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Archive for September, 2016
 
Economic Advisor: September 28, 2016
September 28, 2016


 

The pace of existing home sales fell, while housing starts were down, and lay-offs continued to decline.

Existing Home Sales

Existing home sales slowed for the second month in a row, falling 0.9 percent to an annual rate of 5.33 million in August, according to last week’s report from the National Association of Realtors.

August’s decline put transactions of single-family homes, townhomes, and condominiums and co-ops at their second-lowest pace of 2016. When compared annually, existing home sales are 0.8 percent higher than August 2015’s 5.29 million pace.

So why were sales slipping? NAR Chief Economist Lawrence Yun chalked it up to poor inventory pumping up prices beyond small gains in the labor market and incomes.

“Healthy labor markets in most of the country should be creating a sustained demand for home purchases,” Yun said. “However, there’s no question that after peaking in June, sales in a majority of the country have inched backwards because inventory isn’t picking up to tame price growth and replace what’s being quickly sold.”

Where inventory is concerned, the supply of homes available at the end of August dropped 3.3 percent from July to 2.04 million units for sale, representing a 4.6-month supply at the August sales pace. August’s inventory was 10.1 percent lower than the 2.27 million-unit inventory from the same period a year ago.

Not surprisingly, that shrinking inventory continues to push prices upward. August’s median price for existing homes of all types hit $240,200, which was 5.1 percent higher than August 2015’s $228,500.

Housing Starts

And looking at real estate inventory, starts on construction of new homes during August fell 5.8 percent to an annual rate of 1.142 million, the Census Bureau reported last week.

That said, when compared annually, housing starts were 0.9 percent higher than August 2015’s pace of 1.132 million. Starts on single-family homes in August fell 6 percent to an annual a rate of 722,000.

Building permits issued in August for the construction of homes fell 0.4 percent to an annual rate of 1.139 million. Compared annually, August’s permits were 2.3 percent below August 2015’s rate of 1.166 million.

Permits issued in August for building single-family homes hit a rate of 737,000; this was actually 3.7 percent over July’s figure of 711,000.

Initial Jobless Claims

Switching to the job market, lay-offs were down. First-time claims for unemployment benefits filed during the week ending September 17 fell to 252,000, a decline of 8,000 claims from the preceding week’s total of 260,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a more stable measure of lay-offs — dropped to 258,500 claims, a fall of 2,250 claims from the prior week’s average of 260,750. All told, this marked the 81st straight week of jobless claims falling below 300,000, a level that most economists consider indicative of a growing job market.

This week, we can expect:

  • Monday — New home sales for August from the Census Bureau.
  • Tuesday — Consumer confidence for September from The Conference Board.
  • Wednesday — Durable goods orders for August from the Census Bureau; second quarter GDP, third estimate, from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Personal incomes and spending for August from the Bureau of Economic Analysis; consumer sentiment for September from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: September 21, 2016
September 21, 2016


 

Retail sales fell further than anticipated, while consumer prices crept up, and still-low layoffs notched up slightly.

Retail Sales

Retail sales for August fell 0.3 percent to $456.3 billion, according to last week’s report from the Census Bureau. The fall-off in performance was greater than market expectations, which had anticipated a 0.1 percent decline. Compared to last year, August’s sales were 1.9 percent higher than August 2015’s sales.

August’s poor sales performance was shared across nearly every major retail sales category. Notable losses included miscellaneous store retailers, which dropped 2.4 percent; sporting goods, music, hobby and book stores, which fell 1.4 percent; building material and garden supply stores, which also declined 1.4 percent; and auto and other vehicle dealers, which saw sales contract 1 percent.

Why did retail sales taper off? Jim Baird, chief investment officer at Plante Moran Financial Advisors, chalked it up to a conservative financial outlook on the part of consumers.

“Stronger income growth should put consumers in a position to be able to spend more,” Baird told the Wall Street Journal. “But budget-conscious households appear content to balance their spending habits with a greater commitment to their long-term financial health.”

Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) grew 0.2 percent in August, the Bureau of Labor Statistics reported last week. Over the past 12 months, the all items index rose 1.1 percent.

The driver for last month’s price increase was largely due to core inflation, which constitutes all retail sales items except the usually volatile categories of food and energy. The Bureau’s index for all items less food and energy increased 0.3 percent in August, while the energy and food indexes were both unchanged for the month.

