Tag: Macroeconomics

Manufacturing and Home Sales Inch Out Gains in September: What We Learned During the Week of October 17 – 21

Manufacturing and Home Sales Inch Out Gains in September: What We Learned During the Week of October 17 – 21

Kevin Roth

September featured moderate growth in manufacturing, existing home sales, and in leading economic indicators. Here are the 5 things we learned from U.S. economic data released during the week ending October 21.

#1September saw modest growth in manufacturing activity. The Federal Reserve reports that manufacturing sector output grew 0.2% on a seasonally adjusted basis during the month. With the small gain, manufacturing output matched that from September 2015. Durable goods production was unchanged for the month but output of nondurables grew 0.5%. The former was pulled down by falling production of primary metals, machinery, and aerospace/miscellaneous transportation equipment. In the case of the latter, all major categories of nondurable enjoyed output growth, with the largest percentage production gains seen for printing and petroleum/coal products. Overall industrial production inched up 0.1% but remained 1.0% below year ago levels. Utility output fell 1.0% during the month while mining production grew 0.4%. The latter increased during Q3, the 1st quarterly gain in mining output (which includes oil extraction) after 6 straight quarterly declines. industrial-production-data-102116

#2Leading indicators signal moderate economic expansion over the near-term. The Leading Economic Index from the Conference Board added 3/10ths of a point during September to a seasonally adjusted 124.4 (2010=100). This followed a decline in August. 5 of the 10 components that make up the leading index pointed towards improved business activity; including, building permits, the interest rate spread, and jobless claims. The coincident index added 2/10ths of a point to 114.2, as all its components (nonfarm payrolls, person income transfer payments, manufacturing/trade sales, and industrial production) made positive contributions to the index. The lagging index grew by 2/10ths of a point to 122.3, with 4 of 7 index components making a positive contribution at the backward looking measure. The press release stated the gain in the leading index suggests the U.S. economy will grow at a “moderate pace” into early next year.

#3Sales of previously owned homes grew in September following declines during the 2 prior months. Existing home sales were at a seasonally adjusted annualized rate of 5.47 million units, up 3.2% from August and 0.6% from a year earlier. The National Association of Realtors measure grew during the month in all 4 Census regions: Northeast (+5.7%), West (+5.0%), Midwest (+3.9%), and South (+0.9%). Only the Midwest and West, however, had positive 12-month comparables in terms of sales activity. Inventories of unsold homes remained tight—there were 2.04 million previously owned homes available for sale at the end of September, up 1.5% for the month but 6.8% below year ago inventory levels. The resulting 4.5 month supply prompted a 5.6% gain in the median sales price versus a year earlier (to $234,200). NAR’s press release noted that a third of home sales were from first-time home buyers, the highest percentage of first-time buyers in over four years. 

#4Housing starts slowed in September, centered with multi-family units. The Census Bureau estimates housing starts were at a seasonally adjusted annualized rate of 1.047 million units. This was 9.0% decline for the month and 11.9% below year ago levels. The pace of starts for multi-family units (5+ units) plummeted 38.9% for the month and was 42.5% below year ago levels, while starts of single-family units jumped 8.1% during September to 783,000 units (SAAR, +5.4% vs. September 2015). Permit activity suggests that starts activity should grow over the intermediate term. The 1.225 million issued construction permits (SAAR) was 6.3% above the previous month’s pace and was 8.5% over September 2015 levels. The annualized count of permits was up 4.4% for single-family units and was 17.2% above September 2015’s pace for permits for 5+ unit properties. The rate of completions, however, slowed to their lowest level for 2016: down 8.4% for the month to 951,000 units.

#5Energy, shelter, and medical commodities sparked higher consumer prices in September. The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) grew a seasonally adjusted 0.3% during the month, its largest single-month increase since April. Prices for food held steady during the month, while energy CPI jumped 2.9%. The latter, which was its largest monthly gain since April, resulted from a 5.8% surge in gasoline prices, a 2.4% hike in fuel oil prices, a 0.8% increase in prices for utility delivered natural gas, and a 0.7% gain in electricity price. Net of energy and food, core CPI increased 0.1% (down from August’s 0.3% gain). Core commodity prices slipped 0.1% while those for core services increased 0.2. Prices grew for medical care commodities (+0.6%) and shelter (+0.2%) but fell for apparel (-0.7%), used cars (-0.3%), and new cars (-0.1%). Headline CPI was increased 1.5% over the past year while the core index was 2.2% above its September 2015 level.

