September Chicago Business Barometer rose to second-highest level in over three years

The MNI Chicago Business Barometer rose to 65.2 in September, hitting the highest level in three months and the second highest level in over three years.

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Personal income, spending and prices all rose slightly in August

Personal income increased 0.2 percent in August and personal consumption expenditures (PCE) increased 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

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September consumer sentiment dipped 1.8 points from August but up 4.3 points year-on-year

Consumer sentiment remained largely unchanged from the slightly lower level recorded at mid-month. The resilience of consumers has again been demonstrated as concerns about the impact of the hurricanes on the national economy have quickly faded. Given that the survey was able to reach most households in Florida and Texas in late September, it should be no surprise that small declines were recorded in the current financial situation of households.

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Initial unemployment claims rise by 12,000 in latest report, impacted by hurricanes

In the week ending September 23, initial unemployment claims were 272,000, an increase of 12,000 from the previous week's revised level. The 4-week moving average was 277,750, an increase of 9,000 from the previous week's unrevised average of 268,750. This is the highest level for this average since February 6, 2016 when it was 277,750.

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Mortgage applications dip 0.5 percent in latest survey as rates rise 7 basis points

The Market Composite Index decreased 0.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 3 percent and refinancing down 4 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.11 percent from 4.04 percent.

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2Q 2017 GDP growth at 3.1 percent in third and final estimate

Real gross domestic product (GDP) increased at an annual rate of 3.1 percent in the second quarter of 2017, according to the third and final estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.2 percent-line.

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Bloomberg Consumer Comfort Index rises for first time in a month

Americans' confidence rose for the first time in four weeks as households grew more upbeat about their finances amid higher stock prices, with the index rising from 50.6 to 51.6.

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August durable goods orders rose more than expected, shaking off storm impacts

New orders for key U.S.-made capital goods increased by 1.7 percent in August and shipments maintained their upward trend. The data pointed to underlying strength in the economy despite an anticipated drag to growth from Hurricanes Harvey and Irma. Business investment has been buoyed by the energy sector, where oil and gas drilling has rebounded after declining in the wake of a collapse in crude oil prices.

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Richmond Fed: Regional manufacturing index rose sharply in September

The Richmond Fed's composite manufacturing index rose from 14 to 19, supported by a sizable increase in the index for shipments — which, at a reading of 22, is the highest it has been since December 2010 — and a smaller rise in the index for new orders. The third component of the composite index, the employment index, fell slightly.

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August Pending Home Sales Index fell to lowest level since January 2016

The Pending Home Sales Index retreated 2.6 percent to 106.3 in August. The index is now at its lowest reading since January 2016 (106.1), is 2.6 percent below a year ago, and has fallen on an annual basis in four of the past five months.

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State Street Investor Confidence Index dips 2.4 points in September

The Global Investor Confidence Index decreased to 104.4, down 2.4 points from August’s revised reading of 106.8. The decline in sentiment was driven by a 6.3 point drop in the North American ICI to 105.6. By contrast, the European ICI rose by 4.7 points to 93.7 along with the 3.7 increase in the Asian ICI to 102.8.

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July Case-Shiller index up 0.7 percent from June and 5.8 percent year-on-year

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.9% annual gain in July, up from 5.8% the previous month. Before seasonal adjustment, the National Index posted a month-over-month gain of 0.7% in July.

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Consumer confidence dips in September, largely due to hurricane impacts

Consumer confidence decreased slightly in September after a marginal improvement in August. Confidence in Texas and Florida, however, decreased considerably, as these two states were the most severely impacted by Hurricanes Harvey and Irma.

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August new home sales dropped to 8-month low

Sales of new single-family houses in August 2017 were at a seasonally adjusted annual rate of 560,000, the lowest level in eight months. This is also 3.4 percent below the revised July rate of 580,000 and is 1.2 percent below the August 2016 estimate of 567,000.

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30 days left to register for the 8th annual Inland Empire Economic and Forecast Conference on 10/25/17

It's only one month away!

The Housing Chronicles Blog and MetroIntelligence are pleased to partner as a sponsor with the UC Riverside School of Business' Center for Economic Forecasting & Development for their next economic conference on October 25, 2017 in Riverside, CA.

Entitled "Urban Inland Empire: California's Next Metropolis? Re-Imagining Economic Growth in the IE," this afternoon-long program will bring together economists, elected officials and academics.

Click here to register and save $25! You can also key in the code mrea17 at check-out to receive this discount.

What you can expect from this conference:

The Inland Empire is different from similarly sized markets like Atlanta and Houston in a critical way: It has no central downtown or 'urban core' where jobs are densely located.

