Tuesday, July 22, 2014

Existing Home Sales Surpass 5 Million Mark

Existing home sales improved 2.6% in in June, reaching an annualized pace of 5.04 million units. The pace is above 5 million for the first time since last October. May’s pace was revised upward, indicating an improving housing market.

All four regions improved in June. The Midwest had the strongest monthly growth at 6.2%. The Northeast, West and South followed respectively at 3.2%, 2.7% and 0.5%. Aside from the South, sales declined in the other three regions compared to year ago levels.

Housing inventory remained the same in June at 5.5 months, while below April’s level, housing inventory is nearing the 6-month mark that indicates a balanced market.

The national median existing-home price was $223,300 in June. House price appreciation is slowing, and declined to a year-over-year growth of 4.3%. Stabilizing housing prices, low interest rate environment and stronger job growth creates an environment of housing affordability and a positive outlook for an active housing market.

Read the NAR release.

Consumer Prices Rose 0.3% in June

Prices rose by 0.3% in June, a slightly slower pace than the month prior. The increase from year-ago levels remained at 2.1%, the same as the month prior and just above the Federal Reserve’s 2.0% target. The most recent minutes from the Federal Reserve’s FOMC meeting noted that inflation is rising faster than anticipated for the medium run. However core inflation, the focus of the FOMC, rose 1.9% over the year, slightly below the Fed’s target.

Energy prices surged 1.6% in June, the largest monthly increase in 6 months. A 3.3% increase in seasonally adjusted gasoline prices was the driver behind the energy gain. Food prices grew 0.1%, a much slower pace than the 0.5% the month prior. The slower pace dropped the annual growth rate of food to 2.4%.

Core prices grew 0.1%, the slowest growth since January. The slower growth was driven by services, which saw its smallest monthly gain in 6 months. Goods prices grew 0.1%, consistent with the previous month.

Read the BLS report.

Thursday, July 17, 2014

Housing Starts Dropped 9.3% in June, Record Decline in South

Housing starts in June are at their slowest pace since September 2013 and saw the biggest monthly decline in 5 months. Notably, the decline was concentrated in the South. The South fell 29.6%, a record monthly decline. The Midwest and Northeast saw strong growth. Starts in the West grew modestly. The decline in residential GDP investment helps explain the housing start decline, as a lack of investment in the first quarter creates fewer housing starts in the second quarter.

New residential construction slowed in June, reaching an annual rate of 893,000 units, down from a revised 985,000 in May. April was revised down as well. Housing starts are currently running 7.5% above their pace one year ago. Both multi-family and single-family starts contributed to June’s decline. Multi-family starts declined 9.9% over the month and single-family declined 9.0% over the same period.

Permit issuance was also weaker in June, declining 4.2%. Multi-family permit issuance declined 14.9%. Single family permit issuance was a bright spot, rising 2.6% over the month to a pace of 631,000 permits per year.

Despite the weak June report, overall the second quarter improved from the first quarter. Housing starts remain well below the long-run average of 1.5 million units.

Read the Census report.

Wednesday, July 16, 2014

Beige Book: U.S. Economy Grew at “Moderate to Modest Pace”

The Federal Reserve’s Beige Book, released today indicated that economic expansion is continuing at a “moderate to modest pace,” a slight slowdown from the previous report. Reports from Boston, New York, Chicago, Minneapolis, Dallas and San Francisco all indicated moderate growth. Philadelphia, Atlanta, Cleveland, Kansas and St. Louis districts saw the pace of growth improve modestly, while the pace slowed slightly in the Boston and Richmond districts.

Consumer spending expanded in every district, a positive sign for second quarter GDP growth. Vehicle sales remained strong, with several districts reporting robust and strong auto sales. Summer tourism was strong as, “tourism activity expanded in all reporting Districts, with growth ranging from slight in Philadelphia to very strong in Boston.” The districts are more optimistic for future growth.

Manufacturing also expanded in each district. The two strong segments to improve were metal and auto industries and the energy sector.

Loan volumes increased since the last reporting period. San Francisco was the only district to note a slight decline in credit quality. Notably, Philadelphia and Chicago mentioned that competitive pressures were leading some financial institutions to add more loans to their portfolios.

The report noted that market conditions improved in all the districts. Continuing a recent trend, many districts report difficulty filling qualified workers for high-skilled positions. Notably, the districts reported upward wage pressures, a positive sign of a growing economy. Moreover, the wage pressure was generally for lower skilled positions, which have the stickiest wages since the recession.

Most districts reported modest price increases. Price raises were highest for meat, dairy products, construction materials, and some metals (namely steel, copper, and nickel).

Read the Federal Reserve release.

Industrial Production Improved 0.2% in June

Industrial production rose 0.2% in June, following a revised 0.5% increase in May. Manufacturing and mining contributed to June’s growth, moderately offset by a decline in utilities.

Manufacturing growth improved 0.1% in June. Motor vehicle parts and non-durable goods each declined 3.0% in June. High-tech drove manufacturing growth at 4.0%.

Mining production grew 0.8% in June. Utilities production decreased 0.3%, declining for the fifth month in a row. The capacity utilization ratio remained the same in June at 79.1%.

Read the Federal Reserve release.

Producer Prices Rose 0.4% in June

Produce prices appreciated 0.4% in June, reversing a decline from the month prior. March’s gain was driven heavily by energy goods. Producer price appreciation from one year ago declined slightly to 1.9%, but is still near the 2.0% target of the Federal Reserve.

Prices for finished energy goods improved 2.1% in June, a rebound from the previous month’s decline. The finished foods index decline by 0.2%, the second consecutive monthly decline.

Prices at earlier stages of production showed similar patterns. Processed intermediate food declined 0.1% and unprocessed intermediate food dropped 3.0%. Total processed intermediate goods grew by 0.4%, but unprocessed intermediate goods shrank 0.9%.

Read the BLS report.

Tuesday, July 15, 2014

Retail Sales Rose a Modest 0.2% in June

Retail sales improved modestly in June, growing 0.2% from the month prior. However, June’s report included an upward revision to May’s headline number. Excluding automobile and gasoline sales, retails sales increased 0.4%. Year-over-year growth was 4.3%, down 0.3% from the previous month’s revised value.

Retail gains in June were led by general merchandisers, which saw sales increase by 1.1%. The decline in sales was limited to a few select segments, including motor vehicle and parts. The largest monthly decline in sales occurred for building materials, which dropped 1.0% in June. However, the drop did not fully offset the large gains seen the prior three months.

The outlook for future growth is positive. Year-over-year growth has remained above 4% for four consecutive months, the first time since last summer.

Read the Census report.