Trade Data Holds Steady in July: September 4 – 8

The trade picture barely changed during July, but the service sector perked up in August. Here are the five things we learned from U.S. economic data released during the week ending September 8.

#1The trade deficit held steady during July. The Census Bureau and Bureau of Economic Analysis tell us that exports slowed $0.6 billion to a seasonally adjusted $194.4 billion (+4.9 percent versus July 2016) and that import activity slipped by $0.4 billion to $238.4 billion (+5.1 percent versus 2016). The resulting trade deficit of $43.7 billion was up a mere $0.1 billion from June but was up 5.8 percent from a year earlier. The goods deficit was essentially unchanged at -$65.3 billion while the services surplus shrank by $0.2 billion to +$21.6 billion. While civilian aircraft exports grew by $1.1 billion, exports slowed for consumer goods and automotive vehicles. Capital goods imports increased $1.3 billion (largely of computers and associated accessories) while imports of crude oil and passenger cars both declined. The United States had its largest goods trade deficits in July with China, the European Union, Japan, and deficit 2013-2017-090817

#2A slowdown in transportation goods pulled down factory orders during July. Per the Census Bureau, new orders for manufactured goods fell 3.3 percent during the month to a seasonally adjusted $466.4 billion. Transportation goods orders plummeted 19.2 percent, thanks to a 70.8 percent drop in orders for manufactured goods and a 0.9 percent decline in orders for automobiles. Net of transportation goods, core factory orders gained 0.5 percent during July to a seasonally adjusted $392.2 billion. Growing during the month were new orders for electrical equipment/appliances (+2.6 percent), computers/electronics (+2.1 percent), furniture (+1.9 percent), fabricated metal products (+0.5 percent), nondurable goods (+0.4 percent), and primary metals (+0.2 percent). Shipments grew 0.3 percent during July, with shipments of non-transportation goods increasing 0.4 percent. Unfilled orders contracted 0.3 percent while inventories expanded 0.2 percent.

#3Business activity in the service sector picked up during August. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business grew by 1.4 points during to a seasonally adjusted reading of 55.3, regaining some of the measure’s losses from July. The NMI has been above a reading of 50.0—indicative of an expanding service sector—for 92 straight months. Three of the NMI’s four components improved during the month: business activity, new orders, and employment. The component for supplier deliveries declined during the month. Fifteen of 18 tracked service sector industries reported growth during the month, led by retail, information, and management of companies/support services. The press released noted that a “majority of respondents are optimistic about business conditions going forward.”

#4Q2 productivity growth was a bit better than previously believed. The Bureau of Labor Statistics upwardly revised its estimate of nonfarm business sector productivity growth from the 0.9 percent gain reported a month ago to a 1.5 percent increase, with output growing 4.0 percent and the number of hours worked rising 2.5 percent. Productivity gains have varied greatly quarter-to-quarter and, as a result, output per hour worked has increased by only 1.3 percent over the past year. Manufacturing sector productivity rose 2.9 percent during the quarter (up from the 2.5 percent previously reported), led by a 3.8 percent bump in output per hour for durable goods (this was unchanged from the initial estimate released a month ago). Nondurable goods production increased 0.5 percent during Q2, an improvement from the original estimate of a 0.1 percent contraction.

#5Hurricane Harvey led to a surge in jobless claims during the final days of August. The Department of Labor estimates that there were a seasonally adjusted 298,000 first time claims made for unemployment insurance benefits during the week ending September 2. This was up 62,000 from the previous week and 41,000 claims from the same week a year earlier. The state of Texas—site of Harvey’s prolonged landfall—suffered from 63,742 first time claims, up a sharp 51,637 claims from the previous week. The state with the second largest biggest week-to-week increase in first-time claims was Michigan, which saw its first-time claims count grow by a mere 3,283. The boost in unemployment resulting from Harvey is expected to be fleeting, but of course, Hurricane Irma will have similar (if also likely temporary) negative impact on the labor market over the coming weeks. Even with the surge in first-time claims, the four-week moving average of first-time claims of 250,250 was still down 3.6 percent from the moving average of the same week a year earlier.

