ths of a point during the month to a seasonally adjusted reading of 109.5. This was the PHSI’s highest point since June. The index jumped 4.1 percent in the Northeast and edged up 0.4 percent in the Midwest while pulling back modestly in both the West (-1.8 percent) and South (-0.4 percent). The PHSI has grown 0.8 percent over the past year, with positive 12-month comparables in the South (+2.0 percent), Northeast (+1.1 percent), and Midwest (+0.8 percent). Meanwhile, contract signings to purchase a previously owned home in the West were 2.3 percent below that of a year earlier. While the press release notes that the “housing market is closing the year on a stronger note,” it warned that potential buyers were being “stifled by tight supply and higher prices.”

#4Home prices continued to rise in October. The 20-city Case-Shiller Home Price Index grew 0.2 percent without seasonal adjusted and jumped 0.7 percent after adjustments for seasonal variation. The measure of home prices has risen 6.4 percent over the past year, putting the index just 1.3 percent below its pre-recession peak back in 2006. The index gained on a seasonally adjusted basis in all 20-tracked markets with increases greater than 1.0 percent in Las Vegas (+1.4 percent) and San Francisco (+1.2 percent). The press release states that rising home prices have been the result of “low interest rates, low unemployment and continuing economic growth” but also notes that higher prices are making renting “more attractive than buying.” 

#5Agricultural prices jumped in November. The Department of Agriculture reports that the prices received by farmers swelled 4.2 percent during the month, its first monthly gain since May. The measure has increased 9.1 percent since November 2016. The prices received for livestock production surged 8.1 percent (and was up 18.0 percent from the same month a year earlier), as poultry & egg prices jumped 15.0 percent and that of metal animals grew 7.2 percent. Dairy product prices increased 1.0 percent. Meanwhile, prices received for crop production slumped 1.0 percent during November but was still 1.1 percent above the prices received a year earlier. Prices fell for vegetables/melons (-6.1 percent) and grain/oilseed (-3.5 percent) but gained 1.4 percent for fruit/tree nuts.

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