Other data released over the past week that you might find of interest:
– Jobless Claims (week ending October 15, 2016, First-Time Claims, seasonally adjusted): 260,000 (+13,000 vs. previous week; -5,000 vs. the same week a year earlier). 4-week moving average: 251,750 (-6.0% vs. the same week a year earlier).
– Housing Market Index (September 2016, Index (>50 = “good” housing market), seasonally adjusted): 63 (August 2016: 65, September 2015: 65).
– State Employment (September 2016, Nonfarm Payrolls, Seasonally Adjusted):  Vs. August 2016: Payrolls grew in 14 states, contracted in 3 states and essentially was unchanged in 33 states and in the District of Columbia. Vs. September 2015: Payrolls grew in 35 states and in the District of Columba, fell in 1 state and was essentially unchanged in 14 states.
– Beige Book
– Treasury International Capital Flows (August 2016, U.S. Securities Purchased by Foreign Investors): +$30.4 billion (vs. July 2016:  +$71.4 billion, vs. August 2015: -$28.1 billion).

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

Business Activity Was Rocky This Spring: What We Learned During the Week of June 20 – 24

Business Activity Was Rocky This Spring: What We Learned During the Week of June 20 – 24

Kevin Roth

As the world considers the economic and political implications of the Brexit vote, we learned last week that U.S. economic activity lagged during the spring. Here are the 5 things we learned from U.S. economic data released during the week ending June 24.

#1Two indicators of economic activity show soft business conditions this spring. The Chicago Fed National Activity Index (CFNAI), a monthly index based on 85 economic indicators that tracks overall economic activity, dropped 56-basis points during May to a reading of -0.51. While all 4 major categories of index components deteriorated from their April readings, the bulk of decline was associated with production/income-related economic indicators. 062416These measures made a negative contribution to the CFNAI of 32-basis points (a 45-basis point drop from their April contribution of +0.13). The other 3 major categories of index components also losing stream during May were: consumption/housing (off 7-basis points to -0.09), employment (off 3-basis points to -0.09) and sales/orders (off a basis point to -0.01). The CFNAI’s 3-month moving average shed 11-basis points to -0.36. This was the moving average’s lowest reading in nearly 4 years. Nevertheless, the reading is not indicative of an U.S. economy that was in a recession since it remained above -0.70. Rather, the moving average reading of -0.36 is consistent with below average economic growth.

The Conference Board’s Leading Economic Index lost 2/10ths of a point during May to a reading of 123.7. The index was unchanged from 6 months earlier and was up by only 1.2% from a year earlier. 6 of 10 components made a positive contribution to May’s leading index reading, including the interest rate spread, factory orders for nondefense/non aircraft capital goods, and building permits. The main drag was a bump up in 1st time unemployment insurance claims. The coincident index was unchanged for the month and was up 1.9% from a year earlier. 3 of the coincident index’s 4 components improved during May. The lagging index added 3/10ths of a point during the month to 121.5 (+3.8% vs. May 2015), as 5 of 7 index components enjoyed gains. The press release said the index readings suggest “moderate” economic growth over the coming months but warns that “volatility in financial markets and a moderating outlook in labor markets could pose downside risks to growth.”

#2Sales of previously owned homes inched ahead to a post-recession high during May. Existing home sales were a seasonally adjusted annualized rate of 5.53 million units during the month, up 1.8% from April, up 4.5% from a year earlier, and the fastest sales pace since February 2007. According to the National Association of Realtors, sales of previously owned homes improved in 3 of 4 Census regions during the month: West (+5.4%), South (+4.6%), and Northeast (+4.1%). Sales slowed 6.5% in the Midwest. There were 2.15 million homes available for sale at the end of May, up 1.4% from April but off 5.7% from May 2015. The resulting tight 4.7 month supply led to a 4.7% year-to-year increase in the median sales price of previously owned homes to $239,700. While warning that first-time homebuyers were “still struggling to enter the market,” NAR’s press release did predict that home sales “have the potential to mostly maintain their current pace through the summer.”

