Friday, March 27, 2015

Consumer Sentiment Fell in March

Consumer sentiment fell in March according the University of Michigan survey, dropping 2.4 points from the previous month.

University of Michigan economist Richard Curtin noted that harsh weather combined with the slight uptick in gas prices contributed to the decline.

Most of the decline in confidence came from low income demographics, whereas middle and upper class households reported confidence gains. Curtin also noted that although interest rates are expected to rise this year, few consumers anticipate altering their purchasing behavior.

The current conditions and future expectations indices declined this month, falling by 1.9 points and 2.7 points, respectively.

Inflationary expectations for the next year increased significantly. Consumers now expect prices to be 3% higher one year from now, up from 2.5% in January.

Fourth Quarter GDP Estimate Remains Unchanged

The third estimate of U.S. Real GDP for the fourth quarter of 2014 increased at a rate of 2.2%, unchanged from last month’s “second” estimate. Personal consumption expenditures contributed 3% to growth, up from 2.8% in the previous estimate.

Rising dollar values and weak oil prices contributed to the decline in net exports, dragging GDP growth by 1.03% compared to a 1.15% drag in the second estimate. Government spending declined by 0.4%, largely due to a reduction in national defense spending which decreased by 12.4% compared to an increase of 16% last quarter.

For the year as a whole, GDP increased by 2.4% reflecting positive contributions from personal consumption expenditures, nonresidential fixed investment, exports, state and local government spending and private inventory investment, partially offset by a decline in federal government spending.

Read the BEA release

Wednesday, March 25, 2015

Durable Goods Orders, Factory Shipments Fell in February

New orders for durable manufactured goods decreased unexpectedly in February, falling 1.4%, according to the U.S. Census Bureau. The decrease was the third over the last four months. Excluding transportation, orders decreased 0.4%. Orders for defense capital goods increased 10%, one of the few notable gains for the month.

January orders were revised down from 2.8% to 2.0%. Excluding transportation, new orders fell by 0.7%.

February shipments of manufactured durable goods decreased 0.2%, following a decrease of 1.4% in January. A 1.1% drop in orders for primary metals led the decrease. Inventories of manufactured durable goods rose 0.3% to the highest level since the index was first published in 1992.

Read the Census Bureau release.

Tuesday, March 24, 2015

New Home Sales Increase to Highest Level Since 2008

Sales of new single-family houses in February were a seasonally adjusted annual rate of 539,000, according to the U.S. Census Bureau and Department of Housing and Urban Development. This is the highest level since February 2008 when 593,000 new home sales were reported. The February rate is 7.8% above the upwardly revised January rate of 500,000, and 24.8% above the year-ago rate of 432,000.

New home sales in two of the four regions increased this month. Sales in the Northeast jumped 152.9% and the South rose 10.1%, whereas the Midwest decreased 12.9% and the West declined 6.0%.

The median sales price of new homes sold in February was $275,500, dropping 4.8% from January. The average price was $341,000, dipping 0.9% from January.

At the end of February, there were an estimated supply of 4.7 months at the current sales rate.

Read the Census report.

Energy Prices Turn Up After Prolonged Decline

The Consumer Price Index rose 0.2% in February on a seasonally adjusted basis, driven by broad-based increases in shelter, energy and food indexes, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the CPI was unchanged before seasonal adjustment.

The energy index rose 1.0% on a monthly basis after a long series of declines as the gasoline index turned up after its sharp decline the previous month. Gasoline reported the largest increase in the energy category, increasing 2.4% from January.

The index for all items less food and energy rose 0.2% from the previous month, and 1.7% over the last 12 months. The food index rose 3.0% from the previous year. These year-over-year increases were offset by an 18.8% decline in the energy index.

Read the Bureau of Labor Statistics report.

Monday, March 23, 2015

Existing Home Sales Improve Slightly

Existing home sales rose 1.2% in February to a seasonally adjusted annual rate of 4.88 million.

The median existing-home price increased 7.5% year-over-year to $202,600 in February, the largest gain since the 8.8% increase in February 2014.

Total housing inventory increased 1.6% in February to 1.89 million homes available for sale, but remained 0.5% below February 2014. There is currently a 4.6-month supply of total existing homes available for sale, consistent with January.

Existing home sales were mixed across the four regions, as month-over-month sales declined 6.5% in the Northeast, remained unchanged in the Midwest, increased 1.9% in the South and jumped 5.7% in the West.

NAR Chief Economist Lawrence Yun noted: “Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels,” he said. “Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise.”

All-cash sales were 26% of transactions in February, one percentage point lower than in January and 9 percentage points lower than February 2014.

First-time home buyers represent 29% of all buyers, up from 28% in January.

Read the NAR report.

Wednesday, March 18, 2015

Federal Reserve Opens Door to June Rate Increase

The Federal Reserve removed the assurance that it would be “patient” in raising interest rates, opening the door to a possible June increase.

“Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” stated the Chairwoman, tempering expectations of a swift rise in rates. The Fed lowered its forecast for the Federal Funds rate with the median forecast predicting rates at 0.625% at the end of 2015, down from 1.125% the previous forecast. Yellen noted that the adjustment was due to changes in the economic forecast rather than a change in the Fed’s approach to tightening monetary policy.

The current forecast suggests that a rate increase is likely to take place mid-to-late 2015. Bond market futures are currently predicting 9% odds of an increase at June’s meeting and 42% chance of an increase in September. Chairwoman Yellen stated that an interest rate increase would likely accompany a meeting with a press conference, but noted that the Fed has the ability to add a press conference to a meeting whenever necessary.

The Fed noted that although economic growth has moderated, labor market conditions have improved with strong job gains and lower unemployment. The committee stated that an increase in the federal funds rate is unlikely during the April meeting, but that the rate will increase upon further improved labor market conditions and after inflation appears to be on track for the 2% inflation target.

Read the Fed Release