Home Sales & Starts Inched Up: November 19 – 23

Home sales and starts grew in October, but builder confidence stumbled nonetheless.  Here are the five things we learned from U.S. economic data released during the week ending November 23.

#1Existing home sales grew for the first time in seven months in October. Sales of previously owned homes increased 1.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.22 million units, its first increase since March. The National Association of Realtors tells us that sales grew in the three of four Census regions: West (+2.8 percent), South (+1.9 percent), and Northeast (+1.4 percent). Sales slipped 0.8 percent in the Midwest. Existing home sales have fallen a sharp 5.1 percent over the past year, with negative 12-month comparables in all four Census regions: West (-11.2 percent), Northeast (-6.8 percent), Midwest (-3.1 percent), and South (-2.3 percent). Inventories of homes available for sale remained very tight as there were 1.85 million homes on the market at the end of October, down 1.6 percent for the month and the equivalent to a 4.3 month supply. The median sales price of homes sold was $255,400, up 3.8 percent from that of a year earlier. This slower growth rate in home prices allowed, according to the press release, “for much more manageable, less frenzied buying conditions.”Existing Home Sales 112318

#2Housing starts grew, but homebuilders were less confident about the market. The Census Bureau reports that housing starts increased 1.5 percent to a seasonally adjusted annualized rate (SAAR) of 1.228 million units. Even with the increase, starts were 2.9 percent behind the year-ago pace. October’s gain was solely on the multi-unit side—starts of five or more unit housing increased 6.2 percent during the month. Meanwhile, single-family home starts slowed 1.8 percent. Looking towards the future, the number of issues building permits slipped 0.6 percent to a SAAR of 1.27 million units (-6.0 percent versus October 2017). Fewer homes were finished as the new home housing completed fell 3.3 percent during the month to 1.111 million units (SAAR).

The Housing Market Index (HMI), the National Association of Home Builder’s measure of builders’ sentiment, plummeted by eight points to a seasonally adjusted 60. While this was the 53rd consecutive month in which the HMI was above a reading of 50—meaning more homebuilders see the housing market as “good” rather than “bad”—it was the index’s lowest mark since August 2016. The HMI fell sharply in all four Census regions: Northeast (down nine points to 52), West (down nine points to 65), Midwest (down six points to 54), and South (down five points to 65). Also losing ground were indices for single-family home sales (down seven points to 67), expected sales (down ten points to 65), and traffic of prospective buyers (down eight points to 45). The press release notes survey respondents had stated consumers were “taking a pause due to concerns over rising interest rates and home prices.”

#3Forward-looking economic indicators suggest moderating growth over the near-term. The Conference Board’s Leading Economic Index (LEI) grew by only 1/10th of a point in October to a seasonally adjusted 112.1, its smallest increase since May and representing a still robust 5.9 percent gain over the past year. Five of the LEI’s ten components made positive contributions during the month, led by consumers’ economic expectations and the interest rate spread. The coincident index added 2/10ths of a point to a reading of 104.7, up 2.2 over the prior 12 months. All four coincident index components made positive contributions, including nonfarm payrolls and personal income net of transfer payments. The lagging index increased by 4/10ths of a point to 105.5 (+2.5 percent versus October 2017), with four of seven components making positive contributions. The press release stressed that the reading still suggests “robust economic growth in early 2019,” but also that rate of economic growth “may already have peaked.”

#4Durable goods orders slumped in October. The Census Bureau estimates new orders for manufactured durable goods plummeted 4.4 percent to a seasonally adjusted $248.5 billion, its third decrease over the past four months. Aircraft orders can be volatile month-to-month and tend to be a primary driver for the headline estimate of durable goods orders, and October was no exception. Civilian aircraft orders fell 21.3 percent and defense aircraft orders slumped 59.3 percent. As a result, overall transportation goods order declined 12.2 percent (motor vehicle orders inched up 0.2 percent). Net of transportation goods, durable goods orders eked out a 0,1 percent gain. Falling during the month were orders for primary metals (-2.3 percent) and machinery (-0.5 percent) while orders rose for electrical equipment/appliances (+2.9 percent), computers/electronics (+1.6 percent), and fabricated metal products (+1.0 percent). Weakness continued for core capital goods (i.e., civilian capital goods net of aircraft—a proxy for business investment), which were unchanged in October after having declined in both August and September.

#5Consumer sentiment edged down in November. The Index of Consumer Sentiment from the University of Michigan lost 1.1 points during the month to a seasonally adjusted reading of 97.5 (1966Q1=100). This reading was 8/10ths of a point below the preliminary November reading reported a few weeks ago and one full point under the November 2017 mark. The index has been within a relatively tight 5.7 point range over the past 12 months. The current conditions index shed 8/10ths of a point during the month to a reading of 112.3 (November 2017: 113.5) while the expectations index fell by 1.2 points to 88.1 (November 2017: 88.9). The press release noted that sentiment among lower-income survey respondents had improved during the month while that of higher income respondents had slumped.