The 0.3-percent growth in the index for all items less food and energy was the largest gain since February. Key drivers for that gain in core inflation included prices for shelter; medical care; motor vehicle insurance; apparel; and communication.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly laid off during the week ending September 10 ticked up to 260,000, a slight gain of 1,000 claims over the prior week’s total of 259,000, the Employment and Training Administration reported. The gain was lower than market expectations, which had predicted a rise to 263,000.

Economists consider lay-off levels below 300,000 jobless claims indicative of a growing job market. Last week’s report marked the 80th straight week of sub-300,000 claims, which is the longest such stretch since 1970.

“Claims remain low, consistent with a still-strong trend in employment growth,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics, in a note to clients.

The four-week moving average — considered a more stable measure of lay-offs — skirted down to 260,750 claims, a slight drop of 500 claims from the preceding week’s average of 261,250.

There were no special factors impacting this week’s initial claims.

This week, we can expect:

  • Tuesday — Housing starts and building permits for August from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; existing home sales for August from the National Association for Realtors.

 

Posted in Economic Advisor



Economic Advisor: September 14, 2016
September 14, 2016


 

Consumer borrowing exceeded expectations, while wholesale inventories essentially hovered and lay offs fell.

Consumer Credit

Consumer borrowing grew 5.8 percent in July to hit a total of $3.66 trillion, according to last week’s release from the Federal Reserve. The $17.7 billion gain was well above the $16 billion increase that the market had been expecting, and was a good showing after June noted weak growth in consumer credit.

The main driver for July’s gains was non-revolving debt, such as car and student loans, which grew 6.7 percent to hit a total of $2.69 trillion. Meanwhile, revolving debt, such as credit cards, came of a series of strong monthly gains to only increase 3.4 percent, reaching a total of $969 billion.

Coming off the previous week’s gains in consumer spending, the increase in consumer credit was encouraging, because it indicates continued consumer activity. Given that consumer spending drives 70 percent of the U.S. economy, consumer credit is a key indicator to monitor.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending September 3 dropped to 259,000 claims, a decline of 4,000 from the prior week’s total of 263,000, the Employment and Training Administration.

The total marked a two-month low, which surprised many economists as the market had actually expected claims to notch up to 265,000. The week’s total marked the 79th consecutive week of first-time claims below 300,000 — which economists consider indicative of a growing job market — since 1970.

The four-week moving average — considered a more stable measure jobless claims — declined to 261,250, a drop of 1,750 claims from the prior week’s average of 263,000.

Wholesale Inventories

Wholesale inventories — a key indicator because they show manufacturers’ and distributors’ anticipated retailer demand — grew a slight 0.1 percent in July to $591.3 billion, which was virtually unchanged from June. Compared annually, total inventories were up 0.5 percent in comparison to July 2015 totals.

Meanwhile, sales for wholesalers during July dropped 0.4 percent to $441.9 billion. Compared annually, July’s sales were down 1 percent from July 2015’s total. July’s inventories-to-sales ratio for wholesalers was 1.34. Compared against last year, the July 2015 ratio was 1.32.

This week, we can expect:

  • Tuesday — August budget from the Treasury Department.
  • Wednesday — Import and export prices for August from the Census Bureau and the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; producer price index for August from the Bureau of Labor Statistics; industrial production and capacity utilization for August from the Federal Reserve; July business inventories from the Census Bureau.
  • Friday — Consumer price index for August from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: September 7, 2016
September 7, 2016


 

Unemployment

The economy added 151,000 jobs in August, keeping the unemployment rate hovering at 4.9 percent, with the total unemployed population essentially unchanged at 7.8 million people, Bureau of Labor Statistics reported last week. This was slightly off from market expectations of 180,000 added jobs and an unemployment rate of 4.8 percent.

“At this point in the business cycle, adding 100,000 jobs a month is not bad at all,” Carl Tannenbaum, chief economist at Northern Trust, told the Wall Street Journal. “It confirms that the economy is performing well, but does not provide the threat of overheating that might have caused an interest-rate increase sooner rather than later,” he added, in another interview with the New York Times.

