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Archive for April, 2014
 
Economic Advisor: April 30, 2014
April 30, 2014


 

Real estate dominated last week’s economic headlines, with sales of both existing and news homes dropped, as inventory remained scant and prices grew. Meanwhile, initial jobless claims experienced an unexpected spike.

Existing Home Sales

March saw basically flat sales of existing homes, but inventory continued to push prices upward. Sales of existing single-family homes, townhomes, condominiums and co-ops, slipped 0.2 percent to an annual rate of 4.59 million in March from 4.6 million in February, and are 7.5 percent below the 4.96 million-unit pace in March 2013, the National Association of Realtors reported.

This marked the slowest since July 2012’s 4.59 million-pace, and the month was clearly underperforming by historical standards, according to NAR chief economist Lawrence Yun. That said, Yun said he expects improvement.

“There really should be stronger levels of home sales given our population growth,” he noted. “In contrast, price growth is rising faster than historical norms because of inventory shortages.”

“With ongoing job creation and some weather delayed shopping activity, home sales should pick up, especially if inventory continues to improve and mortgage interest rates rise only modestly,” he added.

Looking at price, March median existing-home price for all housing types grew 7.9 percent from March 2013 to hit $198,500. Total housing inventory rose 4.7 percent in March to 1.99 million existing homes available for sale, representing a 5.2-month supply at the current sales pace. The median time on market for all housing types was 55 days in March, which was down from 62 days in February, as well as 62 days in March 2013.

New Home Sales

Turning to new real estate, sales of new single-family homes dropped to an annual rate of 384,000 units in March, according to data released last week by the Census Bureau and the Department of Housing and Urban Development. This marked a hefty 14.5 percent decline from February’s revised rate of 449,000 and was 13.3 percent under March 2013’s rate of 443,000.

March’s drop marked an eight-month low for new home sales, various analysts sought an explanation for the drop. Given that the rough winter weather was wearing off by March, many expects felt snow couldn’t be the sole cause of the drop.

“The housing recovery is on pause,” RBS Securities Inc. economist Guy Berger told Bloomberg. “There may be some weather impact, but it doesn’t seem like that’s what’s really holding things back. What does seem to be holding things back is this shortage of inventory.”

Where inventory was concerned, the estimate of new homes for sale at the end of March was 193,000, which represented a six-month supply at March’s sales rate. Looking at price, the median price tag for new homes sold in March 2014 was $290,000, and the average sales price was $334,200.

Employment

After some relative calm, initial jobless claims saw a spike, according to last weeks report from the Employment and Training Administration.

First-time claims for unemployment benefits by the newly unemployed during the week ending April 19 saw a 7.9 percent jump to 329,000, a gain of 24,000 over the previous week’s revised level of 305,000. This outpaced analysts’ expectations of roughly 315,000 claims.

Before getting too worried, the four-week moving average — considered a more reliable gauge of near-term employment activity — only grew by 1.5 percent to 316,750 claims, an increase of 4,750 from the previous week’s unrevised average of 312,000 claims, the Administration reported.

Moreover, regardless of a single swing, initial jobless claims are still at their lowest level since 2007, indicating that firings have slowed considerably.

“You’re hard-pressed to make much of weekly wiggles; we still expect that the broader trend in claims will continue to hover around 300,000,” Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC, told USA Today. “At the end of the day, it’s encouraging that the firing side of the equation continues to show improvement, and that’s what’s been happening, even with today’s number.”

This week, we can expect:

  • Tuesday — April consumer confidence from The Conference Board.
  • Wednesday — Advance GDP for the first quarter from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; personal incomes and spending for March from the Bureau of Economic Analysis; March construction spending from the Census Bureau; and April car and truck sales from the auto manufacturers.
  • Friday — April unemployment, payrolls, earnings and workweek from the Bureau of Labor Statistics; March factory orders from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: April 23, 2014
April 23, 2014


 

Retail sales showed solid performance in March, while consumer prices trended up for the month. Real estate continued to suffer inventory snags, while near-term employment continued to hold its own.

Retail Sales

March’s retail sales saw a solid surge, growing 1.1 percent over February to hit $433.9 billion for the month, the Census Bureau reported last week. This marked the biggest growth in a year and a half for retail and food service sales. On an annual basis they were 3.8 percent higher than March 2013.

