The Housing Chronicles Blog: 2018

Wednesday, August 15, 2018

Mortgage applications dip 2.0 percent, rates slip three basis points

The Market Composite Index decreased 2.0 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 30 percent and refinance activity remaining flat. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.81 percent from 4.84 percent.

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Inflation expectations for business remain unchanged at 2.1 percent in the year ahead

Firms' inflation expectations went unchanged at 2.1 percent over the year ahead. Current economic environment: Sales levels remain "about normal," on average. Profit margins improved somewhat, and year-over-year unit costs increased somewhat to 2.0 percent, on average.

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Retail sales up 0.5 percent in July and 6.4 percent year-on-year

U.S. retail sales rose a healthy 0.5% in July, although June's sales were reduced from a 0.5% to a 0.2% gain. Retail sales rose 0.6% minus gas stations and auto dealers.  Over the last year, retail sales have increased 6.4%, close to the long-run average since 1980.

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2Q 2018 productivity up 2.9 percent from 1Q versus 1.3 percent year-on-year

Nonfarm business sector labor productivity increased 2.9 percent during the second quarter of 2018, as output increased 4.8 percent and hours worked increased 1.9 percent. From the second quarter of 2017 to the second quarter of 2018, productivity increased 1.3 percent, reflecting a 3.5-percent increase in output and a 2.2-percent increase in hours worked.

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August builder confidence drops one point to 67, buyer traffic index falls below 50

Builder confidence in the market for newly-built single-family homes edged down one point to a solid 67 reading in August on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI index measuring current sales conditions inched one point lower to 73 while the component gauging expectations in the next six months all fell a single point to 72. Meanwhile, the metric charting buyer traffic dropped two points to 49.

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Tuesday, August 14, 2018

Total household debt rose another 0.6 percent to all-time high, delinquency rates stable at low levels

Total household debt increased by $82 billion (0.6%) to $13.29 trillion in the second quarter of 2018. It was the 16th consecutive quarter with an increase, and the total is now $618 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008. Further, overall household debt is now 19.2% above the post-financial-crisis trough reached during the second quarter of 2013.

While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans.

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July Small Business Optimism Index rose to second-highest level in 45-year history

The Small Business Optimism Index marked its second highest level in the survey’s 45-year history at 107.9, rising to within 0.1 point of the July 1983 record-high of 108. The July 2018 report also set new records in terms of owners reporting job creation plans and those with job openings.

A seasonally adjusted net 23 percent are planning to create new jobs, up three points from June. Thirty-seven percent of all owners reported job openings they could not fill in the current period, a one-point increase from June.

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Friday, August 10, 2018

Second Quarter 2018 Economic Update: The Strongest Growth since 2014, But Will it Last?

It was certainly good news to hear that the initial estimate for GDP growth of 4.1 percent in the second quarter of 2018 was the fastest since the third quarter of 2014. This recent rate of growth compares to 2.2 percent in the first quarter of 2018, 2.3 percent in 2017 and 1.5 percent in 2016. As of early August, GDPNow was also forecasting third quarter growth of 4.3 percent, although both these GDP estimates and forecasts are likely to change as more information comes in.

Most of the surge noted during the second quarter was due to a boost in consumer spending (along with the highest levels of consumer confidence in years), exports, nonresidential fixed investment (including commercial real estate, factories and machinery) and government spending. It would have been even higher were it not for declines in private inventory investment by businesses and residential fixed investment (including home building and remodeling).

One political factor weighing heavily on the boost in growth was the export of goods, with its rise quadrupling from the first quarter to 13.3 percent, as numerous countries stocked up in advance in order to avoid real and potential retaliatory tariffs.   This export surge itself was responsible for about one full point of the 4.1-percent GDP increase. At the same time, the rate of import growth fell sharply to just 0.5 percent, indicating that domestic suppliers either had adequate inventories or capacity to meet demand.

Another political factor was the tax cuts enacted at the beginning of 2018, which boosted consumer spending after a lag in the first quarter, and led to large corporations buying hundreds of billions of their own shares, thus helping to support the stock market. A healthy stock market, in turn, improves both 401k balances as well as consumer confidence.

What we don’t know yet is if the export surge or the boost in consumer spending is sustainable, but we’ll find that out through the rest of the year.

