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Archive for December, 2014
 
Economic Advisor: December 31, 2014
December 31, 2014


 

Existing home sales dropped in November, as did new home sales, while initial jobless claims fell and personal incomes and spending grew. 

Existing Home Sales

After reaching their peak for 2014, sales of existing homes dropped in November. Transactions of single-family homes, townhomes, condos and co-ops dipped 6.1 percent to an annual rate of 4.93 million from October’s 5.25 million pace, according to last week’s figures from the National Association of Realtors.

While November saw a monthly decline, on an annual basis, November’s pace was still 2.1 percent higher than November 2013. Part of November’s decline could easily be tied to winnowing supply of homes for sale, which is pushing prices upward, according to NAR chief economist Lawrence Yun.

“Lagging homebuilding activity continues to hamstring overall housing supply and is still too low in relation to this year’s promising job growth,” Yun said. “Much faster price and rent appreciation – easily exceeding wage growth – will occur next year unless new construction picks up measurably.”

In terms of inventory, the supply of homes for sale at the close of November dropped 6.7 percent to 2.09 million units for sale, which represented a 5.1-month supply at November’s sales rate. That said, it’s worth mentioning that inventory was 2 percent higher than a year ago. Still, looking at prices, November’s median existing-home price for all homes of all types notched up to $205,300, which was 5 percent over November 2013’s median price, and marked the 33rd straight year-over-year price gain.

New Home Sales

Sales of new homes hit a four-month low in November, with transactions of new single-family units dropping 1.6 percent to an annual rate of 438,000, the Census Bureau and the Department of Housing and Urban Development reported last week. Compared to last year, November’s rate was 1.6 percent below November 2013’s estimate of 445,000.

November’s new home dip was due largely to similar factors as existing home sales: the impact of inadequate supply pushing up prices and quashing volume.

“[New home sales] will get back in tune in 2015 with these continued low mortgage rates and more job growth,” PNC Financial Services Group Inc. Chief Economist Stuart Hoffman told Bloomberg. “I don’t see any fundamental weakening going on here, it’s just more of the very slow back-and-forth in housing improvement.”

Looking at price and supply, November’s median new home price was $280,900, and the average price was $321,800. November’s estimated inventory of new houses for sale was 213,000, which represented a 5.8-month supply at November’s sales pace.

Initial Jobless Claims

New claims for unemployment benefits filed by the recently unemployed during the week ending Dec. 20 dropped to 280,000, a decline of 9,000 claims from the preceding week’s level of 289,000, the Employment and Training Administration reported last week. This marked the lowest point for layoffs since Nov. 1.

“The labor market is tightening up,” MUFG Union Bank chief financial economist Chris Rupkey told Reuters. “Any job losses are just normal frictional unemployment in a healthy growing economy.”

The four-week moving average, considered a more stable read of jobless activity, fell to 290,250, a drop of 8,500 claims from the prior week’s average of 298,750.

Personal Incomes and Spending

Two key segments of the economy various analysts are watching, incomes and spending, both saw improvement in November. Personal incomes for the month increased $54.4 billion, or 0.4 percent, and disposable personal income (DPI; incomes after taxes) increased $42.4 billion, or 0.3 percent, the Bureau of Economic Analysis reported last week.

Personal consumption expenditures increased $67.9 billion, or 0.6 percent. Personal outlays, which comprise PC with personal interest payments and personal current transfer payments, grew $67.7 billion in November.

Personal saving, which is DPI minus personal outlays, totaled $576.5 billion in November, compared with $601.7 billion in October. The personal saving rate, which express personal saving as a percentage of disposable personal income, came to 4.4 percent in November, compared with 4.6 percent in October.

This week, the holiday season finally catches up with the Economic Advisor, and we will see an extremely light slate of economic releases:

  • Friday — December manufacturing index from the Institute of Supply Management; November construction spending from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: December 24, 2014
December 24, 2014


 

New home construction saw a dip, but layoffs enjoyed an encouraging drop, as did consumer prices, leading some analysts to say they were on the watch for continued good news in the New Year.

New Home Construction

Construction of new homes lost some momentum in November, according to last week’s numbers from the Census Bureau. Building permits issued for private housing dropping to an annual rate of 1,035,000, which was 5.2 percent below October’s revised rate of 1,092,000. Permits issued in November for single-family homes dipped to a rate of 639,000, which was down 1.2 percent from October.