Many experts took note of the fact that March’s improved retail performance occurred when the weather was still cold for much of the country, which buoyed some analysts’ outlook about the overall strength of the economy.

“It shows there is an underlying current of strength in the economy despite the drag from the severe winter weather,” Comerica Bank chief economist Robert Dye told the New York Times.

“This is not a fragile economy,” said Bank of Tokyo-Mitsubishi UFJ chief financial economist Chris Rupkey added. “The linchpin of economic growth — the consumer — is back, and with the consumer’s help, growth will be even faster in 2014.”

Key retail segments that enjoyed gains in March included motor vehicle and parts sales, which saw 3.1 percent growth; building material, garden and home stores, which increased 1.8 percent; and general merchandise stores, which increased 1.9 percent.

Consumer Prices

In related news, not only were retail sales up, but prices were, as well. The Consumer Price Index for All Urban Consumers (CPI-U) grew by 0.2 percent in March, according to last week’s report from the Bureau of Labor Statistics. Moreover, compared to March 2013, the all items index grew by 1.5 percent.

The bureau chalked up the gains in the all-items index to increased in the shelter and food indexes. The food index grew by 0.4 percent in March, with several major grocery store food groups increasing and many experts pointing to beef prices as a key element in that increase. The shelter index saw a 0.3 percent increase.

Real Estate

Meanwhile, in real estate, building permits issued in March for the construction of private housing shrank by 2.4 percent to an annual rate of 990,000, but were still 11.2 percent higher than March 2013, the Census Bureau reported. Permits issued for construction of single family homes notched up by 0.5 percent to a rate of 592,000.

The volume of permits has been on a slight decline for the past three months, which has led some real estate watchers to be concerned about a decrease in inventory. The question up for debate in the media was, did that downturn have to do with the housing market or the bad weather? Opinions varied.

Meanwhile, actual starts on construction of private housing in March hit an annual rate of 946,000, which was 2.8 percent over February’s rate, but 5.9 below March 2013’s rate. Starts on single family homes were up a solid 6 percent to a rate of 635,000 units.

Finally, completed constructions of private housing in March dipped 0.2 percent to an annual rate of 872,000, which was actually 7.7 percent higher than March 2013’s rate. That said, completions on single-family dropped 3.8 percent to a rate of 602,000 units.

Initial Jobless Claims

In employment, first-time claims for unemployment insurance filed by the newly unemployed during he week ending April 12 grew by just 2,000 claims to 304,000 claims, the Employment and Training Administration Reported.

Looking at the four-week moving average — considered a more reliable gauge of near-term employment performance — claims dropped to 312,000, a decrease of 4,750 from the previous week’s revised average. This is the lowest  level for this average since Oct. 6, 2007 when it was 302,000.

This week, we can expect:

  • Monday — Leading economic indicators for March from The Conference Board.
  • Tuesday — March existing home sales from the National Association of Realtors.
  • Wednesday — March new home sales from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; March durable goods orders from the Census Bureau.
  • Friday — Consumer sentiment for April from the University of Michigan and Thompson-Reuters.

Posted in Economic Advisor



Economic Advisor: April 18, 2014
April 18, 2014


 

Consumer credit beat analysts’ forecasts, while initial jobless claims dropped to a seven-year low, according to last week’s economic highlights.

Consumer Credit

Consumer credit grew by 6.4 percent in February to hit $3.12 trillion, a gain of $16.5 billion over the previous month, the Federal Reserve reported last week. This outpaced analysts’ expectations of a gain of $14 billion for the month.

“Consumer credit is keeping track with the slow but positive growth we’ve seen in consumer spending throughout the cycle and in household spending in the first quarter,” Action Economics LLC chief economist Mike Englund told the Bloomberg news services.

Non-revolving debt, such as student loans and car loans, was the key driver for February’s gains, growing 10.1 percent over January to hit $2.27 trillion, the Federal Reserve reported. Meanwhile, revolving debt, such as credit card spending, actually shrank by 3.4 percent, dropping to $854.2 billion.

