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Archive for March, 2014
 
Economic Advisor: March 26, 2014
March 26, 2014


 

New and existing real estate seems to be trying to catch up to housing demand, which has been stymied by rising home prices and narrowing inventories, while claims for jobless benefits by the newly unemployed remained low.

Existing Home Sales

Bad weather pushed the volume of existing home sales down in February, while narrowing inventories pushed prices up, the National Association Realtors reported last week. Total transactions of existing single-family homes, townhomes, condominiums and co-ops, dropped 0.4 percent from January to an annual rate of 4.6 million units in February. This was 7.1 percent below the 4.95 million-unit level in February 2013, marking the lowest pace since July 2012, when it stood at 4.59 million.

“We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago,” said NAR chief economist Lawrence Yun. “Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”

The median price for existing home prices of all types was $189,000 in February, which was 9.1 percent over February 2013. Yun noted that, “Price gains have translated into an additional $4 trillion of housing wealth recovery over the past three years.” The median time on the market in February for all homes types was 62 days, which was slightly down from 67 days in January and considerably down from 74 days on market in February 2013.

Housing inventory of existing homes at the end of February gained 6.4 percent to 2 million units, which represents a 5.2-month supply at February’s sales pace, which was up from 4.9 months in January.

Housing Starts

In new real estate, permits issued for construction of new homes of all types issued in February hit an annual rate of 1.01 million, which was 7.7 percent over January’s revised rate of 945,000, and was 6.9 percent over February 2013’s estimate of 952,000, the Census Bureau reported. Permits issued for construction of single-family homes in February ticked down to a rate of 588,000, which was 1.8 percent below January’s revised rate of 599,000.

Starts on construction of private housing in February notched down to an annual rate of 907,000, which was 0.2 percent below January’s revised estimate of 909,000, and 6.4 percent below February 2013’s rate of 969,000. Starts on single-family homes had a slight gain to a rate of 583,000, which was 0.3 percent over January’s revised pace of 581,000.

Looking at completed constructions, finished housing constructions in February grew to annual rate of 886,000, which was 4.4 percent higher than January’s revised estimate of 849,000, and was 21.9 percent higher than February 2013’s rate of 727,000. Completions of single-family homes in February hit a rate of 631,000, which was 4 percent higher than the January’s revised rate of 607,000.

It appears that despite the bad weather, homebuilders are hustling to tap into the pent up demand that is butting up against increasing home prices.

Initial Jobless Claims

Meanwhile, first-time claims for unemployment benefits filed by newly unemployed workers during the week ending March 15 notched slightly up to 320,000, an increase of 5,000 claims from the previous week’s unrevised figure of 315,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a better gauge of near-term employment activity — was 327,000, a decline of 3,500 from the prior week’s unrevised average of 330,500.

This week, we can expect:

  • Tuesday — March consumer confidence scores from The Conference Board; February New Home sales from the Census Bureau.
  • Wednesday — February durable goods orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Third estimate of Fourth Quarter GDP from the Bureau of Economic Analysis.
  • Friday — February personal incomes and spending form the Bureau of Economic Analysis; March consumer sentiment from the University of Michigan and Thomson Reuters.

Posted in Economic Advisor



Economic Advisor: March 19, 2014
March 19, 2014


 

Last week’s economic headlines showed that retail sales were up while first-time jobless claims had dropped as the winter’s frigid grasp on the economy seemed to be loosening.

Retails Sales

Retail sales for February increased 0.3 percent to $427.2 billion, and were 1.5 percent higher than last year’s sales from February 2013, the Census Bureau reported last week. February’s performance outpaced analysts’ expectations of 0.2 percent growth for the month.

“The economy seems to be rebounding from a winter-related slump,” Bank of Tokyo-Mitsubishi UFJ chief financial economist Chris Rupkey told the Reuters news service. “We expect the Fed will stay the course with its exit strategy.”

“We see this as further confirmation that the underlying momentum in the economy remains quite favorable,” added Millan Mulraine, deputy chief economist at TD Securities in New York.

Key categories that showed solid growth over January were health and personal care stores, which were up 1.2 percent; sport goods, hobbies, book and music stories, which were up 2.5 percent; and non-store retailers, which were up 1.2 percent.