Starts on construction for private homes initiated in November dropped 1.6 percent from October to an annual rate of 1,028,000. Starts on single-family homes in November fell 5.4 percent to an annual rate of 677,000. Completions of private housing in November dipped 6.4 percent from October to an annual rate of 863,000, with completions of single-family homes dropping 2.9 percent to hit an annual rate of 596,000 for the month.

Despite November’s lull, some analysts were forecasting growth in the home market, which will come down to jobs and incomes, according to Moody’s Analytics Inc. senior economist Ryan Sweet.

“All the conditions for stronger residential investment are in place for 2015,” Sweet told Bloomberg. “An improving job market is going to do wonders for the housing market.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly jobless enjoyed a drop, and appeared to be settling at encouraging levels. Initial jobless claims for the week ending Dec. 13 fell to 289,000, a decline of 6,000 from the prior week’s revised level of 295,000, the Employment and Training Administration reported last week.

The four-week moving average, considered a more stable measure of near-term employment activity, ticked down to 298,750, a dip of 750 claims from the preceding week’s revised average of 299,500.

This positive trend in lay-offs will likely continue, according to Pantheon Macroeconomics chief economist Ian Shepherdson.

“The underlying trend in claims, we believe, is still 285,000 to 290,000; low enough to signal very strong payroll growth, assuming indicators of the hiring side of the payroll equation remain strong,” Shepherdson told Business Insider.

Consumer Prices

The consumer price index saw its biggest monthly drop in six years, decreasing 0.3 percent in November, the Bureau of Labor Statistics reported last week. The market had expected only a 0.1 percent decline. Over the last 12 months ending November, the bureau’s price index increased 1.3 percent, compared to 1.7 percent for the 12-month period ending in October.

Energy prices were a big driver for November’s overall price drop, with the gasoline index notching its sharpest decline since December 2008, falling 6.6 percent. The fuel oil and natural gas indexes     also declined, falling 3.5 percent and 1.7 percent, respectively. Overall, the energy index dropped 3.8 percent. Meanwhile, food prices ticked up 0.2 percent.

Stripping out volatile food and energy prices, consumer prices were up 0.1 percent for November. The bureau’s shelter index grew by 0.3 percent in November,  with rent prices increasing 0.3 percent. The medical care index rose 0.4 percent for the month, its largest monthly gain since August 2013.

“The consumer is getting a well-deserved break,” PNC Financial Services Group Inc. chief economist Stuart Hoffman told Bloomberg. “We’re seeing a little more wage growth, more jobs, better confidence and finally a price break at the pump. It adds up to a very strong holiday season.”

This week, we will see a packed slate of economic headlines despite the holiday season:

  • Monday — Existing home sales for November from the National Association of Realtors.
  • Tuesday — Durable goods orders for November from the Census Bureau; third quarter gross domestic product (third estimate) and November personal incomes and spending from the Bureau of Economic Analysis; December consumer sentiment from the University of Michigan and Thomson-Reuters survey of consumers; November new home sales from the Census Bureau.
  • Wednesday — Initial jobless claims for last week from the Employment and Training Administration.

Posted in Economic Advisor



Economic Advisor: December 17, 2014
December 17, 2014


 

Reassuring retail sales beat market expectations, as did wholesale inventories (an important economic indicator), and lay-offs continued to drop.

Retail Sales

Retail sales nearly doubled market expectations last week, with retail and food sales for November growing 0.7 percent to $449.3 billion, the Census Bureau reported last week. This was 5.1 percent higher than November 2013, and was the largest increase in eight months.

Key growth sectors were motor vehicle and parts sales, which grew 1.7 percent; building and materials and garden supplies, which increased 1.4 percent; department stores, which were up 1 percent; and electronics and appliances, which gained 0.9 percent. The two segments that were down were gasoline, which dropped 0.8 percent, and the bureau’s miscellaneous retailer category, which was down 1.7 percent.

November’s performance also undercut some retailers’ bleak Black Thursday reports, which had fostered some fretting among pundits at the time. The upshot was that, thanks to a record 50 straight months of job creation, consumers seemed to be feeling upbeat about spending money.

“Most measures of confidence seem to be trending higher,” Moody’s Analytics’ senior director of consumer economics Scott Hoyt told the Los Angeles Times. “It appears that consumers are getting the message and going out and spending.”