For now, the job market remains tight, with July unemployment dipping back to 3.9 percent along with 157,000 new positions. Looking at just the second quarter of 2018 alone, job growth rose by over 21 percent versus the same quarter of 2017. Moreover, for the first seven months of 2018, job growth increased by over 16 percent versus 2017.

Wages, which had remained stubbornly flat throughout much of the economic recovery, surged during the second quarter of 2018 by 2.8 percent over the previous year, for the sharpest increase since the third quarter of 2008.

Still, with inflation slowly on the rise, most of these wage gains are being eaten up by higher costs for energy, transportation and shelter. Annual core inflation readings from the CPI, PPI and PCE Price Index have recently ranged from 1.9 to 2.8 percent versus the Fed’s preferred increase of 2.0 percent. It’s for that reason that we’re likely to see a total of four interest rate increases by the Fed this year, and up to three more in 2019.

For the housing market, although home builders continue to push forward on meeting demand, they’re up against several headwinds including higher mortgage rates (up 18 percent annually through the first week of August), higher building costs (especially tariffs on Canadian timber) and ongoing difficulties locating suitable land and labor.

Although average monthly housing starts and building permits did fall by a small amount between the first and second quarters of 2018, they were still up moderately for the first half of the year versus 2017. New single-family home sales, which averaged an annual rate of 646,000 in the second quarter of 2018, were also up 6.4 percent for the first half of the 2018 versus 2017.

The pricing premium for new versus existing homes, which approached 40 percent as recently as the end of 2017, steadily fell to just nine percent by June of 2018, thus making a new home much more competitive. In fact, forecasters are pointing to the new home market to drive the housing market in the near term, as the existing home market remains penned in by low inventory, increasing affordability issues and higher interest rates.

Still, with the backlog of unsold new single-family homes rising to 5.7 months in June, some builders are also facing similar affordability challenges with their buyers. In the long run, however, given the huge pent-up demand for housing in the U.S., only the most serious shocks to the economy are likely to derail the long and slow recovery.

July CPI up 0.2 percent from June and 2.9 percent year-on-year

The July CPI rose 2.9% year-on-year, largely due to energy (+12.1%), transport (+4.0%) and shelter (+3.5%).  The 'core' index rose 2.4% year-on-year, for the highest increase in nearly 10 years.

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Thursday, August 9, 2018

Initial unemployment claims dip 6,000 in weekly report

In the week ending August 4, initial unemployment claims were 213,000, a decrease of 6,000 from the previous week's revised level. The 4-week moving average was 214,250, a decrease of 500 from
the previous week's revised average.

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Mortgage applications dip to lowest level in 2.5 years, rates remain unchanged

The Market Composite Index decreased 3.0 percent on a seasonally adjusted basis from one week earlier to its lowest level since January 2016, with purchase loans falling 2.0 percent and refinance activity down 5.0 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained unchanged at 4.84 percent.

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Bloomberg: Consumer comfort index rises to 17-year high of 59.3 in weekly update

U.S. consumer sentiment advanced to a 17-year high of 59.3, elevated by rosier views of the economy and personal finances.  This is the highest level noted since February 2001.

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June wholesale trade sales slipped 0.1 percent from May but up 10.2 percent year-on-year

June 2018 sales of merchant wholesalers were down 0.1 percent from May but up 10.2 percent year-on-year. Inventories were up 0.1 percent from May and 5.1 percent year-on-year.

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July Producer Price Index unchanged from June, up 3.3 percent year-on-year

The Producer Price Index for final demand was unchanged in July, seasonally adjusted, and rose 3.3 percent year-on-year. The index for final demand less foods, energy, and trade services moved up 0.3 percent in July, and was up 2.8 percent year-on-year.

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Wednesday, August 8, 2018

Consumer borrowing growth slowed in June as revolving credit use declined

Consumer borrowing slowed in June after hitting a six-month high in the prior month, but still rose at an annual rate of 3.1 percent.  Revolving credit, including credit cards, declined by 0.2% in June after rising 11.2% in May. This is the second drop in credit-card use in the past four months. Nonrevolving credit, including auto and student loans, rose 4.4% in June, and has been rising at a relatively steady pace in recent months.

