Housing Starts Rebound in June, Leading Economic Indicators Gain: July 17 – 21

Housing construction rebounded in June while leading economic indicators point towards accelerated economic activity during the latter half of this year. Here are the five things we learned from U.S. economic data released during the week ending July 21.

#1Housing construction jumped in June. Per the Census Bureau, housing starts were at a seasonally adjusted annualized rate (SAAR) of 1.215 million units, up 8.3 percent from May, 2.1 percent from a year earlier and its highest point since February. This had followed three consecutive monthly declines in starts. The annualized rate of single-family home starts grew 6.3 percent during the month to 849,000 units (+10.3 percent) while that for multifamily units surged 15.4 percent to 359,000 (off 10.7 percent from the year ago pace). Looking towards the future, the number of issued building permits jumped 7.4 percent during the month to 1.168 million permits (5.1 percent above the June 2016 rate). Housing completions increased 5.2 percent during June to an annualized rate of 1.144 million units. This was 8.1 percent ahead of the completions rate of a year earlier.Housing Starts-2006-2017-072117

#2Homebuilders were (slightly) less confident in July. The Housing Market Index (HMI) from the National Association of Home Builders shed two points to a seasonally adjusted reading of 64. While this was the HMI’s lowest mark since last November, it was still up six points from a year earlier and the 37th straight month in the measure was above a reading of 50, indicating more builders described housing conditions as “good” rather than “poor.” The HMI fell in two of four Census regions—South (down five points to 68) and Midwest (down four points to 64) but gained in the West (up three points to 74) and the Northeast (up two points to 48). Shedding two points were indices for both current and expected sales (to 70 and 73, respectively) while the measure of prospective buyers traffic slipped a point to 48. The press release described overall confidence as “solid,” but noted that homebuilders were “growing increasingly concerned over rising material prices, particularly lumber” that was “hurting housing affordability even as consumer interest in the new-home market remains strong.”

#3Forward looking economic indicators suggests greater economic growth for the rest of this year. The Conference Board’s Leading Economic Index (LEI) jumped by 8/10ths of a point during June to a seasonally adjusted 127.8 (2010=100). This represented nearly a four percent increase over the past year. Eight of the LEI’s ten component made a positive contribution to the index, led by housing building permits, manufacturing new orders, and the interest rate spread. Both the coincident index and the lagging index added 2/10ths of a point to 115.5 and 124.4, respectively. All four components of the coincident index made positive contributions, including nonfarm payrolls and industrial production. Four of seven components to the lagging index made positive contributions, led by the average prime rate charged by banks. The press release said the Conference Board expects “continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year.”

#4Employers added workers in 14 states during June. Detailed state-level employment data from June released by the Bureau of Labor Statistics finds nonfarm payrolls grew by a statistically significant amount in 14 states but were “essentially” unchanged in the other 36 states and the District of Columbia. States with the largest payroll gains during June were Texas (+40,200), Georgia (+27,400), New York (+26,000), and Maryland (+13,300). Thirty-nine states enjoyed significant employment gains over the past year but held steady in the other 11 states and in the District of Columbia. The states with the largest year-to-year percentage gains in nonfarm payrolls were Nevada (+3.8 percent), Utah (+3.0 percent), and Florida (+2.9 percent).

#5Bankruptcy filings continue to decline. The Administrative Office of the U.S. Courts reports that there were 796,037 bankruptcy filings during the 12 month period through June 30, 2017. This was off 2.8 percent from the same 12-month period a year earlier and down 30.0 percent from the 12-month count of four years earlier. There were 23,443 business bankruptcy filings during the 12-month period ending June 30, 2017 (down 7.1 percent from a year ago) and 772,594 non-business filings (down 2.7 percent from a year earlier). 

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 15, 2017, First-Time Claims, seasonally adjusted): 233,000 (-15,000 vs. previous week; -25,000 vs. the same week a year earlier). 4-week moving average: 2435,750 (-6.1% vs. the same week a year earlier).
Import Prices (June 2017, not seasonally adjusted):  -0.2% vs. May 2017, +1.5% vs. June 2016. Nonfuel imports: +0.1% vs. May 2017, +1.0% vs. June 2016.
Export Prices (June 2017, not seasonally adjusted):  -0.2% vs. May 2017, +0.6% vs. June 2016. Nonagricultural exports: unchanged vs. May 2017, +1.1% vs. June 2016.
Treasury International Capital Flows (May 2017, Net Foreigner Purchases of Domestic Securities, not seasonally adjusted): +$95.5 billion (vs. April 2017: +$3.8 billion, vs. May 2016: +$16.3 billion).