Wholesale Inventories

Another economic indicator that outpaced predictions was wholesale inventories, which hit $542 billion in October, according to last week’s numbers from the Census Bureau. This represented a 0.4 percent gain over the previous month, which was double the 0.2 percent the market had expected.

Gains in wholesale inventories typically indicate anticipated sales on the part of wholesalers, and the October’s increase could help boost the nation’s third quarter gross domestic product.

And where sales were concerned, transactions for wholesalers grew 0.2 percent to hit $454.6 billion in October. This was 4.3 percent higher than October 2013’s wholesale sales. Comparing October’s sales to stockpiles put the October inventories-to-sales ratio at 1.19, which was slightly up from October 2013’s ratio of 1.16. 

Initial Jobless Claims

First-time claims for jobless benefits filed by the newly unemployed during the week ending Dec. 6, dropped to 294,000, a decline of 3,000 from the previous week’s unrevised level of 297,000, the Employment and Training Administration reported last week. The moderate decline put new claims at their lowest level in three weeks.

“The change is still fairly modest given normal volatility, especially at this time of year,” High Frequency Economics’ chief U.S. economist Jim O’Sullivan told MarketWatch. “Nor is there any sign of a sustained uptrend in new claims.”

Last week’s four-week moving average, considered a more steady measure of new jobless claims, notched up to 299,250, an increase of 250 claims from the previous week’s unrevised average of 299,000.

This week, we can expect:

  • Tuesday — November industrial production and capacity utilization from the Federal Reserve.
  • Wednesday — November housing starts and construction permits from the Census Bureau.
  • Thursday — November consumer price index from the Bureau of Labor Statistics.
  • Friday — Initial jobless claims for last week from the Employment and Training Administration; November leading economic indicators from The Conference Board.

Posted in Economic Advisor



Economic Advisor: December 10, 2014
December 10, 2014


 

Job growth and declining layoffs highlighted last week’s employment headlines, while home construction spending posted a healthy gain, and consumer borrowing grew, but not to expectations.

Unemployment

New hires greatly outperformed analysts’ expectations for the month of November, with the economy adding 321,000 jobs, according to last week’s figures released by the Bureau of Labor Statistics. The gain was well above the market expectation of 230,000 jobs, and was driven by strong performance in professional and business services, retail trade, healthcare, and manufacturing, the bureau reported.

“We are kind of hitting that point where the tide is turning, and the labor market is more in favor of the worker than it has been in many years,” Tara Sinclair, chief economist at job search site Indeed.com, told the Washington Post.

The unemployment rate remained at 5.8 percent with 9.1 million Americans out of work. The number of people unemployed 27 weeks or longer (categorized as “long-term unemployed”) continued to hover at 2.8 million in November, and comprised 30.7 percent of total unemployment.

The number of Americans involuntarily employed on a part-time because of reasons such as that was the only work they could find or because their hours were cut totaled 6.9 million in November, little changed from October.

Initial Jobless Claims

After seeing a noticeable increase three weeks ago, first-time claims for unemployment benefits experienced a sizable drop the week before last, putting claims at continued low levels. Initial jobless claims filed by the newly unemployed in the week ending Nov. 29 fell to 297,000, a decline of 17,000 claims from the prior week’s revised level of 314,000, the Employment and Training Administration reported.

The four-week moving average, considered a more stable measure of jobless claims, notched up to 299,000, an increase of 4,750 claims from the preceding week’s revised average of 294,250. All told, these are still exceptionally low figures for layoffs.

“We have no reason to think the trend in claims is turning higher, so we expected a further decline next week,” Pantheon Macro’s Ian Shepherdson told Business Insider. “That said, the trend probably has now flattened off, but at an extraordinarily low level, consistent with very strong payroll numbers.”

Construction Spending

Construction spending regained in October, its momentum increasing by 1.1 percent to an annual rate of $971.0 billion, which represented the biggest monthly gain since May, according to figures released last week by the Census Bureau.

Driving the growth was spending on private construction, and particularly homes. Spending on private construction grew by 0.6 percent to an annual rate of $692.4 billion, and residential construction grew 1.3 percent to an annual rate of $353.8 billion, with spending on single-family home construction jumping a solid 1.8 percent. Compared to last year, single-family home construction spending was up 13.2 percent from October 2013.