Initial Jobless Claims

There was good news in recent employment activity, with first-time claims for jobless benefits hitting a seven-year loan, according to figures released by the Employment and Training Administration reported last week. Claims filed by the newly unemployed for unemployment insurance dropped by 32,000 claims during the week ending April 5 to 300,000. The last time initial claims were that low was May 12, 2007 when they dropped to 297,000.

The four-week moving average, considered a more reliable gauge of near-term employment activity, backed up last week’s score, falling 4,750 claims to 316,250. A key driver for the improvement was the warmer weather, which was helping to heat up economic activity as well, according to various employment watchers, such as said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

“The return of warmer temperatures has brought with it better data,” Baird told the Reuters news services. “There are a number of signs that progress in the jobs market could be accelerating, a positive sign for the broad economy, as well.”

Producer Price Index

The Producer Price Index for final demand notched up 0.5 percent in March, the Bureau of Labor Statistics reported last week. March’s gain followed a drop of 0.1 percent in February and a rise of 0.2 percent in January. The Bureau attributed March’s 0.5-percent increase to its index for final demand services, which rose 0.7 percent. Prices for final demand goods in March were unchanged.

The PPI for final demand is a recently implemented index that the Bureau uses to measure price change for goods, services, and construction products sold for personal consumption, for capital investment, for export, and to government.

This week, we can expect:

  • Monday — March retails sales and February business inventories from the Census Bureau.
  • Tuesday — March consumer price index from the Bureau of Labor Statistics.
  • Wednesday — March building permits and housing starts from the Census Bureau; March industrial production and capacity utilization from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.

Posted in Economic Advisor



Economic Advisor: April 9, 2014
April 9, 2014


 

The job market made headlines after adding back the 8.8 million jobs it lost during the recession, but still had a ways to go, while construction spending was flat, according to last week’s economic releases.

March Unemployment

The economy added 192,000 jobs in March, keeping the unemployment rate at 6.7 percent, with 10.5 million people out of work, the Bureau of Labor Statistics reported last week. Overall, there were 116.1 million private sector jobs, which is significant, because that is higher than the previous peak of 116 million jobs recorded in January 2008. This means that the country has gained back the jobs it lost during the recession of the past five years.

However, the job market still has much further to go given that a considerably larger number of younger people have entered the workforce over that time. The labor force participation rate, the number of employment age Americans either employed or actively looking for work, still hovered at 63.2 percent in March, a continued low of more than 30 years.

The number of Americans involuntarily employed on part-time basis for economic reasons, such as because their hours had been cut or they were unable to find full-time work, hovered at 7.4 million in March.

The number of long-term people unemployed for 27 weeks or longer totaled 3.7 million in March, comprising 35.8 percent of the unemployed. This was little changed from February, but the number of long-term unemployed was down by 837,000 over the year. “While down, this population represents some of the most vulnerable of the unemployed,” Federal Reserve chair Janet Yellen said in a speech last week.

“In some ways, the job market is tougher now than in any recession,” she said in regard o the long-term unemployed. “These workers find it exceptionally hard to find steady, regular work, and they appear to be at a severe competitive disadvantage when trying to find a job. The concern is that the long-term unemployed may remain on the sidelines, ultimately dropping out of the workforce.”

Initial Jobless Claims

Turning to more recent employment activity, first-time claims for unemployment benefits filed by the newly unemployed during the week ending March 29 grew to 326,000, a gain of 16,000 from the prior week’s revised figure of 310,000, the Employment and Training Administration reported last week. The gain was much higher than the 9,000-claim jump that analysts had expected.

However, while the recent week’s claims saw a spike, the four-week moving average — considered a more reliable gauge of near-term employment activity — was much more stable. The four-week total ticked up to 319, 500 claims, a slight gain of only 250 claims from the preceding week’s revised average of 319,250.

“Layoffs are still very, very low,” Moody’s Analytics Inc. senior economist Ryan Sweet told Bloomberg. “Claims are pointing toward an improvement in the job market. It’s evidence that the economy’s struggles this year were temporary.”

Construction Spending

Turning to real estate, construction spending during February hit an annual rate of $945.7 billion, 0.1 percent over January’s revised rate $944.6 billion, the Census Bureau reported last week. Compared to a year ago, February’s spending was 8.7 higher than the February 2013 estimate of $869.9 billion.

