PUBLISHED: Jan 25, 2024
Happy New Year! It might be a time for new beginnings, but when it comes to the economic indicators the Federal Reserve cares about, it’s the same old story. While inflation is coming down, it’s not happening as quickly as the Fed might like.
As always, this report contains analysis from our friends at Econoday.1 Let’s get into it!
This index from the National Association of Home Builders (NAHB) came in slightly higher in December, up 3 points at 37. The market is still fairly weak in the minds of builders for new homes, but falling mortgage rates are leading to a little bit of optimism. As a reminder, over 50 indicates growth.
Present sales of single-family homes were unchanged at an index level of 40. The index tracking anticipated sales over the next 6 months was much better, up 6 points at 45. That’s the highest it’s been since September. Meanwhile, traffic of prospective buyers walking through homes was up 3 points at 24.
Let’s start with completions, which are the closest to being occupied. These were up 5% at a seasonally adjusted rate of 1.447 million, according to the Census Bureau and Department of Housing and Urban Development (HUD). It is 6.2% lower than November of last year. On the single-family side, completions were down 3.2% at 960,000. Multifamily completions in buildings with five units or more came in at 472,000.
Starts in November were up 14.8% as shovels have gone in the ground at a seasonally adjusted annual rate of 1.56 million. This is 9.3% higher than it was a year ago at the same time. In single-family construction, starts were up 18% at 1.143 million. Meanwhile, multifamily starts came in at 404,000.
Permits are furthest out, but they can be a leading indicator of what’s going on in the market. These were down 2.5% in November at 1.46 million, but there were 4.1% higher compared to the previous 12 months. On the single-family side, there was 0.7% more permits pulled at a rate of 969,000 to go along with 435,000 multifamily permits.
In December, consumer confidence was up 9.7 points to 110.7, said the Conference Board. This beat consensus estimates by almost 6 points. It’s the best level since July and one of the top readings in the last 2 years.
Only 13.2% of those surveyed see jobs being hard to get, which is down 2.4% compared to November. Meanwhile, 2.1% more people see jobs being plentiful, as this number represents 40.7% of those surveyed. Meanwhile, fewer people see jobs being less plentiful in the future at 17.2% compared to 20.1%.
On the income side, more people see incomes going up, with this number being 1% higher at 18.7%. The markets are also showing signs of financial optimism as well, with those who are bullish on the stock market outnumbering pessimists 37.4% to 28%. Also 18.5% of people expect rates to fall in the next year and buying plans are up all over.
Existing home sales came in up 0.8% for the month of November at 3.82 million on a seasonally adjusted annual basis. They fell 7.3% compared to the same time a year ago, according to the National Association of REALTORS® (NAR).
Rates are starting to come down, but the biggest problem in this market remains ongoing inventory issues. Supply is at 2.5 months relative to the current pace of sales. On the single-family side, sales are up 0.9% at 3.41 million units, while multiunit homes are flat at 410,000.
The median price of an existing home in November was $387,600, down 1%. However, prices have risen 4% from a year ago.
GDP came in slightly lower in the final reading of Q3, but still showed 4.9% growth for the quarter. The biggest step back was probably in the personal consumption expenditures reading, which went from 3.6% in the last preliminary estimate to 3.1% to end the quarter. People are spending less on services than previously thought.
There was still a 6.7% increase in spending on durable goods. The Bureau of Economic Analysis (BEA) also had a slightly higher revision to the spending report on nondurable goods. Gross investment was up 10% in the final reading including nonresidential investment being up 1.4% and a 6.7% increase in residential investment.
Inventories came in at $102 billion, which is down a little bit from the prior estimate. Meanwhile, the trade deficit shrank slightly compared to the second estimate. This is a good sign for the soft landing the Fed is looking for.
Durable goods orders were up 5.4% compared to October in November according to the Census Bureau. Transportation had a big part in this because orders were up 0.5% when that category was removed. Meanwhile, core capital goods were up 0.8%.