Employment

First-time claims for unemployment insurance filed by the newly unemployed during the week ending March 8 hit dropped to 315,000, a decline of 9,000 from the previous week’s revised figure of 324,000, the Employment and Training Administration reported last week. This was the lowest level since November, which saw a six-month low. The four-week moving average — considered a more stable gauge of near-term employment activity — dropped to 330,500, a dip of 6,250 claims from the previous week’s revised average of 336,750.

Initial jobless claims have been volatile during the extreme winter conditions felt by most of the country, as well as due to other factors, according to Barclay’s Cooper Howes in an interview with Business Insider.

“Claims data have been volatile dating back to last fall, as factors such as computer system upgrades, seasonal adjustments related to moving holidays, and severe weather all potentially complicated the interpretation of the previously steady downward trend,” Howes explained. “That being said, the four week moving average has settled in around where it was last summer before these factors came into play, suggesting that it may be stabilizing.”

Wholesale

Meanwhile, sales for wholesalers dipped in January while inventories increased. Sales for merchant wholesalers dropped 1.9 percent from December to $432.6 billion, but were up 3.9 percent from January 2013, the Census Bureau reported last week.

Total inventories for merchant wholesalers grew by 0.6 percent in January to hit $521.2 billion. Key categories that saw gains were drugs and druggist sundries (up 2.7 percent), motor vehicles and parts (up 2.2 percent), and paper and paper products (up 2.8 percent).

January’s activity put the inventory-to-sales ratio at 1.20, which was virtually unchanged from January 2013’s ratio of 1.21.

This week, we can expect:

  • Monday — Capacity utilization and industrial production for February from the Federal Reserve.
  • Tuesday — Building permits and housing starts for February from the Census Bureau; February consumer price index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Existing home sales for February from the National Association of Realtors; February leading economic indicators form The Conference Board.

Posted in Economic Advisor



Economic Advisor: March 12, 2014
March 12, 2014


 

Last week offered some optimistic economic headlines. February’s jobs report showed job growth, as did last week’s jobless claim report. Incomes and spending credit, however, all ticked up to varying degrees.

Employment

Shrugging off the cold weather, employers added 175,000 jobs in February, putting the nation’s unemployment rate at 6.7 percent, which was relatively unchanged from January’s rate of 6.6 percent, the Bureau of Labor Statistics reported last week. Many of the new jobs were in professional and business services as well as wholesale trade.

“The report showed solid job growth in February despite clearly negative effects from the weather,” Dean Maki, chief United States economist at Barclays, told the New York Times. “It suggests the jobs numbers should improve as the weather gets better.”

The total number of unemployed workers was at 10.5 million people. Over the year, the number of unemployed Americans has dropped by 1.6 million people. This is partly due to the lowest trend in labor market participation since 1978. The labor force participation rate — which shows how many employable workers are actively involve in the job force — hovered at 63 percent.

February’s population of long-term unemployed (those jobless for 27 weeks or longer) grew by 203,000 to 3.8 million. The number of persons involuntarily employed part-time for economic reasons, such as because their hours had been cut or they couldn’t find full-time work, stayed at 7.2 million in February.

Initial Jobless Claims

In more recent employment news, first-time claims for unemployment benefits filed by the newly unemployed during the week ending March 1, dipped to 323,000, a decline of 26,000 claims from the previous week’s revised figure of 349,000, the Employment and Training Administration reported.

The drop was larger than expected by analysts, and marked a three-month low, pointing to easing layoffs. Looking at the four-week moving average, considered a more stable figure, claims fell to 336,500, a drop of 2,000 from the previous week’s revised average of 338,500.

Incomes and Spending

U.S. consumer spending for January passed up analysts’ growth expectations, as personal consumption expenditures increased $48.1 billion, or 0.4 percent, according to last week’s report from the Bureau of Economic Analysis. Similarly, personal income increased $43.9 billion, or 0.3 percent, in January, and disposable personal income (DPI; income after taxes) increased $45.2 billion, or 0.4 percent.

“Consumer spending had “okay” momentum,” Brian Jones, senior U.S. economist for Societe Generale, told Bloomberg. “We expect to see better job growth in the spring. More people with jobs means more money to spend.”

Personal saving (DPI less personal outlays) dipped a bit in January to $540.1 billion from December’s $544.5 billion in December. That said, January’s personal saving rate (personal saving as a percentage of disposable personal income) hovered at 4.3 percent, unchanged from December.