Once again, bad weather was to blame, with harsh winter snows and cold temperatures keeping construction activity low during the opening months of the year.

Private construction spending ticked up to an annual rate of $680 billion, which was just 0.1 percent over January’s revised estimate of $679.1 billion. The big loss was in residential construction, which dropped to an annual rate of $360.4 billion in February, marking a 0.8 percent drop from January’s revised rate of $363.2 billion.

This week, we can expect:

  • Monday — Consumer credit for February from the Federal Reserve.
  • Wednesday — February wholesale inventories from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; March import and export prices from the Census Bureau; March Treasury budget from the Treasury Department.
  • Friday — March producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: April 2, 2014
April 2, 2014


 

Last week saw a busy slate of economic news, including a drop in new home sales, gains in consumer incomes and spending, encouraging near-term employment, and better-than-expected performance for fourth quarter GDP.

Real Estate

Sales of new single-family homes in February dipped to an annual rate of 440,000, marking a 3.3 drop from January’s revised rate of 455,000, and 1.1 percent dip from February 2013’s estimate of 445,000, the Census Bureau and the Department of Housing and Urban Development reported last week.

In terms of price, February’s median sales price of new homes sold in 2014 was $261,800, and the average sales price was $317,500. In terms of inventory, the estimated number of new homes for sale at the end of February was 189,000, representing a 5.2-month supply.

Overall, March’s performance represented a five-month low that many experts chalked up to bad weather, too-high prices and tight inventory.

“The trend in sales is flat,” Pantheon Macroeconomics chief economist Ian Shepherdson told the Wall Street Journal. “The upward trend of 2012 and early 2013 is gone.”

Personal Incomes and Spending

Personal incomes and spending for February both increased, according to last week’s report from the Bureau of Economic Analysis. Personal incomes grew $47.7 billion, or 0.3 percent, and disposable personal income (DPI; income after taxes) increased $42.3 billion, or 0.3 percent, while personal consumption expenditures (PCE) increased $30.8 billion, or 0.3 percent.

Personal outlays, which combine PCE, personal interest payments and personal current transfer payments, notched up $33.8 billion in February. Personal savings — DPI less personal outlays — grew to $544.5 billion in February, compared with $535.9 billion in January. The personal savings rate, which is personal saving as a percentage of DPI, hit 4.3 percent in February, which was slightly up from 4.2 percent in January.

Employment

Looking at near-term employment, first-time claims for unemployment insurance filed by the newly unemployed during the week ending March 22 dropped to 311,000, a decline of 10,000 claims from the prior week’s revised figure of 321,000, according to last week’s figures from the Employment and Training Administration.

The four-week moving average, which is considered a more reliable gauge of recent employment activity, fell to 317,750, a similar drop of 9,500 claims from the preceding week’s revised average of 327,250, claims. Overall, the week’s performance marked a four-month low for initial jobless claims, and led some economists to speak in more encouraging terms about the job market.

“The rate of firing in the economy remains low, a positive for employment growth looking ahead to the second quarter,” said Neil Dutta, head of economics at Renaissance Macro Research, in an interview with MarketWatch.

Gross Domestic Product

The Bureau of Economic Analysis released its third estimate for fourth quarter 2013’s real gross domestic product, and the scores were slightly higher than expected. Real GDP (the output of goods and services produced by U.S. labor and property) grew at an annual rate of 2.6 percent, which was slightly higher than the previous 2.4 percent estimate.

The increase in Q4’s real GDP was attributed to gains in PCE, exports, and nonresidential fixed investments that were partly offset by negative contributions from federal government spending and residential fixed investment, the Bureau reported.

“The data suggests that the economy had slightly more momentum than previously thought before it was hit by extreme weather at the start of 2014,” Market chief economist Chris Williamson told USA Today.

Market watchers said key drivers for continued GDP growth in 2014 will be consumer spending, declining consumer debt and an improved housing market.

This week, we can expect:

  • Tuesday — February construction spending from the Census Bureau; March car and truck sales from the auto manufacturers.
  • Wednesday — February factory orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; February trade balance from the Census Bureau and Bureau of Economic Analysis.
  • Friday — March Unemployment rate, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistic.

Posted in Economic Advisor



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