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July new home mortgage applications up 0.2 percent from June and 3.6 percent year-on-year

July mortgage applications for new home purchases increased 0.2 percent from June and 3.6 percent year-on-year.  MBA estimates new single-family home sales were running at a seasonally-adjusted
annual rate of 637,000 units in July 2018, up 8.5 percent from June.

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Tuesday, August 7, 2018

July Employment Trends Index up 5.4 percent year-on-year


The Conference Board Employment Trends Index™ (ETI) increased in July, after increasing in June. The index now stands at 109.89, up from 108.72 in June. The change represents a 5.4 percent gain in the ETI compared to a year ago.


CoreLogic: June home prices up 0.7 percent from May and 6.8 percent year-on-year

CoregLogic:  June home prices increased nationally by 0.7 percent from May and 6.8 percent year over year. Looking ahead, the CoreLogic HPI Forecast indicates that the national home-price index is projected to continue to increase by 5.1 percent over the next year.

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JOLTS: June job openings rose 0.5 percent as surplus of open positions remains

Although overall job openings were nearly flat between the final days of May and June (rising by 0.5 percent to 6.7 million), hires fell 1.67 percent while separations rose 1.53 percent. With 6.6 million unemployed persons in June (falling to 6.3 million in July), there still likely remains a surplus of open positions.

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Friday, August 3, 2018

Service sector index dips 3.4 points in July to 55.7

The NMI® registered 55.7 percent in July, which is 3.4 percentage points lower than the June reading of 59.1 percent. There has been a ‘cooling off’ in growth for the non-manufacturing sector, and tariffs and deliveries are an ongoing concern. Still, the majority of respondents remain positive about business conditions and the economy.

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June trade deficit rose to $46.3 billion as imports rose faster than exports

The nation’s international trade deficit in goods and services increased to $46.3 billion in June from $43.2 billion in May, as exports decreased and imports increased.

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Online advertised vacancies rebounded by 170,800 in July

Online advertised vacancies increased by 170,800 to 4,651,500 in July, nearly erasing the loss of 171,633 noted for June. In July of 2017, the number of online job vacancies declined by 146,067.

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Jobs rose by 157,000 in July, unemployment rate edged down to 3.9 percent

Total nonfarm payroll employment rose by 157,000 in July, and the unemployment rate edged down  to 3.9 percent. This growth rate compares with 248,000 in June and 190,000 in July of 2017. Employment increased in professional and business services, in manufacturing, and in health care and social assistance.

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Thursday, August 2, 2018

Initial unemployment claims rise by 1,000 in weekly report

In the week ending July 28, initial unemployment claims were 218,000, an increase of 1,000 from the previous week's unrevised level of 217,000. The 4-week moving average was 214,500, a decrease of 3,500 from the previous week's unrevised average of 218,000.

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Bloomberg: Consumer Comfort Index slips from 17-year high, but gender gap at highest level since 1990

Bloomberg: The weekly Consumer Comfort Index eased to 58.6 from a 17-year high 59 in previous week as the gender gap widened to 18.6 points in favor of men, up from 16.5 points in prior week.  This is the highest gap since 1990.

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June factory goods orders rose 0.7 percent, up for second straight month

New orders for U.S.-made goods rose for a second straight month in June and were up by 0.7 percent, but business spending plans on equipment slipped from initial estimates, suggesting a further
slowdown was likely in the third quarter.

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July planned job cuts fall to lowest level of 2018, but YTD cuts still up 6.7 percent from 2017

U.S.-based employers announced plans to cut 27,122 workers from payrolls during July, down both 27.1 percent from June and 4.2 percent year-on-year.  Although July's total was the lowest of the year, YTD job cuts are still up 6.7 percent from 2017. Still, nearly 90 percent of companies polled are in hiring or retention mode.

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Wednesday, August 1, 2018

ISM Manufacturing Index dips to 58.1, high concerns regarding tariffs

The July PMI® registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 percent.

Production and employment continues to expand in spite of labor and material shortages. Inputs — expressed as supplier deliveries, inventories and imports — had expansion increases, due primarily to negative supply chain issues, but at easing levels compared to the prior month. Price pressure remains strong, but the index softened for the second straight month.

Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents are again overwhelmingly concerned about how tariff-related activity, including reciprocal tariffs, will continue to affect their business.

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Mortgage applications dip 2.6 percent as rates rise to 4.84 percent


The Market Composite Index decreased 2.6 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 3.0 percent and refinances down 2.0 percent.  The average contract interest rate for 30-year fixed-rate mortgages increased to 4.84 percent from 4.77 percent.


FOMC Statement: Rates unchanged for now, but future 2018 hikes ahead

As expected, the Fed opted to keep interest rates unchanged for now, but warns of future rate hikes to come in 2018, perhaps as soon as September.

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ADP: Private Sector Employment Increased by 219,000 Jobs in July

Private-sector employment increased by 219,000 from June to July, on a seasonally adjusted basis. 
This compares to 181,000 in June and 203,000 in July of 2017.

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June construction spending fell by largest amount in over a year, but previous months' totals revised upwards

Construction spending fell 1.1 percent in June, the largest decline since April 2017. However, data for May was revised up to show construction outlays rising 1.3 percent instead of the previously reported 0.4 percent gain, and April's outlays increased 1.7 percent instead of the previously estimated 0.9 percent.

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Tuesday, July 31, 2018

July Chicago PMI rose to six-month high, prices paid index rises to 10-year high

The MNI Chicago Business Barometer rose to a six-month high of 65.5 in July, up 1.4 points from 64.1 in June, with the prices paid index rising to a 10-year high.

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July consumer confidence index rebounds slightly from June

Consumer confidence gained marginal ground by rising 0.3 points in July, after a modest decline in June. Consumers' assessment of present-day conditions improved, suggesting that economic growth is still strong. However, while expectations continue to reflect optimism in the short-term economic outlook, back-to-back declines suggest consumers do not foresee growth accelerating.

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June personal income and personal spending both rose 0.4 percent, savings rate unchanged

In June, personal income, disposable personal income and personal consumption expenditures all increased 0.4 percent. The personal savings rate was unchanged from May at 6.8 percent.

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Wage inflation: 2Q 2018 compensation costs rose at highest annual rate since 2008

Compensation costs for civilian workers increased 0.6 percent, seasonally adjusted, for the 3-month period ending in June 2018. Wages and salaries increased 0.5 percent and benefit costs increased 0.9 percent. Year-on-year, compensation costs rose 2.8 percent, with wages and salaries up 2.8 percent and benefits rising 2.9 percent.

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May Case-Shiller Index up 1.1 percent from April and 6.4 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 6.4% annual gain in May, remaining the same as in the previous month. Before seasonal adjustment, the National Index posted a month-over-month gain of 1.1% in May.

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Fed-preferred June PCE Price Index up 0.1 percent from May and 2.2 percent year-on-year

In June, the PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent. Year-on-year, the PCE price Index rose 2.2 percent.  Excluding food and energy, the index rose 1.9 percent.

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Monday, July 30, 2018

July Global Investor Confidence rebounds 1.0 point to 101.8, but investor sentiment remains depressed

The Global Investor Confidence Index increased to 101.8 in July, up 1.0 point from June's revised reading of 100.8.  It is possible that the prospects of escalating trade protectionism, political uncertainty, and lagging earnings growth continue to depress institutional investor sentiment.

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Gallup: Nearly 4 in 10 of Americans cite the economy as the nation's most positive factor

According to a Gallup poll, 37 percent of respondents cited the economy or jobs as nation's biggest positive factor. This marks a 14-year high in Gallup's monthly poll series.

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June pending home sales index rebounds 0.9 percent from May, but still down 2.5 percent year-on-year

The Pending Home Sales Index rose 0.9 percent to 106.9 in June from 105.9 in May. Despite last month's increase, contract signings are still down 2.5 percent on an annual basis.

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Friday, July 27, 2018

July consumer sentiment dipped 0.3 points to 97.9, still at high levels

Consumer sentiment posted a trivial 0.3 point one-month decline in July, remaining a half of an Index-point or less from the average in the prior twelve months (97.7) or since the start of 2017 (97.4). Despite the expectation of higher inflation and higher interest rates during the year ahead, consumers have kept their confidence at high levels due to favorable job and income prospects.