The gains were encouraging, because real estate watchers have wanted increased inventory to keep prices under control, which will increase sales volume of new homes. That said, the pace would be higher if wages were to increase.

“This is showing up in less construction employment and a smaller acceleration in wages than we would like given the age of this recovery, which in dog years is well into middle age,” Mesirow Financial chief economist Diane Swonk told the Associated Press.

Consumer Credit

Consumer borrowing continued to increase in October, albeit at a slower rate than before, with overall consumer credit growing by 4.9 percent to $3.27 trillion, according to last week’s report from the Federal Reserve. Consumer credit growth for the month was less than market expectations by $3.3 billion.

Non-revolving debt, such as student and car loans, continued to drive most of consumer credit’s growth, increasing 6.2 percent to $2.39 trillion. Revolving debt, such as credit cards, grew by 1.3 percent to 882.6 billion.

This week, we can expect:

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

Posted in Economic Advisor



Economic Advisor: December 3, 2014
December 3, 2014


 

Sales of new homes increased, but not as much as real estate watchers had hoped. Personal incomes and spending both posted gains. Layoffs, while up, remained at low levels.

New Home Sales

Sales of new single-family homes in October posted gains for the third-straight month, but the performance was tepid. Transactions of new homes grew 0.7 percent to an annual rate of 458,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development.

October’s new home transactions were short of the 470,000-unit pace that the market had expected and likely pointed to mediocre gains in momentum for the new home market for the remainder of the year. Still, compared to last year, the month was up 1.8 percent from the October 2013 rate of 450,000.

Looking at home values, the median sales price of new homes sold in October was $305,000 and the average price was $401,100. In terms of inventory, the estimated number of new homes for sale at the end of October was 212,000, which represented a 5.6-month supply at October’s sales rate.

Personal Incomes and Spending

Consumer spending bounced back a bit and beat expectations in October, while incomes also posted gains. Incomes grew in October by $32.9 billion, or 0.2 percent, and disposable personal income (DPI; income after taxes) gained $23.4 billion, or 0.2 percent, the Bureau of Economic Analysis reported last week.

Personal consumption expenditures (PCE) grew by $27.3 billion, or 0.2 percent, which outpaced market expectations of 0.1 percent growth. Personal outlays, which combine PCE, interest payments, and transfer payments, swelled by $26.3 billion during October, which was significantly larger than September’s $8.7 billion in outlays.

October’s personal savings, which are DPI less personal outlays, notched down to $651.2 billion in October, compared with $654.0 billion in September. The personal saving rate, which is personal saving expressed as a percentage of DPI, stayed unchanged from September’s at 5 percent.

“The storyline is basically that U.S. household spending appears to have regained its footing this quarter after slipping badly at the end of Q3,” TD Securities’ deputy head of U.S. research and strategy Millan Mulraine told the Wall Street Journal. “However, given the relatively subdued pace of gains, we continue to expect economic momentum to slip in Q4, with the pace of GDP growth slowing to between 2.5 percent and 3 percent.”

Initial Jobless Claims

First-time claims for unemployment benefits took an unexpected jump, but remained at low levels. Claims for unemployment insurance filed by the newly unemployed during the week ending Nov. 22 surged to 313,000, a sizable gain of 21,000 claims over the previous week’s revised level of 292,000, the Employment and Training Administration reported last week.

The four-week moving average, considered a more stable measure of near-term jobless activity, grew to 294,000, an increase of 6,250 over the prior week’s revised average of 287,750.

Looking at the total number of insured unemployed, the number of workers covered by benefits dropped to 2,316,000 during the week ending Nov. 15, a decline of 17,000 from the previous week’s revised level of to 2,333,000. This marked the lowest level for insured unemployment since Dec. 9, 2000’s level of 2,263,000.

“Though we have seen increases over the past three weeks in the four-week average, the trend in claims remains relatively low,” BNP Paribas’ Derek Lindsey told Business Insider.

This week, we can expect:

  • Tuesday — October construction spending from the Census Bureau; November car and truck sales from the auto manufacturers.
  • Wednesday — Third quarter productivity scores from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — November unemployment rate, payroll, earnings and average workweek from the Bureau of Labor Statistics; October trade balance and factor orders from the Census Bureau; October consumer credit from the Federal Reserve.

Posted in Economic Advisor



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