Tag: Leading Indicators

Retail Sales Jumped, Factory Output Slowed in July: August 14 – 18

Retail Sales Jumped, Factory Output Slowed in July: August 14 – 18

Kevin Roth

The summer of 2017 is shaping up better for retail sales than previously believed. Here are the five things we learned from U.S. economic data released during the week ending August 18.

#1Retail sales heated up in July (and the picture in June was better than previously reported). The Census Bureau tells us that retail/food services sales totaled a seasonally adjusted $478.9 billion, up 0.6 percent from May and 4.2 percent from a year earlier. The same report presented a significant upward revision to its estimate for June, raising the previously reported 0.2 percent sales decline to a 0.3 percent rise. After removing the impact of sales at auto dealers/parts stores (+1.2 percent) and gas stations (-0.4 percent), retail sales increased 0.5 percent during July. Most retail segments enjoyed sales gains during the month, led by home materials/garden stores (+1.2 percent), non-luxury department stores (+1.0 percent), furniture retailers (+0.4 percent), bars/restaurants (+0.3 percent), and sporting goods/hobby retailers (+0.3 percent). Sales slumped 0.5 percent at electronics/appliance stores and 0.2 percent at apparel retailers during July. Nonstore retailers (including web retailers) sales continued to blossom, with sales rising 1.3 percent for the month and 11.5 percent from the same month a year earlier.July17 Retail Sales-081817

#2Factory output slowed in July. The Federal Reserve’s industrial production report finds manufacturing output slipped 0.1 percent during the month, leaving factory output up a modest 1.2 percent from a year earlier. Durable goods production declined 0.5 percent while that of nondurables advanced 0.4 percent. The former was pulled down by a sharp 3.5 percent drop in motor vehicle production, along with decreases in output greater than one percent for both furniture and primary metals. Production increases greater than one percent of both apparel and chemicals led the growth in nondurables output. Overall industrial production grew 0.2 percent, putting it 2.2 percent its July 2016 level. Greater oil and gas extraction led to a 0.5 gain in mining output (+10.2 percent versus July 2016) while higher demand for electricity due to warm summer weather pushed up the production at utilities by 1.6 percent (-0.6 percent versus July 2016). Capacity utilization held steady during the month at 76.7 percent, which remained 3.2 percentage points below the measure’s long-run average.

#3Forward-looking indicators point towards continued economic growth during the remainder of the year. The Conference Board’s Leading Economic Index (LEI) added 4/10ths of a point during July to a seasonally adjusted 128.3 (2010=100). The measure has grown 3.9 percent over the past year. Eight of ten components of the LEI made positive contributions, led by the interest rate spread, new manufacturing orders, and consumers’ expectations for future business conditions. The coincident index added 3/10ths of a point to 115.7, up 1.9 percent from a year earlier. All four components of the coincident index made positive contributions, including nonfarm payrolls and industrial production. The lagging index eked out a 1/10th of a point gain to 124.8, up 2.5 percent over the past year. Three of the lagging index’s seven components made positive contributions, led by the prime interest rate charged by banks. The press release said the results imply “the U.S. economy may experience further improvements in economic activity in the second half of the year.”

#4Housing starts slowed during July. Per the Census Bureau, housing starts declined 4.8 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.155 million units. This was off 5.6 percent from a year earlier. Most of the decline during July came from a sharp 17.1 percent in multi-family units (5+ units) in starts (-35.2 percent from the same month a year ago). Single-family home starts slipped 0.5 percent during July but nevertheless remained 10.9 percent above the July 2016 pace. Looking towards the future, there were 1.223 million issued building permits (SAAR), down 4.1 percent from June but up 4.1 percent from the same month a year ago. While the SAAR for single-family home issued permits held firm during July, they declined 12.1 percent for multi-family home permits. Housing completions slowed 6.2 percent during July to a SAAR of 1.175 million units. This was up 8.2 percent from the July 2016 pace.

#5And yet, homebuilders grew more optimistic during August. The Housing Market Index (HMI) from the National Association of Home Builders (NAHB) added four points during the month to a seasonally adjusted reading of 68. This was up nine points from a year earlier and represented the 38th consecutive month in which the homebuilder sentiment measure was above a reading of 50, meaning more builders saw the housing market as “good” versus being “poor.” The index grew in all four Census regions: South (up seven points to 70), West (up five points to 79), Northeast (up three points to 51), and Midwest (up a point to 65). All growing during the month were indices for sales of single-family homes (up four points to 74), expected sales of single-family homes (up five points to 78), and the traffic of prospective buyers (up a point to 49). The NAHB attributes builders’ more positive outlook to “ongoing job and economic growth, attractive mortgage rates, and growing consumer confidence.” 

Other U.S. economic data released over the past week:
– Jobless Claims (week ending August 12, 2017, First-Time Claims, seasonally adjusted): 232,000 (-10,000 vs. previous week; -29,000 vs. the same week a year earlier). 4-week moving average: 240,500 (-8.7% vs. the same week a year earlier).
– Business Inventories (June 2017, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.869 trillion (+0.5% vs. May 2017, +2.8% vs. June 2016).
– University of Michigan Consumer Sentiment (August 2017-preliminary, Index of Consumer Sentiment (1966Q1=100, seasonally adjusted): 97.6 (vs. July 2017: 93.4, vs. August 2016: 89.8).
– Treasury International Capital Flows (June 2017, Net Purchases of U.S. Securities by Foreign Investors, not seasonally adjusted: +$35.3 billion (vs. May 2017: +$95.5 billion, vs. June 2016: -$1.6 billion).
– FOMC Minutes

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

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

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

Kevin Roth

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

Kevin Roth

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.