Consumer Credit

Consumer credit grew by 5.3 percent in January, with total outstanding debt at $3.11 trillion, according to last week’s report from the Federal Reserve. The key driver was non-revolving debt, such as student loans and car loans, which grew by 7.5 percent to $2,25 trillion. Revolving debt, such as credit cards, which had shown healthy growth in recent months, actually contracted by 0.3 percent for the month, declining to $856.2 billion.

A key driver for the gains in non-revolving debt was student loans, according to Barclays economist Cooper Howes, who remarked to the Wall Street Journal, “We expect student loans to continue to push non-revolving credit higher while revolving credit growth remains tepid.”

This week, we can expect:

  • Tuesday — January wholesale inventories from the Census Bureau.
  • Wednesday — February budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; February retail sales totals, business inventories, and import and export prices from the Census Bureau.
  • Friday — February producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: March 5, 2014
March 5, 2014


 

While developments in the Ukraine and Venezuela dominated last week’s news, some noteworthy economic developments were announced, including a surprise spike in new home sales, an unexpected climb in new jobless claims, and a confusion among the two leading consumer outlook indices.

New Real Estate

Sales of newly built homes hit a five-and-a-half-year high in January, with completed transactions of new single-family homes hitting an annual rate of 468,000, the Census Bureau and the Department of Housing and Urban Development reported last week. January’s sales marked a healthy 9.6 percent climb from December’s revised rate of 427,000, and were 2.2 percent higher than January 2013’s pace of 458,000.

Looking at price and inventory, the median price of new homes sold in January rang in at $260,100, and the average sales price was $322,800. The estimated number of new homes for sale at the end of January was 184,000, which represented a supply of 4.7 months at January’s sales rate.

It’s important to note that new home sales can become volatile, and comprise a smaller portion of the real estate market than existing home sales. That said, housing market watchers are expecting overall growth for the real estate market through 2014.

“Despite higher mortgage rates, the fundamentals for new-home sales and residential construction are solid,” PNC Financial Services Group chief economist Stuart Hoffman told the Washington Post last week. “The economy is adding jobs and incomes are growing, making households more confident.”

Initial Jobless Claims

First time claims for unemployment insurance filed by the newly unemployed during the week ending Feb. 22 experienced an unexpected increase, according to figures released by the Employment and Training Administration last week. Initial jobless claims, grew by 14,000 claims to 348,000, outpacing the market expectation of 335,000 claims.

That said, the four-week moving average, considered a more reliable gauge of current employment activity, came in at 338,250, which was unchanged from the previous week’s revised average.

Most analysts chalked up the jobless claim spike to February’s continued poor weather and its impact on business overall. Moreover, some, such as Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC, said they expect a better labor market once the sun comes out.

“We still have a fairly constructive view on the labor market,” Mulraine said in an interview with the Bloomberg news service. “There have been some weather-related setbacks in hiring, but as it warms up, you’re going to see much better performance in labor market activity.”

Consumer Outlook

The glum weather and its economic impact, resulted in a mixed bag of consumer opinions, according to last week’s news. On the one hand, The Conference Board’s Consumer Confidence Index, fell to 78.1 in February from 79.4 in January (a baseline of 100 was set in 1985). On the other hand, The University of Michigan-Thomson Reuters Consumer Sentiment Index hovered at 81.2 in February, unchanged from January. And it should be noted that analysts polled by Reuters had actually expected a dip in February to 80.6.

To add to the discontinuity between the two indices, the drop in Consumer Confidence was driven by the Expectations Index (how consumers feel their economic prospects will fare), which dropped to 75.7 in February from 80.8; and the drop in the Consumer Sentiment was driven by consumer’s take on current economic conditions, which slipped to 94 in February from 96.8 in January.

If anything, this confusion over how to read the economy, whether on the part of the experts or the part of the consumers, is probably proof that this winter’s combination of frigid temperatures in the East and Midwest, along with drought conditions on the west coast has obscured everyone’s crystal ball. Hopefully when the weather clears, so to will everyone’s perspective on the economy.

This week, we can expect:

  • Monday — Personal incomes and spending for January from the Bureau of Economic Analysis; January construction spending from the Census Bureau; car and truck sales for February from the auto makers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Fourth Quarter productivity scores from the Bureau of Labor Statistics; January factory orders from the Census Bureau.
  • Friday — February unemployment rate, payrolls, workweek and earnings from the Bureau of Labor Statistics; January consumer credit totals form the Federal Reserve.

Posted in Economic Advisor



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