• What does this dynamic mean for business creation and economic development in the region?
• Is the creation of an urban core the way to develop and grow the local economy?
• Would an urban core appeal more to new businesses and do more to expand current ones?

Join some of the state's leading experts for a new economic forecast and a data-driven discussion about the region's urban future.

Click here to register and save $25! You can also key in the code mrea17 at check-out to receive this discount.

Chicago Fed National Activity Index declined in August

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved down to -0.31 in August from +0.03 in July.

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September business inflation expectations index remained the same at 1.9 percent

Firms' inflation expectations were unchanged at 1.9 percent over the year ahead. Sales levels improved somewhat, and profit margins declined further over the month.

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IHS Markit Flash U.S. Composite PMI Output Index rose further in September

September data revealed a strong increase in U.S. private sector business activity, with the rate of growth close to August's seven-month peak.

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Initial unemployment claims fall 23,000 in latest report, but 4-week average up 6,000

In the week ending September 16, initial unemployment claims were 259,000, a decrease of 23,000 from the previous week's revised level.  The 4-week moving average was 268,750, an increase of 6,000 from the previous week's revised average. This is the highest level for this average since June 4, 2016 when it was 269,500.

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Mortgage applications fall 9.7 percent in latest survey, likely due to storm impacts

The Market Composite Index decreased 9.7 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 11 percent and refinances down 9 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.04 percent.

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August FHFA House Price Index up 0.2 percent from July and 6.3 percent year-on-year

The FHFA House Price Index (HPI) reported a 0.2 percent increase in U.S. house prices in July from the previous month.  From July 2016 to July 2017, house prices were up 6.3 percent.

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Leading Economic Index rose 0.4 percent in August

The August gain is consistent with continuing growth in the U.S. economy for the second half of the year, which may even see a moderate pick up. While the economic impact of recent hurricanes is not fully reflected in the leading indicators yet, the underlying trends suggest that the current solid pace of growth should continue in the near term.

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Federal Reserve leaves interest rates unchanged for now, forecasts another raise this year

The Fed will start cutting its $4.5 trillion balance sheet in October, initially by just $10bn per month. The FOMC also left US interest rates unchanged, at 1.25% to 1.5%, but expects to raise them one more time this year, followed by three raises in 2018.

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August existing home sales dipped 1.7 percent from July, up 0.2 percent year-on-year

Existing-home sales stumbled in August for the fourth time in five months as strained supply levels continue to subdue overall according to the National Association of Realtors®. Sales gains in the Northeast and Midwest were outpaced by declines in the South and West.

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August building permits up 5.7 percent from July and 8.3 percent year-on-year

Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,300,000. This is 5.7 percent above the revised July rate of 1,230,000 and is 8.3 percent above the August 2016 rate of 1,200,000.

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August housing starts down 0.8 percent from July but up 1.4 percent year-on-year

Privately-owned housing starts in August were at a seasonally adjusted annual rate of 1,180,000. This is 0.8 percent below the revised July estimate of 1,190,000, but is 1.4 percent above the August 2016 rate of 1,164,000.

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Builder confidence drops three points in August to 64, largely due to twin hurricane impact

Builder confidence in the market for newly-built single-family homes fell three points to a level of 64 in September from a downwardly revised August reading of 67 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), due mostly to concerns about the availability of labor and the cost of building materials.

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Economic Impact from Hurricanes: Short-Term Pain and Long-Term Lessons Abound

Just before Hurricanes Harvey and Irma landed on the shores of Texas and Florida, the U.S. economy had been gradually picking up steam, with estimates of third-quarter GDP growth rising to nearly 3.0 percent.  However, given the destruction to the Houston area and throughout parts of Florida, a variety of economists and Wall Street analysts have downgraded this estimate by as much as 0.8 percentage points, and the economic impact from the twin hurricanes could exceed $150 billion, including $20 to $40 billion in lost economic output alone.

Given the unique economies of these two areas, the impacts will be national, regional, and/or local in scope.  Nationally, besides the temporary reduction in GDP growth, prices for gas and other petroleum products (such as aviation fuel and heating oil) are expected to remain elevated until Texas’ refining facilities – responsible for nearly 25 percent of the nation’s output – are back online. Auto sales, already weakening this year after years of rising demand, could decline by 100,000 to 200,000 vehicles as potential buyers focus on other issues.  It will also take months for insurers to deal with up to 500,000 claims for flooded cars, many of which were unsold units on dealer lots.

As of mid-September, we’re already seeing some of the impacts from Hurricane Harvey on retail sales and industrial production, both of which dipped after months of increases.  Yet such dips are transitory, and likely to be made up in the fourth quarter and into 2018.  Similarly, initial applications for unemployment insurance, spiking in the first week of September to the highest level since early 2015, will provide a temporary safety net while most companies survey their damage and gradually re-open for business.