#3Even with a drop in May, new home sales also remained their near post-recession highs. The Census Bureau reports that new home sales were at a seasonally adjusted annualized rate of 551,000 units. Despite being down 6.0% for the month, new home sales were 8.7% above their year ago pace. Sales slowed in 3 of 4 regions—the Northeast, West, and South—but improved in the Midwest. 3 of 4 Census regions—the Northeast, Midwest, and South had positive year-to-year sales gains. Homebuilders had 244,000 homes on the market at the end of May (+1.2% vs. April 2016, +16.2% vs. May 2015), the equivalent to a 5.3 month supply.

#4Durable goods orders stumbled in May following 2 monthly gains. The Census Bureau estimates the value of new orders for durable manufactured goods declined 2.2% to a seasonally adjusted $230.7 billion (+1.5% vs. May 2015). Transportation goods orders fell 5.6% during the month as orders for vehicles (-2.8%) and defense aircraft (-34.1%) both slowed. Civilian aircraft orders grew 1.0% in May following the previous month’s 69.4% surge. Orders for non-transportation durable goods declined 0.3% during the month following gains of 0.3% and 0.5% during the 2 previous months. While orders for communications equipment jumped 4.7%, orders dropped for computers (-2.5%), primary metals (-1.4%), and fabricated metals (-0.3%). Shipments declined for the 3rd time over the past 4 months with a 0.2% drop. Non-transportation goods shipments slowed 0.3%. The value of unfilled orders expanded for the 4th time in 5 months with a 0.2% increase while inventories of durable goods contracted for the 10th time in the past 11 months with a 0.3% decline.

#5One survey finds consumers are slightly less optimistic about economic conditions. The University of Michigan Index of Consumer Sentiment came in at a seasonally adjusted reading of 93.5 for June, off 8/10ths of a point from the preliminary June reading released a few week ago, 1.2 points from May, and 2.6 point from a year earlier. The drop from May was the result of a weaker outlook for future economic business conditions, with an index reading 82.4 being off 2.5 points from May and 5.4 points from a year earlier. The present conditions index edged up 9/10ths of a point during the month to 110.8 (+1.9 points vs. June 2015). The press release stated that consumers do not anticipate a recession but they “increasingly expect a slower pace of growth in the year ahead.” Further, the results are consistent with GDP growth of less than 2.0% and real consumer spending increased 2.6% for all of 2016.

Other data released over the past week that you might find of interest:
– Jobless Claims (week ending June 18, 2016, First-Time Claims, seasonally adjusted): 259,000 (-18,000 vs. previous week; -13,000 vs. the same week a year earlier). 4-week moving average: 267,000 (-2.6% vs. the same week a year earlier).
– FHFA House Price Index (April 2016, Purchase-Only Index, seasonally adjusted): +0.2% vs. March 2016, +5.9% vs. April 2015.

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

Existing Home Sales, Housing Starts Grow: What We Learned During the Week of May 16 – 20

Existing Home Sales, Housing Starts Grow: What We Learned During the Week of May 16 – 20

Kevin Roth

Relatively speaking, last week featured solid if not particularly spectacular data on both housing and manufacturing activity. Here are the 5 things we learned from U.S. economic data released during the week ending May 20.

#1Home sales held near to post-recession highs in April. Sales of previously owned homes gained 1.7% during the month to a seasonally adjusted annualized rate (SAAR) of 5.45 million units. While sales were 6.0% above its year ago reading, the National Association of Realtors’ measure has consistently stayed in the low 5-million SAAR range for more than a year. For the month, sales jumped 12.1% in the Midwest and 2.8% in the Northwest, but slowed 2.7% in the South and 1.7% in the West. More owners are putting their properties on the market.052016 There were a seasonally adjusted 2.14 million homes for sale at the end of April, up 9.2% from March and the most since last September. But even with the gain, this still translated into a tight 4.7 month supply. As a result, the median sales price of previously owned homes of $232,500 was up 6.3% from a year earlier. Because of the price appreciation, NAR’s press release warned that “there’s growing concern a number of buyers will be unable to find homes at affordable prices if wages don’t rise and price growth doesn’t slow.”

#2Housing starts grow in April while home builder sentiment remains firm. The Census Bureau estimates April new home starts were at a seasonally adjusted annualized rate (SAAR) of 1.172 million units. While this was up 6.6% from March, it was off 1.7% from a year earlier with the data series remaining within a tight SAAR range of the low 1 million units since last spring. During the month, starts gained by double-digit percentages in both the Midwest and South, but chilled in the West and Northeast. Starts of single-family homes gained 3.3% while those for multi-family units jumped 13.9%. Looking forward, the count of issued construction permits increased 3.6% to a SAAR of 1.116 million units (-5.3% vs. April 2015). The SAAR of issued permits for single-family homes gained 1.5% during the month while those for multi-family units grew 8.0%. Softening was the SAAR of completed homes—at 933,000 units, it was off 11.0% for the month and 7.4% from the same month a year earlier.

