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:
FOMC Minutes

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

Housing Paused in April: May 20 – 24

Home sales—and overall economic activity—were sluggish in April.  Here are the five things we learned from U.S. economic data released during the week ending May 24.

#1Existing home sales slowed in April. The National Association of Realtors tells us that sales of previously owned homes slipped 0.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.190 million units. Sales grew 1.8 percent in the West but had slowed 4.5 percent in the Northeast and 0.4 percent in the South while holding even in the Midwest. Existing home sales were 4.4 percent below their year-ago sales pace, with negative 12-month comparables in all four Census regions. Home supplies improved a bit (but remained tight) as the count of unsold homes grew 9.6 percent to 1.830 million units. This was up 1.7 percent from a year earlier and the equivalent to a 4.2 month supply of homes. The median sales price of $267,300 represented a 3.6 percent increase over the past year. NAR’s press release noted that “job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales.”

#2…As did new home sales. Sales of new single-family homes dropped 6.9 percent in April to a seasonally adjusted annualized rate (SAAR) of 673,000 homes, per the Census Bureau. Even with the drop, new home sales were up 7.0 percent versus a year earlier and were near a post-recession high. Sales slumped in three of four Census regions during the month: West (-8.3 percent), Midwest (-7.4 percent), and South (-7.3 percent). All four regions enjoyed positive 12-month sales comparables. There were 332,000 unsold new homes available for sale at the end of April, down 0.9 percent from March, up 11.0 percent from a year earlier, and the equivalent to a 5.9 month supply.

#3Economic activity pulled back in April. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators indexed such that a reading 0.00 signals the U.S. economy was growing at its historical average—lost 50-basis points during the month to a reading of -0.45. Only 33 of the 85 indicators made positive contributions to the CFNAI while the other 52 made negative contributions. The contributions from three of four major categories of indicators declined during the month: production (down 40-basis points to -0.44), consumption/housing (down five basis points to a neutral contribution), and sales/orders/production (down five basis points to +0.01). Indicators tied to employment improved slightly with a one-basis point gain to +0.04. The CFNAI’s three-month moving average shed 38-basis points to -0.22, suggesting the U.S. economy was expanding at a below average rate.

#4Transportation goods—and in particular civilian craft—led to a drop in durable goods orders. The Census Bureau estimates the value of new orders of manufactured new goods slumped 2.1 percent in April to a seasonally adjusted $248.5 billion New orders for transportation goods fell 5.9 percent as civilian aircraft orders slowed 25.1 percent and motor vehicle orders declined 3.4 percent. Net of transportation goods, new orders were unchanged for the month at $163.0 billion. Rising during the month were orders for computers (+4.0 percent), electrical equipment/appliances (+0.9 percent), fabricated metal products (+0.4 percent), and machinery (+0.1 percent). New orders contracted for communications equipment (-5.5 percent) and primary metals (-0.8 percent). Also slumping was a proxy for business investment—civilian non-aircraft capital goods—as it dropped 0.9 percent.

#5Jobless claims remained relatively sparse in mid-May. The Department of Labor reports that there were a seasonally adjusted 211,000 first-time claims made for unemployment insurance benefits during the week ending May 18, down 1,000 from the prior week and 16,000 from the same week a year earlier. The four-week moving average of initial jobless claims shrank by 4,750 during the week to 220,250. While up 1.0 percent from the same week a year earlier, the measure remains close to its nearly five-decade low. 1.565 million people were receiving some form of unemployment insurance benefits during the week ending May 4, off 3.6 percent from the same week a year earlier.

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

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

Home Sales Sputtered Again: January 21 – 25

Home sales disappointed again during the final days of 2018.  Here are the five things we learned from U.S. economic data released during the week ending January 25.

Note that the partial shutdown of the federal government has delayed the release of certain economic data reports.

#1Existing home sales plummeted as 2018 ended. The National Association of Realtors indicates sales of previously owned homes dropped 6.4 percent in December to a seasonally adjusted annualized rate (SAAR) of 4.99 million units. This was the measure’s worst showing since November 2015 and represented a 10.3 percent decline from a year earlier. Sales fell in all four Census regions on both a month-to-month and year-to-year basis, including double-digit percentage drops over the previous year in the West (-15.0 percent) and Midwest (-10.5 percent). Also falling during the month was the number of unsold homes on the market, with inventories shrinking 5.1 percent to 1.550 million units. This was equivalent to a very tight 3.7 month supply (smallest since last March). The median sales price of $253,600 was a 2.9 percent gain from a year earlier. NAR’s press release included a bit of optimism for the near-term, stating that “with mortgage rates lower, some revival in home sales is expected going into spring.”

#2Forward-looking economic indicators suggest a showdown in December. The Conference Board’s Leading Economic Indicators (LEI) lost 1/10th of a point to a reading of 111.7 (2016=100), its second drop in three months. Even with the December’s decline, the LEI has risen 4.3 percent over the past year. The partial federal government shutdown delayed the release of some government economic data, which forced the Conference Board to estimate values of some LEI components. With that caveat in mind, six of the LEI’s ten components made positive contributions in December, led by first-time jobless claims, the Leading Credit Index, and the interest rate spread. Improving during the month were both the coincident and lagging indices. The former gained 2/10ths of a point to 105.1 (+2.1 percent versus December 2017) while the latter added a half point to 106.7 (+2.8 percent versus December 2017). The press release stated that the effects of the partial government shutdown had not yet been reflected in the data, but the drop in the LEI suggests “the economy could decelerate towards 2 percent growth by the end of 2019.”

#3Jobless claims fell to a nearly 50-year low in mid-January. The Department of Labor estimates there were a seasonally adjusted 199,000 first-time claims made for unemployment insurance benefits during the week ending January 19. This was 13,000 claim decline from the prior week and the fewest reported since the week ending November 15, 1969(!). By comparison, there were 229,000 first-time claims made during the same week a year ago. The four-week moving average of first-time claims was at 215,000, off 9.5 percent from a year earlier. 2.216 million people were receiving some form of unemployment insurance benefits during the week ending January 5, down 9.7 percent over the previous year

#4Home prices rose at a solid pace in November. The Federal Housing Finance Administration (FHFA) reports that its purchase-only House Price Index grew 0.4 percent during the month on a seasonally adjusted basis. This matched October’s gain, along with that of June, July, and August (September’s increase was slightly smaller 0.3 percent.) The index grew in six of nine Census regions, including sizable gains in the South Atlantic (+1.1 percent), Middle Atlantic (+1.0 percent), West South Central (+1.0 percent), and East South Central (+0.9 percent). Prices fell in the Pacific (-0.8 percent), East North Central (-0.2 percent), and West North Central (-0.1 percent) regions. FHFA’s price measure of homes purchased with a conforming mortgage has risen 5.8 percent over the past year with favorable 12-month comparables in all nine Census regions.

#5Crude oil and gasoline inventories expanded in mid-January. The Energy Information Administration tells us that U.S. crude oil inventories—net of what is held in the Strategic Oil Reserve—grew by 8.0 million barrels during the week ending January 18 to 445.0 million barrels. This was up 8.1 percent from the same week a year earlier and “about” nine percent above the five-year average for this time of the year. Gasoline inventories grew 4.0 million barrels during the same week to 295.6 million barrels, up 6.4 percent from a year earlier. Inventories of distillates contracted by 0.6 million barrels to 142.4 million barrels (+1.9 percent versus the week ending January 19, 2018). The average retail prices of gasoline—$2.25—was 12.3 percent below that of mid-January 2018.

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