As for the housing market, given that the combined areas of the Houston MSA and the State of Florida had accounted for nearly 14 percent of building permits from January through July of 2017, there will certainly be an impact filtering throughout the building industry.  Prices for lumber – already elevated due to the Trump Administration's 20 percent excise tax on Canadian timber – are likely to rise even further given the scale of homes in need of immediate repair.

National spending on remodeling and repair could rise by nearly 10 percent, while also siphoning off labor and materials from new home construction.  Overall inflation, which has been recently bouncing around the two-percent level, could rise in the short term depending on the demand to rebuild and refurnish households.

In Houston, the floods which had inundated as much as 30 percent of Harris County meant that 100,000 homes or more would have to be partially or totally rebuilt, which has created a surge in demand for temporary lodging and suitable rentals.  For now, look for both new home incentives and apartment rent concessions to wane as excess supply disappears.

Given experiences with previous hurricanes, it will likely take up to five years for the hardest-hit areas along the Texas coast to rebuild.  Still, boosters are already saying that the resilience of Houston’s building industry – the largest market in the country with nearly 45,000 permits in 2016 -- could sharply reduce that timeline.

In Florida, because Hurricane Irma impacted almost the entire state, there was more damage to power and water infrastructure as well as homes and businesses.  In terms of economic loss, although the state’s industrial economy is much less built-up than in Houston, other sectors including tourism,  agriculture, health care and business services are expected to take the biggest hit.

In the long run, there will also be a national discussion about re-building in areas prone to natural disasters such Harvey and Irma.  Although many Houstonians can simply elevate their homes to avoid local flooding, the region’s rapid growth (and related ability to provide affordable housing) will be intently studied.  In Florida -- the lowest-lying state with an average elevation of 100 feet – potential homebuyers may have second thoughts about living close to its 1,200 miles of coastline.

For now, Congress will have to shore up and fix the National Flood Insurance Program, already in debt by $25 billion prior to these most recent storms due to premiums not matching payouts for past disasters including Hurricane Katrina and Superstorm Sandy. Some changes might include reducing the 30 percent commission paid to commercial insurers, streamlining the claims process, or even transferring the flood insurance business entirely to the private sector.

Given that lenders will not issue mortgages on homes in flood plains without the required insurance available, the long-term impact to the building industry could be substantial.

Business inventories up 0.2 percent in July

U.S. business inventories rose 0.2% in July, manufacturing inventories were up 0.2% and wholesaler inventories increased 0.6% from a month earlier. Retailers decreased stockpiles by 0.1% in July from June.

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Consumer sentiment dips in early September due to twin hurricanes, but impact likely short-lived

Consumer confidence edged downward in early September due to concerns over the outlook for the national economy. Consumers' assessments of current economic conditions improved, however, with the Current Conditions Index reaching the highest level since November of 2000.

Across all interviews in early September, 9% spontaneously mentioned concerns that Harvey, Irma, or both, would have a negative impact on the overall economy. Renewed gains in incomes as well as rising home and equity values have acted to counterbalance the negative impacts from the hurricanes. Given the current resilience of consumers, recent events are unlikely to derail confidence.

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Industrial production reported August dip, partially due to Hurricane Harvey

Industrial production declined 0.9 percent in August following six consecutive monthly gains. Hurricane Harvey, which hit the Gulf Coast of Texas in late August, is estimated to have reduced the rate of change in total output by roughly 3/4 percentage point.

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August retail sales post largest decline in six months, partly due to Hurricane Harvey

Retail sales dropped 0.2 percent in August, the biggest decline in six months as motor vehicle sales tumbled 1.6 percent. Sales of building materials, electronics and appliances as well as clothing also fell.

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Initial unemployment claims dip 14,000 in latest survey, but 4-week average up 13,000

In the week ending September 9, initial unemployment claims were 284,000, a decrease of 14,000 from the previous week. The 4-week moving average was 263,250, an increase of 13,000 from the previous week. This is the highest level for this average since August 13, 2016 when it was 263,250.

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Mortgage applications rose 9.9 percent in latest weekly survey

The Market Composite Index increased 9.9 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 11 percent and refinances up 9 percent.  The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.03 percent.

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August new home mortgage applications up 7.0 percent from July and 6.8 percent year-on-year

Mortgage applications for new home purchases increased 6.8 percent compared to August 2016. Compared to July 2017, applications increased by 7 percent relative to the previous month.

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August CPI up 0.4 percent during the month and 1.9 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.9 percent.

