Tuesday, August 19, 2014

Housing Starts Rebound Above 1 Million Unit Pace in July

Housing starts rebounded in July, to an annualized rate of 1.093 million units. July’s pace grew 15.7% from the positively revised June rate. July’s growth was due to both single family and multi-family construction improvements. The pace of new construction is now 8.3% higher than a year ago.

Of the four regions, only the Midwest did not contribute to the overall gain. The South, which had a record decline in June, rebounded in July. Multifamily starts jumped 28.9% in July, bringing the annual pace to 437,000 units. Single family starts also improved by 8.3% to an annual rate of 656,000 units.

Permit issuance was also stronger in July. Overall housing permits increased 8.1%, driven by a 21.5% monthly growth in multi-family permits. It’s the largest monthly growth since February.

Despite the strong July report, housing starts remain well below the long-run average of 1.5 million units.

Read the Census report.

Consumer Prices Rose 0.1% in July

Prices rose by 0.1% in July, a slightly slower pace than the month prior. The increase from year-ago levels was 2.0%, consistent with the Federal Reserve’s 2.0% target. The most recent minutes from the Federal Reserve’s FOMC meeting noted that the likelihood of inflation running persistently below 2% has diminished somewhat. However core inflation, the focus of the FOMC, rose 1.9% over the year, slightly below the Fed’s target.

Energy prices dropped 0.3% in July, the largest monthly decrease since February. Gasoline prices fell 0.3%, contributing to the decline. Food prices grew 0.4%, a 30 basis point increase from the month prior. The faster pace increased the annual growth rate of food to 2.6%.

Core prices grew 0.1%, in line with the previous month. Airline fare, decreasing by 5.9%, had the most drastic decline, followed by gasoline prices. Goods prices grew 0.1%, consistent with the previous month.

Read the BLS report.

Friday, August 15, 2014

Industrial Production Increased 0.4% in July

Industrial production improved 0.4% in July, the same growth seen during the previous month. Manufacturing and mining contributed to July’s growth, moderately offset by a decline in utilities.

Manufacturing growth improved 1.0% in July, led by a 10.1% jump in motor vehicle and parts. Manufacturing grew at the fastest pace since February. Manufacturing is the core component of industrial production and does not fluctuate like mining and utilities. As such, growth in manufacturing demonstrates that the core of industrial production is improving.

Mining production increased 0.3% in July, a slowing of the pace compared to the previous 4 months. Utilities production declined 3.4%, the biggest drop since April for the highly volatile index. The capacity utilization ratio improved in July, rising 1 basis point to 79.2%.

Read the Federal Reserve release.

Producer Prices Rose 0.1% in July

Producer prices increased a modest 0.1% in July, driven by a strong 0.4% increase in energy prices. Producer prices improved 1.7% from year ago levels, a slowing of the year-over-year growth compared to the previous three months.

Earlier stages of production saw similar increases, with intermediate goods prices rising 0.1% in July. Intermediate energy prices declined 0.3% while the remaining categories all improved in July. The crude goods index sharply declined in July, dropping 2.7%. The decline was led by a 6.4% decrease in energy prices.

Prices for the headline index increased 0.1% in July, compared to a 0.4% increase the month prior. Finished energy prices took the biggest hit, declining 0.6% over the month, the largest monthly decline since last November. Finished food and transportation and warehousing saw the biggest monthly improvements, growing 0.4% and 0.5% respectively.

Read the BLS report.

Wednesday, August 13, 2014

Federal Deficit through July Lowest Since 2008

According to data released by the Treasury Department, the deficit thus far for fiscal year 2014 is at the lowest level since 2008. The decline in the deficit is due solely to increased revenues.

The Federal Government earned $211 billion in revenue during July, a 5% increase from year ago levels. Federal spending has also increased, but at a slower pace. The government spent $305 billion in July, a 3% increase from year ago levels.

A large portion of Government revenue came from the Federal Reserve, which paid Treasury $4 billion more in July 2014, as compared to July 2013. The Congressional Budget Office attributed the larger payment to a larger Federal Reserve portfolio with higher yields.

Retail Sales Growth Was Flat in July

In July, retail sales growth was stagnant. Excluding automobile and gasoline sales, retails sales increased a modest 0.1%. Year-over-year growth was 3.7%, down 0.6% from the previous month. July is the third consecutive month of decline for the year-over-year growth figure.

Despite the overall stagnant growth, some categories of retail sales showed improvement. Clothing and accessories had the strongest monthly growth at 0.4%. Food and beverages followed at 0.3%. The largest monthly drop occurred for general merchandisers. The drop more than offset the gain from the month prior.

Despite weaker growth in July, future outlook is strong. The steady improvements in the labor market should drive spending higher.

Read the Census report.

Tuesday, August 12, 2014

Small Business Optimism Edges up in July

The NFIBs Small Business Optimism index rose to 95.7 in July from 95.0. July’s uptick was mainly seen in the rise of the index components that relate to future plans and expectations. The most substantial increases from the previous month came from expectations that the economy will improve and expected improvements in credit conditions allowing expansion.

Financing continues to be the least cited concern holding back small business conditions, with 2% of respondents citing it as the single more important problem. Taxes shared the top spot with government requirements and red tape, each rising 1% to 22%, followed by poor sales with 13%.

Six of the ten index components improved slightly, three components declined and one component, earnings trends, was unchanged. Expectations that the economy will improve increased 4 points to -6%, an improvement from the 10 point drop the previous month.

Current job openings took the biggest hit, dropping 2 points to 24%. However, July was the tenth consecutive positive month in terms of employment gains, and the best string of gains since 2006.

The percent of owners reporting higher nominal sales in the past 3 months compared with the prior 3 months fell 1 point to -3%, albeit still one of the best readings since 2007.

Read the NFIB report.