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Second quarter GDP growth jumps to 4.1 percent in first of three estimates

U.S. GDP grew by 4.1 percent in the second quarter of 2018 in the first of three estimates. Most of this jump from the 2.2 percent rate noted in the first quarter was from personal spending, exports, nonresidential fixed investment, federal government spending, and state and local government spending.

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Thursday, July 26, 2018

Initial unemployment claims rise by 9,000 in weekly report

In the week ending July 21, initial unemployment claims were 217,000, an increase of 9,000 from the previous week's revised level. The 4-week moving average was 218,000, a decrease of 2,750 from the previous week's revised average.

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Mortgage applications dip 0.2 percent, rates remain flat

The Market Composite Index decreased 0.2 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 1.0 percent but refinances up 1.0 percent. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 4.77 percent.

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Bloomberg: Consumer confidence rises to highest level since February 2001 in weekly update

Americans' confidence rose to the highest level since February 2001 on brighter assessments of the economy, with the Bloomberg Consumer Comfort Index rising for the seventh straight week to 59.0 from 58.8.

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June trade in goods deficit rose 5.5 percent as imports outpaced exports

The international trade deficit was $68.3 billion in June, up 5.5 percent from $64.8 billion in May. Exports of goods for June were $141.9 billion, $2.2 billion less than May exports. Imports of goods for June were $210.3 billion, $1.3 billion more than May imports.

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Durable goods orders rebounded strongly in June

Overall orders for durable goods, items meant to last three years or more, increased 1.0 percent in June as demand for transportation equipment rebounded. Excluding transportation, orders rose 1.5 percent.

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Wednesday, July 25, 2018

Direct foreign investment in the U.S. fell sharply in 1Q 2018

Net foreign direct investment in the U.S. was $53.1 billion in 1Q 2018, the first quarter in which the tax cuts took effect.  This level of investment is down 43% from the same quarter of 2017 and 37% from the fourth quarter of 2017.

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June new home sales dip to eight-month low, but still up 2.4 percent year-on-year

Sales of new single-family houses in June 2018 were at a seasonally adjusted annual rate of 631,000, the lowest rate in eight months and down 5.3 percent from May.  Still, sales were up 2.4 percent year-on-year. The median new house price fell 4.2 percent to $302,100 in June from a year ago.

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Tuesday, July 24, 2018

FHFA: Home prices up 0.2 percent in May and 6.4 percent year-on-year


The FHFA House Price Index (HPI) reported a 0.2 percent increase in U.S. house prices in May from April.  From May 2017 to May 2018, house prices were up 6.4 percent.


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Private sector growth strong in July, but prices charged rising at record rate

U.S. private sector companies experienced a robust rise in overall business activity during July, supported by an improving economic backdrop and another sharp upturn in incoming new work. Relatively strong rates of business activity growth were recorded in both the manufacturing and service sectors.

Intense cost pressures continued in July, which resulted in a sharp and accelerated increase in average prices charged by private sector firms. The latest rise in output charges was the fastest since composite data were first collected in October 2009.

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Monday, July 23, 2018

Chicago Fed National Activity Index rebounded strongly in June

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rebounded to +0.43 in June from –0.45 in May. The index’s three-month moving average, CFNAI-MA3, edged up to +0.16 in June from +0.10 in May.

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June existing home sales dip for third straight month, prices rise to all-time high

Existing-home sales decreased for the third straight month in June, falling by 0.6 percent from May and down 2.2 percent year-on-year. The ongoing supply and demand imbalance helped push June’s median sales price to a new all-time high of $276,900, up 5.2 percent year-on-year.

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Thursday, July 19, 2018

Initial unemployment claims fall to lowest level since December 1969

In the week ending July 14, initial unemployment claims were 207,000, a decrease of 8,000 from the previous week's revised level. This is the lowest level for initial claims since December 6, 1969 when it was 202,000. The 4-week moving average was 220,500, a decrease of 2,750 from the previous week's revised average.

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Mortgage applications fall 2.5 percent as purchase loans slip

The Market Composite Index decreased 2.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 5.0 percent but refinances rising 2.0 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.77 percent from 4.76 percent.