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Producer Price Index up 0.2 percent in August and 2.4 percent over previous 12 months

The Producer Price Index for final demand advanced 0.2 percent in August. On an unadjusted basis, the final demand index increased 2.4 percent for the 12 months ended in August.

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Small Business Optimism Index rose another 0.1 points, maintaining high levels since last November

The NFIB Index rose 0.1 points to 105.3. Five of the components increased, while five declined. The lofty reading keeps intact a string of historically high performances extending back to last November.

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July job openings rose to record high of 6.2 million, while hires rose to 1.5-year high

The number of job openings rose to 6.2 million on the last business day of July, up 0.9 percent from June and the highest level since December 2000. Over the month, hires rose 1.3 percent to a 1.5-year high of 5.5 million, while separations rose 0.4 percent to 5.3 million.

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July wholesale trade dipped 0.1 percent from June but up 5.9 percent year-on-year

July 2017 sales of merchant wholesalers were down 0.1 percent from June, but were up 5.9 percent from the July 2016 level.

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Consumer credit use rose 5.9 percent in July

Consumer credit increased at a seasonally adjusted annual rate of 5.9% in July. Total outstanding credit increased $18.5 billion during the month (compared with $11.9 billion in June) to $3.75 trillion.

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Initial unemployment claims rise 62,000 in latest report

In the week ending September 2, initial claims were 298,000, an increase of 62,000 from the previous week's unrevised level of 236,000. The 4-week moving average was 250,250, an increase of 13,500 from the previous week's unrevised average of 236,750.

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Mortgage loan applications rise 3.3 percent in latest survey as rates dip again

The Market Composite Index increased 3.3 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 1.0 percent and refinances 5.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to its lowest level since November 2016, 4.06 percent.

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Service sector revenue rose 3.2 percent in 2Q 2017, up 6.2 percent year-on-year

U.S. selected services total revenue for the second quarter of 2017, rose by 3.2 percent from the first quarter of 2017 and up 6.2 percent from the second quarter of 2016.

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Labor productivity rose 1.5 percent in 2Q 2017, up 1.3 percent year-on-year

Nonfarm business sector labor productivity increased 1.5 percent during the second quarter of 2017 as output increased 4.0 percent and hours worked increased 2.5 percent. From the second quarter of 2016 to the second quarter of 2017, productivity increased 1.3 percent, reflecting a 2.8-percent increase in output and a 1.5-percent increase in hours worked.

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Beige Book: Moderate economic expansion in July and August, but low for-sale home inventory

Economic activity expanded at a modest to moderate pace across all twelve Federal Reserve Districts in July and August. Both residential and commercial construction increased slightly overall. Low inventories of homes for sale continued to weigh on residential real estate activity across the country, while commercial real estate activity increased slightly.

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Service sector index rose 1.4 points in July

The NMI® registered 55.3 percent, which is 1.4 percentage points higher than the July reading of 53.9 percent. The non-manufacturing sector has rebounded from the prior month's cooling-off period. The majority of respondents are optimistic about business conditions going forward.

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Manufacturing sector index rose 2.5 percentage points in July

The August PMI® registered 58.8 percent, an increase of 2.5 percentage points from the July reading of 56.3 percent. Comments from the panel reflect expanding business conditions, with new orders, production, employment, backlog and exports all growing in August.

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Factory goods orders slipped 3.3 percent in July

Factory goods orders tumbled 3.3 percent amid a slump in demand for transportation equipment. That was the biggest drop since August 2014 and followed a 3.2 percent surge in June.

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Gallup: U.S. Confidence Index rose by two points to +6 in August

Americans' confidence in the U.S. economy varied in August but was not remarkably different from economic attitudes in July. Gallup's U.S. Economic Confidence Index was +6 in August, just slightly higher than the +4 recorded in July.

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Consumer confidence remains at highest level so far in 2017 since 2000

Consumer confidence has remained at a very favorable level, although slipping somewhat from mid-month. The Sentiment Index has been higher during the first eight months of 2017 than in any year since 2000, which was the peak year of the longest expansion in U.S. history. Given the current resilience of consumers, temporary increases in gas prices as well as a brief period of weakness in economic growth and employment are unlikely to derail confidence.

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Construction spending fell 0.6 percent in July to nine-month low

U.S. construction spending unexpectedly fell 0.6 percent in July, hitting a nine-month low to $1.21 trillion amid a steep decline in investment in private structures.

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Job growth slowed to 156,000 in August

Total nonfarm payroll employment increased by 156,000 in August, and the unemployment rate rose to 4.4 percent. Job gains occurred in manufacturing, construction, professional and technical services, health care, and mining. Job growth for June and July also declined by a total of 41,000.

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