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

Home Sales Remain Firm, Moderate Economic Growth on Target for 2017: June 19 – 23

Home sales improved during May while forward-looking economic indicators suggest moderate economic growth during the rest of this year. Here are the 5 things we learned from U.S. economic data released during the week ending June 23.

#1Existing home sales crept up during May. The National Association of Realtors reports that sales of previously owned homes grew 1.1 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.62 million homes. This was 2.7 percent above the year ago annualized sales pace and just below its post-recession sales peak. Sales grew in three of four Census regions during May: Northeast (+6.8 percent), West (+3.4 percent), and South (+2.2 percent). Sales fell 5.9 percent in the Midwest. The 12-month comparables followed the same pattern, with sales growing in the Northeast, South, and West, but falling in the Midwest. There remained a dearth of homes on the market. A mere 4.2 month supply of homes were available for sale at the end of May, with the 1.96 million homes on the market representing 8.4 percent decline from a year earlier. As a result, the median sales price of existing home sales jumped 5.8 percent from a year earlier to $252,800. The press release noted that “[t]he job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level.”

#2New home sales also bounced up during May. The Census Bureau estimates the seasonally adjusted annualized sales rate for new homes was at 610,000 units, up 2.9 percent for the month and 8.9 percent from a year earlier. Sales surged in both the West and South by 13.3 percent and 6.2 percent, respectively, but cooled in both the Midwest (-25.7 percent) and Northeast (-10.8 percent). Homebuilders had 268,000 new homes available for sale at the end of May, up 1.5 percent from the previous month and 11.2 percent from a year earlier. This translated into a still tight 5.3 month supply of new homes. The median sales price for new homes jumped 16.8 percent over the past year, although some of the “increase” reflects larger (and therefore more expensive) homes sold.

#3Leading economic indicators point to 2017 economic growth of two percent or more. The Conference Board’s Leading Economic Index grew 0.3 percent during May to a seasonally adjusted reading of 127.0 (2010 = 100). This was up 3.5 percent from a year earlier. Eight of the leading index’s components made positive contributions to the measure during May, led by the interest rate spread, new orders for manufactured goods, and consumers’ expectations for business conditions. The coincident economic index edged up 1/10th of a point to 115.3 (+2.2 percent vs. May 2016) as three of four index components making positive contributions (personal income net of transfer payments, nonfarm payrolls, and manufacturing/trade sales). The lagging economic index also added 1/10th of a point to 124.2 (+2.1 percent vs. May 2016) with only three of seven index components making a positive contribution during the month. The press release noted that the leading indicators suggest “the economy is likely to remain on, or perhaps even moderately above, its long-term trend of about 2 percent growth for the remainder of the year.”

#4Layoff activity remained light during mid-June. Per the Department of Labor, there were a seasonally adjusted 241,000 first-time claims made for unemployment insurance benefits during the week ending June 17, up 3,000 for the week but 21,000 below the number of claims from the same week a year earlier. The jobless claims count has been below 300,000 for 120 consecutive weeks, a feat not seen since 1970(!). The four-week moving average of first-time claims of 244,750 was 8.3 percent below that of a year earlier. 1.817 million people were receiving some form of unemployment insurance benefits during the week ending June 3, 10.2 percent below the count of a year ago.

#5Americans’ household debt service remained relatively low in early 2017. The Federal Reserve indicates that financial obligations represent 15.47 percent of households’ disposable personal income during the first quarter of 2017. The financial obligations ratio was down one basis point from the previous quarter but up a basis point from a year earlier. This ratio has been consistently below 16 percent since 2011 (contrasting with ten years ago when the percentage was consistently nearly 18 percent) and has stayed near 30-year lows. The debt service ratio held steady at 10.04 during Q1 and was up two basis points from a year earlier. By comparison, this measure was above 13 percent ten years ago. Nondebt financial obligations (e.g., rent, leases) represented 5.43 percent of disposable income, down 1-basis point from the previous quarter but keeping the measure near its highest levels in 30 years.Financial Obligations Ratio--06232017

Other U.S. economic data released over the past week:
FHFA House Price Index (April 2017, Purchase-only Index, seasonally adjusted): +0.7% vs. March 2017, +6.8% vs. April 2016.

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

Manufacturing Rebounds in April, Leading Indicators Point Up: May 15 – 19

Manufacturing output bounced up in April, led by a boost in automobile production. Leading indicators suggest economic growth in the coming months. Here are the 5 things we learned from U.S. economic data released during the week ending May 19.