The number of people involuntarily employed on a part-time basis in August, for reasons such as their hours being cut or that being the only work they could find, saw little change at 6.1 million workers for the month. The number of people without work for 27 weeks or longer — the long-term unemployed — was also essentially unchanged at 2 million in August.

Initial Jobless Claims

Turning to more recent economic news, layoffs ticked up slightly, according to last week’s report from the Employment and Training Administration. First-time claims for unemployment benefits filed by the newly unemployed during the week ending August 27, hit 263,000, a gain of 2,000 claims from the preceding week’s total of 261,000 claims.

The four-week moving average — considered a more reliable gauge of lay-offs — actually dipped to 263,000 claims, a drop of 1,000 claims from the preceding week’s average of 264,000 claims.

The total was still well below the 300,000-claim mark that economists consider indicative of a growing job market. Moreover, the report marked the 78th straight week of initial jobless claims totaling less than 300,000 claims, the longest such streak since 1970.

Construction Spending

Shifting to housing market news, overall construction spending during July was essentially flat, hovering at an annual rate of $1.153 trillion the Census Bureau reported last week. The market had expected that construction spending would grow by at least 0.6 percent. Compared annually, July’s performance was 1.5 percent higher than the July 2015 estimate of $1.135 trillion.

While overall spending was flat, spending on private construction grew 1 percent to hit an annual rate of $875 billion, and residential construction spending grew 0.3 percent to hit an annual rate of $445.5 billion

This week, we can expect a light calendar of economic releases due to the Labor Day holiday:

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; consumer credit for July from the Federal Reserve.
  • Friday — Wholesale inventories for July from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: August 31, 2016
September 6, 2016


 

Existing home sales slowed, while new home sales enjoyed solid enough growth to hit a record high, and lay-offs saw a small, unanticipated decline.

Existing Home Sales

After two months of gains caused by increased purchases by first-time buyers, tight inventory finally caught up with existing home sales. Transactions of existing single-family homes, townhomes, condominiums and co-ops fell 3.2 percent to an annual rate of 5.39 million in July, the National Association of Realtors reported last week.

“Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” NAR Chief Economist Lawrence Yun said. “Realtors are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”

Total housing inventory at the end of July rose just 0.9 percent to 2.13 million existing homes of all types available for sale, representing a 4.7-month supply at July’s sales pace. Compared to last year, July’s inventory was 5.8 percent down from July 2015.

That narrowing supply pushed prices higher, with July’s median existing-home price for all home types hitting $244,100, which is 5.3 percent higher than July 2015’s $231,800 median price.

New Home Sales

Meanwhile, new home sales fared much better, with transactions of new single-family homes in July shooting up to an annual rate of 654,000, a whopping 12.4 percent higher than June’s rate of 582,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. This marked a nine-year high, and when compared annually, July’s sales were 31.3 percent higher than July 2015’s pace of 498,000.

Looking at price and supply, the median sales price of new homes sold in July came in at $294,600, and the average sales price was $355,800. The estimated number of new homes for sale at the end of the month was 233,000, representing a 4.3-month supply at July’s sales rate.

“This is a continued sign that demand for new homes remains solid in a low interest rate, low unemployment environment,” said Ralph McLaughlin, economist at real estate site Trulia.com.

Initial Jobless Claims

Turning to employment news, new claims for unemployment benefits filed by the recently laid off during the week ending August 20 notched down to 261,000, a small decline of 1,000 claims from the prior week’s total of 262,000, according to last week’s report from the Employment and Training Administration.

That total was well below the 265,000 claims that the market had expected, and kept lay-offs well below the 300,000-claim mark that economists consider indicative of a growing job market. So far, this is the 77th straight week of claims below 300,000, which is the longest such streak since 1970.

The four-week moving average — considered a more reliable measure of jobless claims — fell to 264,000, a 1,240-claim drop from the previous week’s average of 265,250.

This week, we can expect:

  • Monday — Personal incomes and spending for July from the Bureau of Economic Analysis.
  • Tuesday — Consumer confidence for August from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; workforce productivity and costs for the second quarter from the Bureau of Labor Statistics; July construction spending from the Census Bureau.
  • Friday — August car and truck sales from the auto manufacturers; July balance of trade from the Census Bureau and the Bureau of Economic Analysis; July factory orders from the Census Bureau; August payrolls, unemployment, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



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