Orders for commercial aircraft were up 80.1%. Orders for motor vehicles were also up 2.8%. Core capital goods orders were up 0.8%. There was a big jump in orders of computers, communications equipment and electrical equipment. Moreover, unfilled orders were up 1.3%, which is a good sign for future manufacturing employment.
Personal incomes went up 0.4% in November while expenditures only rose 0.2%, according to the BEA. People were able to save some money. Overall prices were down 0.1% for the month and they’ve risen 2.6% for the year. The one the Fed pays attention to is the core index. This was up 0.1% in November and 3.2% over the last 12 months.
Wages and salaries rose 0.6% as strikes were settled in manufacturing. However, overall nonfarm personal income is down 0.1%. Government spending on benefits is down 0.5% mainly due to a decline in Social Security payments.
Spending on durable goods was up 0.5% while spending on nondurable goods fell by an equal amount. Gas prices were lower than they’ve been in a while.
In another joint report released by the Census Bureau and HUD, new home sales were down 12.2% on a seasonally adjusted basis in December, coming in at 590,000. It’s really a tale of the South and West. The South is the biggest home buying region and sales were down 20.9% to 337,000 annually. Sales in the West fell 5.1% to 150,000.
Sales were up 25% at 70,000 in the Midwest and rose 3.1% to 33,000 in the Northeast. The supply of new homes for sale was up to 9.2 months relative to the pace of sales. On the single-family side, median prices were up 4.8% to $434,700. This is down 6% compared to November 2022.
The Case-Shiller index measures home prices across all transactions in 20 major American metros. For October, prices were up 0.6% on a seasonally adjusted basis. They were up 0.1% when not accounting for the adjustment. Prices have gone up 4.9% overall on the year.
Some of the city data is a little surprising and worth mentioning here. Usual suspects like San Diego and New York are second and third in terms of annual growth at 7.2% and 7.1%, respectively.
However, Detroit is leading the way as of October in home price growth compared to 12 months prior, rising 8.1%. One football team is winning national championships. The other is on a playoff run. Detroit property values are appreciating at the highest rates in the country by this metric. It’s a different world for us Motor City residents.
This index is nationwide, but unlike the Case-Shiller index, this index from the Federal Housing Finance Agency is based on regions and not metros. It also only looks at conforming loans backed by Fannie Mae and Freddie Mac. This accounts for some of the differences in the numbers, but directionally, they’re going the same way.
Home prices were up 0.3% in October and 6.3% for the year.
Overall, the manufacturing sector is still in contraction, but it’s doing so at a slower rate. This report from the Institute for Supply Management shows that the index improved by 0.7 points, coming in at 47.4. A number over 50 indicates growth.
Taking a closer look at the numbers, new orders were down 1.2% at 47.1. Meanwhile, production actually went up, rising 1.8 points to come in at 50.3%. Employment in the sector was up 2.3% at 48.1%, shrinking at a slower pace. Supplier deliveries were moving faster as this index improved by 0.8 points to 47%.
Manufacturers are also operating with less inventory as this index was down 0.5% at 44.8%. This could be a good sign for future employment. The price paid for materials was 4.7% lower overall at 49.9%. Finally, order backlogs fell, but they did so at a slower rate. The index was up 6% at 45.3%.
The BLS reported that there were 216,000 jobs added to nonfarm payrolls in December. The unemployment rate was 3.7%, unchanged from the month prior. There were 164,000 jobs added to private payrolls, with government making up the balance of 52,000 jobs.
The labor force participation rate did fall by 0.3% to 62.5%. That’s something to keep an eye on because it means people are leaving the labor force rather than facing the current job market. The good news is average hourly earnings were up 0.4% and have risen 4.1% since last December. The average workweek was 34 hours, 18 minutes.
Goods production gained 22,000 jobs while there were 142,000 jobs added in services. Taking a look at individual sectors, manufacturing payrolls were up by 6,000 positions. Construction added 17,000 jobs. Education and health services added 74,000 jobs. The biggest gainers in the government sector were 19,200 positions in local education.