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June Leading Economic Index rose 0.5 percent after no change in May

The U.S. LEI increased in June by 0.5 percent to 109.8 after being flat in May, pointing to continuing solid growth in the U.S. economy. The widespread growth in leading indicators, with the exception of housing permits which declined once again, does not suggest any considerable growth slowdown in the short-term.

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Wednesday, July 18, 2018

June industrial production rebounded 0.6 from May, up 3.8 percent year-on-year

Industrial production rose 0.6 percent in June after declining 0.5 percent in May. For the second quarter as a whole, industrial production advanced at an annual rate of 6.0 percent, its third consecutive quarterly increase.  At 107.7 percent of its 2012 average, total industrial production was 3.8 percent higher in June than it was a year earlier.

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June building permits dip for third straight month, down 3.0 percent year-on-year

Privately-owned housing units authorized by building permits in June dipped for the third month to a seasonally adjusted annual rate of 1,273,000, which is the lowest rate since September 2017. This is also 2.2 percent below the revised May rate of 1,301,000 and is 3.0 percent below the June 2017 rate of 1,312,000.

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June housing starts dip to lowest level since September 2017, down 4.2 percent year-on-year

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,173,000, dipping to the lowest rate since September 2017. This is 12.3 also below the revised May estimate of 1,337,000 and is 4.2 percent below the June 2017 rate of 1,225,000.

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June new home mortgage applications down 12 percent from May and 8.8 percent year-on-year

June mortgage applications for new home purchases decreased 12 percent since May and were down 8.8 percent year-on-year, but are not seasonally adjusted.  For the first six months of 2018, however, new home applications rose 2.5 percent year-on-year.

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Beige book: Expansion continuing, but tariffs impacting prices and supplies

Economic activity continued to expand across the United States, with 10 of the 12 Federal Reserve Districts reporting moderate or modest growth. The outliers were the Dallas District, which reported strong growth driven in part by the energy sector, and the St. Louis District where growth was described as slight. Manufacturers in all Districts expressed concern about tariffs and in many Districts reported higher prices and supply disruptions that they attributed to the new trade policies.

All Districts reported that labor markets were tight and many said that the inability to find workers constrained growth. Consumer spending was up in all Districts with particular strength in Dallas and Richmond. Contacts reported higher input prices and shrinking margins. Six Districts specifically mentioned trucking capacity as an issue and attributed it to a shortage of commercial drivers. Contacts in several Districts reported slow growth in existing home sales but were not overly concerned about rising interest rates. Commercial real estate was largely unchanged.

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Tuesday, July 17, 2018

June industrial production rebounded 0.6 from May, up 3.8 percent year-on-year


Industrial production rose 0.6 percent in June after declining 0.5 percent in May. For the second quarter as a whole, industrial production advanced at an annual rate of 6.0 percent, its third consecutive quarterly increase.

At 107.7 percent of its 2012 average, total industrial production was 3.8 percent higher in June than it was a year earlier. Capacity utilization for the industrial sector increased 0.3 percentage point in June to 78.0 percent, a rate that is 1.8 percentage points below its long-run (1972–2017) average.


Builder confidence unchanged at 68 in July survey

Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 68 reading in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI index measuring current sales conditions remained unchanged at 74. Meanwhile, the component gauging expectations in the next six months dropped two points to 73 and the metric charting buyer traffic rose two points to 52.

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Builder confidence unchanged at 68 in July survey


Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 68 reading in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The HMI index measuring current sales conditions remained unchanged at 74. Meanwhile, the component gauging expectations in the next six months dropped two points to 73 and the metric charting buyer traffic rose two points to 52.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 57 while the Midwest remained unchanged at 65. The West and South each fell one point to 75 and 70, respectively.


Monday, July 16, 2018

July Empire State Manufacturing Survey index dips two points to 22.6

The headline general business conditions index edged down by over two points to 22.6—still a high level, suggesting a continuation of robust growth. Looking ahead, firms were slightly less optimistic about the six-month outlook than they were last month.

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June retail sales rose 0.5 percent from May and 6.6 percent year-on-year

Retail sales increased 0.5 percent in June, for the largest gain since September 2017, and were up 6.6 percent year-on-year. Total sales for the April 2018 through June 2018 period were up 5.9 percent from the same period a year ago.