Other U.S. economic data released over the past week:
Consumer Credit (July 2017, Outstanding Consumer Credit Balances-net of real-estate backed loans, seasonally adjusted): $3.754 trillion (+$18.5 billion vs. June 2017, +5.9% vs. July 2016).
Wholesale Inventories (July 2017, Inventories of Merchant Wholesalers, seasonally adjusted): $602.4 billion (+0.6% vs. June 2017, +3.3% vs. July 2016).
Beige Book

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

More Homes Featured Sold Signs in January: What We Learned During the Week of February 20 – 24, 2017

Home sales held firm in January, but overall economic activity may have slightly softened. Here are the 5 things we learned from U.S. economic data released during the week ending February 24.

#1Existing home sales hit another post-recession high in January. The National Association of Realtors reports that sales of previously owned homes increased 3.3% during the month to a seasonally adjusted annualized rate of 5.69 million homes (+3.8% vs. January 2016). Existing home sales have not been this strong since February 2007. Sales grew in the same 3 of 4 Census regions on both a month-to-month and year-to-year basis. Sales only slowed in the Midwest (-1.5% vs. December 2016, -0.8% vs. January 2016). As has been the trend in recent years, inventories of previously owned homes remained very tight during the month with only 1.69 million homes available for sale. While inventories had grown 2.4% during the month, it was off 7.1% from January 2016 and the equivalent to a ridiculously tight 3.6 month supply of homes. The median sales price blossomed 7.1% over the past year to $228,900. The press release links the robust housing market to “strong hiring and improved consumer confidence at the end of last year” but also warns tight inventories were “deteriorating affordability conditions.”home-sales-jan17-022517

#2New home sales rebounded in January. The Census Bureau estimates new home sales grew 3.7% during the month to a seasonally adjusted annualized rate of 555,000 units. This had followed a 7.0% drop in December and left new home sales 5.5% above its January 2016 sales pace. Sales grew during the month in 3 of 4 Census regions: Northeast (+15.8%), Midwest (+14.8%), and the South (+4.3%). Sales slowed 4.4% in the West. 3 of 4 regions also had positive 12-month comparables, with the negative outlier being in the South (-1.0% vs. January 2016). Inventories of new homes have been gradually growing in recent months, expanding 3.5% in January to 265,000 units (+10.9% vs. January 2016). This was equivalent to 5.7 month supply. The median sales price of $312,900 was 7.5% above that of a year earlier.

#3It appears the rate of economic growth slowed during January. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic measures, was at -0.05 during January, down 23-basis points from the previous month. An index reading of 0.00 indicates economic growth at its historic rate, so January’s slightly negative CFNAI reading signified slower than normal growth. Among the 4 major categories of components to CFNAI, those associated with production made the biggest negative contribution to the overall index. Production-related indicators made a contribution to CFNAI of -0.07, down 25-basis points from its December 2016 contribution. Indicators tied to personal consumption and housing cost 5-basis points to the CFNAI, down from a -0.03 contribution a month earlier. Meanwhile, making small positive contributions to the CFNAI were those associated with employment (+0.06, up 7-basis points from a month earlier) and sales/orders/inventories (+0.02, down 2-basis points from December). The 3-month moving average slipped by a basis point to -0.03. A year earlier, this moving average was at -0.19.

#4Consumer sentiment slipped but remained solid in February. The Index of Consumer Sentiment from the University of Michigan lost 2.2 points during the month to a seasonally adjusted 96.3 (1966Q1 = 100). This was up 6/10ths of a point from the preliminary February reading reported several weeks ago and up 4.6 points from a year earlier. February’s decline was the product of lowered expectations for the future—the expectations index shed 3.8 points to a reading of 86.5 (February 2016: 81.9). The current conditions index edged up 2/10ths of a point to 111.5 (February 2016: 106.8). The press release noted that the 3-month moving average was at its highest point “in more than a decade” but also said that there was a significant partisan split in results with Democrats expecting a recession and Republicans anticipating “renewed robust economic growth.”

#5First-time jobless claims remain at 40+ year lows. Per the Department of Labor, there were 244,000 first-time claims made for unemployment insurance benefits during the week of February 18. This was up 6,000 from the previous week but 20,000 under the year ago count. The 4-week moving average of jobless claims of 241,000 was 9.8% below the moving average of a year earlier and its lowest point since July 21, 1973. In all, 2.508,785 people were receiving some form of unemployment insurance benefits during the week ending February 4 (-7.4% vs. a year earlier).