The U.S. trade deficit fell by $2.3 billion to $63.2 billion in November, according to the Census Bureau. The goods deficit fell by $600 million to $89.4 billion. On the services side, the surplus was up $700 million to $26.2 billion.
Goods exports were down $5.4 billion, but imports fell more steeply, dropping $6 billion. Nonmonetary gold exports were down $1.9 billion. There was also a $1 billion decrease in crude oil exports. Meanwhile, artwork and collectibles saw a $500 million export decrease. Services exports were up $600 million on travel and transport.
There was a $100 million drop in services imports. On the goods side, we imported $1.5 billion less crude oil to go along with a $700 million drop in drilling and oilfield equipment imports.
Put out by the BLS, the CPI is a measure of inflation. In December 2023, it was up 0.3% overall and 3.4% on the year. When food and energy were taken out, the monthly number was matched while showing prices have gone up 3.9% in the subcategory over the last 12 months.
Shelter was up 0.5% for the month and represents the biggest portion of the gains. Rents were up 0.4% while the cost for homeowners to rent an equivalent space was up 0.5%. The price of auto insurance was up 1.5% while the cost of medical care rose 0.7%. There were also higher costs for recreation, personal care and education.
Energy has been in a price freefall for a while, but it was up this month, rising 0.4%. Meanwhile, food prices rose 0.2%.
Prices for the producers of goods and services fell 0.1% in December, said the BLS. This is good because over time as producers save money, they can pass that savings on to consumers so it can be a leading indicator one way or another of inflation on the consumer side. For the year, inflation in production is up 1%.
When food and energy were taken out, prices were flat. They’ve risen 1.8% on the year. Further excluding goods and services purchased at the retail level, prices were up 0.2% and have gone up 2.5% overall.
Turning to individual categories, food was down 0.9% and has fallen 5% for the year. Meanwhile, energy fell 1.2% and is down 4.8% over the last 12 months. Goods prices were down 0.4% in December and down 0.8% over the course of the year. Services were flat, being up 1.8% for the year.
Data from the Census Bureau shows that retail sales were up 0.6% overall in December. When vehicles were excluded, this figure was 0.4%. When further removing gas, sales were up 0.6%.
In terms of individual categories, sales were up 1.1% for motor vehicles and parts. Meanwhile, gas station sales were down 1.3% on falling gas prices. Sales at nonstore retailers, a big portion of which includes e-commerce, were up 1.5% on holiday sales. At the same time, sales were up 1.3% for general merchandise stores including a 3% rise at department stores.
On the other side of the ledger, sales at furniture and home furnishing stores were down 1% while spending on health and personal care fell 1.3%.
Industrial production was up 0.1% overall in December, matching the increase for manufacturing output. The Federal Reserve further says that the capacity utilization rate in factories held steady at 78.6%.
Turning to other categories, there was a 1% decrease in mining output, but a 0.9% increase in mining. Manufacturing of durable goods was down 0.4% and nondurable production was up 0.6%, despite the decrease in durable goods production, the output of motor vehicle and parts were up 1.6%.
The utilities production decreases were due to a 7.1% decline in natural gas output. We can probably expect that to go back up as there’s been a cold snap across much of the country in January. Meanwhile, mining was up even though there was a 0.6% downturn in oil and gas well drilling.
Mortgage rates have generally been falling into slightly lower ranges for a little bit now. The consensus is that the Federal Reserve will lower the federal funds rate this year. It’s just a matter of time. However, it’s worth noting that no one ever knows exactly what’s going to happen, so if you see a rate you like, feel free to lock it in.
The average rate on a 30-year fixed according to last week’s Freddie Mac Primary Mortgage Market Survey® was 6.66%, up 4 basis points. (Yes, we printed it. If you didn’t catch it earlier, my favorite college team just won the national championship and my pro team is making a playoff run for the first time in my life. I’ll tempt fate.) Last year, it was 6.33%.
Meanwhile, in shorter-term loans, the average rate on a 15-year fixed is down a couple of basis points to 5.87% this week. Last year at this time, the rate was 5.52%.
1Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2024 Econoday, Inc. All rights reserved.
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