Homebuilders remained confident about the housing market in May. The Housing Market Index from the National Association of Home Builders held steady a seasonally adjusted reading of 58 for a 4th straight month in May. For 23 straight months, the index has been above a reading of 50, which means more homebuilders view the housing market as “good” as opposed to being “poor.” The index gained in the Midwest (59) and South (60), held steady in the West (67) and fell in the Northeast (36). While the indices for present sales and the traffic of potential buyers were both unchanged (at readings of 63 and 44, respectively), the expected sales index added 3 points to 65. The press release stated that “job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector moving forward.”

#3Manufacturing output gained in April. According to the Federal Reserve, manufacturing production increased 0.3% during the month but was up a mere 0.4% from a year earlier. All of the gain was for durable goods production, which grew 0.6% during April with strong gains for machinery (approximately +2.5%) and automobile production (approximately +1.25%). Nondurable goods production was unchanged for the month, even though output grew for food/beverages and plastics/rubber products. Overall industrial production expanded for only the 2nd time in 8 months with a 0.7% increase but remained 1.1% below output from the same month a year earlier. While utility output surged 5.8%, mining output contracted for an 8th consecutive month with a 2.3% decline. The latter reflected ongoing declines in the extraction of oil, natural gas and coal. While capacity utilization gained a ½ percentage point to 75.4%, this was 4.6 percentage points below its 44-year average. Manufacturing factory utilization inched up 2/10ths of a percentage point to 75.3%, which was 3.2 percentage points below its historic average.

#4Consumer prices jumped in April and not only at the gas pump. The Bureau of Labor Statistics’ Consumer Price Index (CPI) grew a seasonally adjusted 0.4% during the month, its largest single-month increase since February 2013. Energy CPI jumped 3.4%, which includes an 8.1% bump in prices at the gas pump. Meanwhile, food prices gained 0.2%. Net of both energy and food, core CPI grew 0.2% during the month and was up 2.1% over the past year. Prices for core goods slipped 0.1%, pulled down by lower prices for apparel and both new and used vehicles (-0.3% for all three). Prices for core services gained 0.3%, which includes the impact of a 0.7% jump in transportation services prices (including higher prices for motor vehicle insurance and airplane tickets).

#5Measures of current and leading economic indicators improved during April. The Chicago Fed National Activity Index (CFNAI), a weighted measure of 85 economic indicators, surged by 65-basis points to a positive reading of +0.10. This was the measure’s best reading since January and indicative of above average economic activity as the measure was pulled up by a 58-basis gain in the index components tied to production/income (to a contribution to CFNAI of +0.19) Also improving, although by far smaller amounts, were index components associated with employment (contribution to CFNAI of -0.02), consumption/housing (contribution to CFNAI of -0.07) and sales/orders/inventories (contribution to CFNAI of 0.00). The CFNAI’s 3-month moving average lost 4-basis points to a reading of -0.22. This reading indicates below average economic activity over the past 3 months.

Meanwhile, the Conference Board’s Leading Economic Index advanced 8/10ths of a point in April to a reading of 123.9 (2010=100). Nine of 10 components made positive contributions to the index during the month, led by the interest rate spread, manufacturing hours worked, jobless claims and building permits. The coincident index added 3/10ths of a point to 113.6, with all 4 components making a positive contribution to the index. The lagging index grew by 4/10ths of a point to 121.5, with 4 of 7 index component making a positive contribution. The press release noted that “labor market and financial indicators, and housing permits all point to a moderate growth trend continuing in 2016.”

Other data released over the past week that you might find of interest:
– Jobless Claims (week ending May 14, 2016, First-Time Claims, seasonally adjusted): 278,000 (-16,000 vs. previous week; +2,000 vs. the same week a year earlier). 4-week moving average: 275,750 (+1.9% vs. the same week a year earlier).
– Treasury International Capital Flows (March 2016, Net Domestic Securities Purchased by Foreign Investors): +$64.7 billion (vs. +$28.9 billion in February 2016, vs. +$45.4 billion in April 2015).
– FOMC meeting minutes (April 2016)

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