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

Jobless Claims (week ending November 17, 2018, First-Time Claims, seasonally adjusted): 224,000 (+3,000 vs. previous week; -15,000 vs. the same week a year earlier). 4-week moving average: 218,500 (-9.0% vs. the same week a year earlier).

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

Home Sales Steady, Leading Indicators Firm: September 17 – 21

Existing home sales stalled while housing starts picked up. Here are the five things we learned from U.S. economic data released during the week ending September 21.

#1Sales of previously owned homes held constant in August. The National Association of Realtors places the seasonally adjusted annualized sales rate of existing homes at 5.34 million units, matching July’s sales pace and off 1.5 percent from a year earlier. Sales improved during the month in the Northeast (+7.6 percent) and Midwest (+2.4 percent) but slipped in the West (-5.9 percent) and South (-0.4 percent). Only in the South were existing home sales ahead of their year-ago pace. Also unchanged for the month was the inventory of unsold homes—the 1.92 million homes available for sale at the end of August was 2.7 percent larger than that of a year earlier but also represented a very tight 4.3 month supply. The resulting median sales price of homes sold has grown 4.6 percent over the past 12 months to $264,800. The press release was optimistic: “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market.”Existing Home Sales Aug17-18 092118

#2Housing starts rebounded in August. The Census Bureau reports that housing starts rose 9.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.282 million units. This was 9.4 percent ahead of the August 2017 annualized rate of housing starts. Much of the gain was with multifamily units—starts of buildings with five or more units surged 27.3 percent to 392,000 (SAAR) while single-family unit starts gained a more modest 1.9 percent to 876,000 (SAAR). Looking towards the future, the number of issued construction permits slumped 5.7 percent to an annualized 1.303 million (-5.5 percent versus August 2017). The rate of issued permits fell during the month for single-family (-6.1 percent) and multi-family units (-8.0 percent). Housing completions increased 2.5 percent during August to a SAAR of 1.213 million homes. This represented an 11.2 percent improvement from the August 2017 rate of completions.

#3Homebuilder sentiment remained robust in September. The National Association of Home Builder’s Housing Market Index (HMI) stayed at a seasonally adjusted reading of 67 during the month. This was the 52nd straight month in which the HMI was above a reading of 50, meaning a greater percentage of homebuilders saw the housing market as being “good” as opposed to being “poor.” The HMI improved in the Northeast (61), slipped in the South (69) and Midwest (56), and held steady in the West (73). Gaining during the month were measures for current sales (up a point to 74) and expected sales (up two points to 74) of single-family homes while the measure of traffic of prospective buyers held steady of 49. The press release reported “firm demand for housing” but expressed concerned about both the trade tariffs’ impact on builders’ costs and rising interest rates possibly stemming housing demand.

#4Forward-looking economic indicators continued to point towards more growth this year and into 2019. The Conference Board’s Leading Economic Indicators (LEI) added 4/10ths of a point to 111.2 (2016=100), up 6.4 percent from a year earlier. This was slightly smaller than the 6/10ths and 8/10ths of a point increases during the two prior months. Seven of the ten components that make up the LEI made positive contributions. The coincident index gained by 2/10ths of a point to 104.3 (+2.5 percent versus August 2017). All four components of the coincident index made positive contributions. The lagging index also increased by 2/10ths of a point to 105.4 (+2.3 percent versus August 2017), although only two of seven index components improved during August. While noting that the “strengths among the LEI’s components were very widespread,” the press release pointed out that its “growth trend has moderated since the start of the year.”

#5August’s job gains were centered mainly in just four states. The Bureau of Labor Statistics deeper state-level dive at employment trends for August finds that nonfarm payrolls had statistically meaningful increases in just four states: California, Texas, Arizona, and Florida. Payrolls were “essentially unchanged” in the other 46 states and the District of Columbia. Earlier this month, we had learned that nonfarm payrolls expanded by a seasonally adjusted 201,000 during August. Over the past year, employment had grown in 35 states with the biggest percentage gains in Utah (+3.5 percent), Nevada (+3.3 percent), and Washington state (+3.3 percent).

Other U.S. economic data released over the past week:
Jobless Claims (week ending September 15, 2018, First-Time Claims, seasonally adjusted): 201,000 (-3,000 vs. previous week; -54,000 vs. the same week a year earlier, lowest since November 1969). 4-week moving average: 205,750 (-21.8% vs. the same week a year earlier).
Treasury International Capital Flows (July 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$40.6 billion (vs. June 2018: -$45.5 billion, vs. July 2017: +$0.8 billion)

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

Cash Registers Rang Louder in July: August 13 – 17

Retail sales expanded while growth in manufacturing slowed. Here are the five things we learned from U.S. economic data released during the week ending August 17.