#1Manufacturing output jumped in April. The Industrial Production report from the Federal Reserve tells us that manufacturing output gained 1.0 percent during the month, following a 0.4 percent decline in March. This was the measure’s biggest single-month increase since February 2014. Production of durable and nondurable goods each grew at a 1.0 percent rate during April. The former was led by a 5.0 percent bump in motor vehicles output and 1.8 percent gain in the production of electrical equipment and appliances. Nondurables production benefited from higher output of food/beverage/tobacco products, textiles, and printing. Manufacturing output has risen 1.7 percent over the past year. Overall industrial production also gained 1.0 percent during April and has grown by 2.2 percent over the past year. Mining output rose 1.2 percent during the month, thanks to increased coal mining. Increased air conditioning usage boosted utility production 0.7 percent. Overall factory capacity utilization jumped by 6/10ths of a percentage point to 76.7 percent (its highest reading since August 2015). Manufacturing sector capacity utilization grew by 7/10ths of a percentage point to 75.9 percent, its best reading since December 2014.Increased Manufacturing Output-April2017-051917

#2Forward-looking indicators point to economic expansion over the coming months. The Conference Board’s Leading Economic Indicators grew by 4/10ths of a point during April to a seasonally adjusted 126.9. This was 3.2 percent above its year-ago reading. Eight of the ten components of the leading index made positive contributions to the leading index, led by the interest rate spread, jobless claims, and consumers’ expectations for the economy. The coincident index added 3/10ths of a point to 115.2 (+2.0 percent versus April 2016) as all four index components made positive contributions (including, industrial production and nonfarm payrolls). The lagging economic index increased by 4/10ths of a point to 124.1 (+2.5 percent versus April 2016) as five of seven components improved during the month (including the average length of unemployment and the prime interest rate charged by banks). The press release said that the data suggest that Q1 weak GDP report was “temporary hiccup as the economy returns to its long-term trend of about [a] 2 percent” growth rate.

#3Housing starts cooled slightly during April. The Census Bureau reports that starts of new housing construction fell 2.6 percent during the month to a seasonally adjusted annualized rate of 1.172 million units. Even with the decline, this was 0.7 percent above its year-ago pace and the 25th straight month in which the measure was above an annualized rate of 1 million units. Starts of single-family homes sped up slightly during the month (0.9 percent) and were 8.9 percent above their pace of starts in April 2016. Starts of multifamily residences (those with at least five units) dropped 9.6 percent during the month and were 14.6 percent below the starts rate of a year earlier. Looking towards the future, the annualized rate of issued building permits was at 1.172 million. While this was off 2.5 percent from March, it remained 5.7 percent above April 2016’ SAAR of issued permits. Finally, the annualized rate of housing completions dropped 8.6 percent during April to 1.106 million homes. This was 15.1 percent above the April 2016 pace.

#4Homebuilders remain optimistic. The Housing Market Index (HMI) grew by two points during May to a seasonally adjusted reading of 70, according to the National Association of Home Builders. The measure of homebuilder sentiment has remained above a reading of 50—indicative of a greater percentage of builders characterizing the housing market as “good” as opposed to being “poor—ever since July 2013. This also was the HMI’s second best reading since before the last recession (the best being only two months earlier). The HMI grew in three of four Census regions: Northeast (up five points to 50), West (up three points to 80), and South (up two points to 72). The measure slipped by two points in the Midwest to 65. Also growing was the indices for single-family home sales (up two points to 76) and the expected sales index (up four points to 79, its best reading since 2005). Meanwhile, the measure of the traffic of prospective buyers slipped by a point to a reading of 51. The press release noted the results indicated a housing market that was “solidifying.”

#5Nonfarm payrolls grew in nine states during April . Per state-level employment data released by the Bureau of Labor Statistics, nonfarm payrolls increased significantly in nine states during April, led by increases in Texas (+30,400), Minnesota (+15,100), and Wisconsin (+14,800). Only one state—Indiana—had suffered a significant decrease in nonfarm payrolls (-11,300). Versus a year earlier, 28 states enjoyed significant payrolls gains, with the largest year-to-year percentage gains in Utah (+3.3 percent), Florida (+2.6 percent), Georgia (+2.6 percent), and Idaho (+2.6 percent each). Similarly, 19 states saw significant declines in their unemployment rates, with the biggest declines occurring in Illinois, Oregon, West Virginia, and Wyoming. No state had a significantly higher employment rate in April versus what it had a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 13, 2017, First-Time Claims, seasonally adjusted): 232,000 (-4,000 vs. previous week; -45,000 vs. the same week a year earlier). 4-week moving average: 243,500 (-12.5% vs. the same week a year earlier).
Treasury International Capital Flows (March 2017, Net Purchase of Domestic Securities by Foreign Investors, not seasonally adjusted): +$30.8 billion (vs. February 2017: +$35.7 billion, March 2016: +$65.3 billion).

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