Other U.S. economic data released over the past week:
FHFA House Price Index (December 2016, Purchase-Only Index, seasonally adjusted): +0.4% vs. November 2016, +6.2% vs. December 2015.
FOMC meeting minutes

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

Consumer Sentiment Improved as 2015 Wrapped Up: What We Learned During the Week of December 28 – January 1

Another consumer sentiment survey rebounding in December was the highlight in an otherwise quiet holiday week of economic data news. Here are the 5 things we learned from U.S. economic data released during the week ending January 1.

#1Another survey finds improving consumer confidence as 2015 wrapped up. Mimicking what we saw last week with a University of Michigan survey, the Conference Board Consumer Confidence Index added 3.9 points during December to a seasonally adjusted 96.5 (1985 = 100). Unlike with the University of Michigan Survey (which hit a 6-month high), this survey’s gain only recaptured some of the 6.5 points that were shed back in November. The present conditions index added 4.3 points to 115.3 (its best since September) while the expectations index added 3.5 points to 83.9 (still below the 88.7 reading from October). 27.3% of survey respondents said that business conditions were “good” versus 19.8% that said that they were “bad.” Looking to the future, 12.9% expected the number of available jobs was going to increase over the next 6 months and 16.3% anticipate their incomes will gain. The press release states that “consumers are expecting little change in both business conditions and the labor market” in 2016. Of more immediate interest, the bump up in both sentiment surveys would seem to suggest that the recently completed holiday sales season was a good one. Some other anecdotal information released in recent days suggest the same, including that from MasterCard, while other sales trackers were less sanguine. We will learn more in the coming days and weeks.

#2Even with an increase in the days before Christmas, jobless claims remained at levels not seen in 15 years. The Department of Labor reports that the count of 1st time claims for unemployment insurance benefits jumped by 20,000 during the week ending December 26 to a seasonally adjusted 287,000. This was the measure’s largest 1-week gain since February, but it is worth noting that the data series can be particularly volatile during the holidays. The 4-week moving average increased by 4,500 to 277,000 claims. 010116graphicEven with its recent increases, the moving average in initial jobless claims remained 3.7% below year ago levels and has stayed under 280,000 every week since early May. The 4-week moving average of continuing jobless claims was at 2.220 million for the week ending December 19, down 7.5% from the same week a year earlier. 

#3Pending sales of previously owned homes slowed for the 3rd time in 4 months in November. The Pending Home Sales Index from the National Association of Realtors dropped a full point to a seasonally adjusted 106.9 (2001 = 100). Even with the recent declines, the index remained 2.7% above year ago levels. The index, which tracks signed contracts to purchase previously owned homes, gained during the month in the South (+1.3%) and Midwest (+1.0%) but contracted in the West (-5.5%) and Northeast (-3.0%). The Pending Home Sales Index was above their year ago readings in all 4 Census regions. NAR’s press release offered a number of reasons for the recent softness in contract signings; including, rising home prices, tight inventories and “mixed signs of an economy losing momentum.”

#4Home prices jumped on a seasonally adjusted basis during October. The 20-city S&P Case-Shiller Home Price Index came in at 182.83, up 0.1% from September on a nominal basis that translates into a 0.8% surge after adjusting for typical seasonal variation. The 20-city index was 5.5% above year ago levels, yet remained 11.5% below the data series’ July 2006 peak. The index gained in 10 of the 20-tracked markets—led by Tampa (+0.7%), San Francisco (+0.6%), Phoenix (+0.5%) and Portland (+0.5%)—and was up in all 20 markets after taking typical seasonal variations into account. 3 markets have seen prices grow by more than 10% over the past year: Denver (+10.9%), Portland (+10.9%) and San Francisco (+10.9%). The press release notes that “generally good economic conditions continue to support gains in home prices.” Further, it says that future home buyers have little reason to “fear runaway mortgage interest rates” even as the Federal Reserve begins to bump up the fed funds target rate.

#5Higher prices for fruit, vegetables and dairy goods in November led to only the 2nd gain in agricultural prices over the 6 months. The Department of Agriculture’s index for prices received by farmers increased by 3 points to 95 (100 = 2011). This was down 5.4% from the same month a year earlier. Crop prices gained 2.5% during the month as a 24.5% surge in commercial vegetable prices and a 5.3% jump in fruit prices outweighed the 3.2% drop in the prices for feed gains & hay. Pushing up vegetable prices were big gains for lettuce while strawberries and grapes led the jump in fruit prices. Prices for livestock and related products increased 1.0% during November with a 3.4% increase in dairy product prices and a 4.6% drop in the prices for meat animals.

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