#1Retail sales heated up in July. The Census Bureau estimates retail and food services sales rose 0.5 percent to a seasonally adjusted $507.5 billion. This was an improvement from the downwardly revised 0.2 percent sales gain in June. Sales grew 0.2 percent at auto dealers/parts stores and 0.8 percent at gas stations (think higher gas prices). Net of auto dealers and gas stations, core retail sales jumped 0.6 percent in July following a 0.2 percent bump in June. Sales improved during the month at apparel retailers (+1.3 percent), restaurants/bars (+1.3 percent), department stores (+1.2 percent), grocery stores (+0.8 percent), and electronics/appliance retailers (+0.1 percent). Sales lost traction at retailers focused on sporting goods/hobbies (-1.7 percent), furniture (-0.5 percent), and health/personal care (-0.4 percent). Retail sales have risen 6.4 percent over the past year while the core retail sales measure has a 12-month comparable of +5.6 percent.Retail Sales June-July 2018 081718

#2Industrial production slowed in July. The Federal Reserve reports industrial production crept up a modest 0.1 percent on a seasonally adjusted basis during the month following a 1.0 percent jump in June. Growth in manufacturing slowed to a 0.3 percent increase in July after having surged 0.8 percent during the previous month. Production of durable goods gained 0.4 percent (including increases of around 1.0 percent for motor vehicles and computers/electronics) while the output of nondurables inched up 0.2 percent (with higher output of apparel, petroleum/coal products, chemicals, and plastics/rubber products). Mining output, which has surged 12.9 percent over the past year, slipped 0.3 percent during July (even as oil and gas extraction continued to rise). Utility output slowed for the third straight month with a 0.5 percent decline.

#3Forward-looking economic indicators further strengthened in July. The Conference Board’s Leading Economic Indicators (LEI) jumped by 7/10ths of a point to 110.7 (2016=100). This was an improvement from the 6/10ths of a point gain in June and leaves the LEI 5.1 percent ahead of its year-ago reading. July’s increase was broad-based as nine of the LEI’s ten components made positive contributions, led by the count of jobless claims staying near multi-decade lows. The coincident index grew by 2/10ths of a point to 104.2, a 2.4 percent increase from a year earlier as all four components made positive contributions. The lagging index slipped by 2/10ths of a point to 105.2 with only two of seven components growing during the month. The backward-looking measure was still 2.3 percent above its July 2017 mark. The press release noted that the LEI’s reading indicates economic growth will be “at a solid pace for the remainder of this year.”

#4Housing starts sputtered during July. Housing starts edged up 0.9 percent to a seasonally adjusted annualized rate of 1.168 million units, per the Census Bureau. This was a weak rebound to June’s 12.9 percent drop and left housing starts 1.4 percent below the July 2017 pace. Starts of single-family home gained 1.9 percent while those of construction with more five or more units increased 3.1 percent. Starts weakened in the West (-19.6 percent) and Northeast (-4.0 percent) but improved in both the Midwest (+11.6 percent) and South (+10.4 percent). Looking towards the future, the annualized rate of issued building permits grew 1.5 percent during the month to 1.311 million permits (+4.2 percent versus July 2017). Issued permits increased for both single-family (+1.9 percent) and multi-family (+1.7 percent). Fewer homes were completed during the month—the annualized count of homes completed slumped 1.7 percent to 1.188 million units (-0.8 percent versus July 2017). Single-family home completions plummeted 5.2 percent during the month while multi-family completions gained 8.2 percent.

#5Small business owner optimism inches ever so close to a 35-year high. The Small Business Optimism Index added 7/10ths of a point in July to a seasonally adjusted reading of 107.9 (1986=100). This was not only a 2.7 point gain from a year earlier, it was the measure’s best reading since July 1983 (which itself was the best reading for the National Federation of Independent Business index in its 45-year history). Six of the ten index components improved from their June readings, including three-point gains for indices tracking expected real sales, plans to increase employment, and whether it is a good time to expand. Only two measures—current inventories and plans to increase inventories—declined from their June readings. The press release notes that business owners “anticipate more sales and better business conditions.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 11, 2018, First-Time Claims, seasonally adjusted): 212,000 (-2,000 vs. previous week; -24,000 vs. the same week a year earlier). 4-week moving average: 215,500 (-10.5% vs. the same week a year earlier).
Import Prices (July 2018, All Imports, not seasonally adjusted): Unchanged vs. June 2018, +4.8% vs. July 2017. Nonfuel imports:  -0.3% vs. June 2018, +1.3% vs. July 2017.
Export Prices (July 2018, All Exports, not seasonally adjusted): -0.5% vs. June 2018, +4.3% vs. July 2017. Nonagricultural imports: Unchanged vs. June 2018, +5.0% vs. July2017.
Housing Market Index (August 2018, Index (>50=”Good” housing market, seasonally adjusted): 67 (vs. July 2018: 68, vs. August 2017: 67).
Productivity (2018 Q2-preliminary, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): +2.9% vs. 2018Q1 +1.3% vs. 2017Q2.
State Employment (July 2018, Change in Nonfarm Payrolls, seasonally adjusted): Vs. June 2018: Increased in 6 states, decreased in 1, and essentially unchanged 43 states and the District of Columbia. Vs. July 2017: Increased in 34 states and essentially unchanged in 16 states and the District of Columbia
University of Michigan Surveys of Consumers (August 2018-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 95.3 (July 2018: 97.9 August 2017: 96.8).
Treasury International Capital Flows (June 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$45.5 billion (vs. May 2018: +$20.3 billion, vs. June 2017: +$35.5 billion).

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