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Friday, July 13, 2018

Consumer sentiment slips in mid-July read but still at high level

Consumer sentiment slipped in early July but remained nearly equal to the average in the prior twelve months (97.7) and since the start of 2017 (97.4).  So far, the strength in jobs and incomes has overcome higher inflation and interest rates. The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy. While consumers may not understand the intricacies of trade theory, they have substantial experience making decisions about the timing of discretionary purchases based on prospective trends in prices.

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Thursday, July 12, 2018

Initial unemployment dip by 18,000 in weekly report

In the week ending July 7, initial unemployment claims were 214,000, a decrease of 18,000 from the previous week's revised level. The 4-week moving average was 223,000, a decrease of 1,750 from the previous week's revised average.

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Mortgage applications up 2.5 percent in weekly survey due to purchase loans, refinances dip

The Market Composite Index increased 2.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 7.0 percent but refinance activity falling 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.76 percent.

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Bloomberg: Consumer comfort rose for fifth-straight week to highest level since mid-April

The Consumer Comfort Index improved for a fifth straight week, buoyed by brighter views of their personal finances and record-high confidence among Republicans. The index rose from 57.6 to 58.0, the highest reading since mid-April and matching the second-strongest reading since February 2001.

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CPI up 0.1 percent in June and 2.9 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in June and was up 2.9 percent year-on-year. The index for all items less food and energy rose 0.2 percent in June, and was up 2.3 percent year-on-year.

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Wednesday, July 11, 2018

Mortgage applications up 2.5 percent in weekly survey due to purchase loans, refinances dip

The Market Composite Index increased 2.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 7.0 percent but refinance activity falling 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.76 percent.



Businesses' July Inflation Expectations Hold Firm for the Coming Year

Firms' inflation expectations went unchanged at 2.1 percent over the year ahead.  Sales levels remain "about normal," on average. Profit margins improved somewhat, and year-over-year unit costs decreased somewhat to 1.9 percent, on average.



Wholesale inventories rose faster than expected in May as domestic demand rose

U.S. wholesale inventories were a bit higher than initially estimated in May, rising by 0.6 percent amid strong increases in the stocks of machinery and a range of other goods. Economists expect the pace of inventory accumulation to pick up slightly in the second quarter after weak domestic demand in the first quarter.

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Producer Price Index up 0.3 percent in June and 3.4 percent year-on-year

The Producer Price Index for final demand rose 0.3 percent in June, down from 0.5 percent in May but up from 0.1 percent in April. On an unadjusted basis, the final demand index moved up 3.4 percent for the 12 months ended in June, the largest 12-month increase since climbing 3.7 percent in November 2011.

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Tuesday, July 10, 2018

The Rise of the New Single-Family Rental Home: A Hedge Against Real Estate Cycles


My column for the July edition of Builder & Developer magazine is now posted online.

An excerpt:

In September of 2015, I wrote a column about the introduction of a new product type to the home building marketplace: the single-family home for rent, otherwise known as build-to-rent (B2R). At that time, just a few builders, including Lennar and Toll Brothers, had dipped their toes into these waters, but today it’s being seen as a clever hedge against the boom-and-bust real estate cycles which can test even the best-run companies.

To be sure, it’s not just homebuilders getting into this game. Wall Street-backed companies like Invitation Homes and AmericanHomes4Rent started the trend by buying up cheap, existing single-family homes in foreclosure back in 2012 when home prices were near their lowest, eventually assembling a portfolio of 200,000 units across the country. Even with that rapid growth, their holdings still represent just 1.4 percent of the estimated 14 million single-family rental homes, with most owned by small “mom and pop” operators.


June Small Business Optimism Index dips 0.6 points but still at high level

The Small Business Optimism Index posted its sixth highest reading in survey history for the month of June, at 107.2, down 0.6 from May. Since December 2016, the Index has averaged an unprecedented 105.4, well above the 45-year average of 98 and rivaling the all-time high of 108.0 in July 1983.

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Consumer borrowing picked up in May at fastest rate in six months


Consumer borrowing picked up in May, with total consumer credit increasing at an annual growth rate of 7.6%, which is the fastest pace of credit growth since November.   Most of this was due to revolving credit, like credit cards, which rose by 11.4% in May, and indicating consumers are willing to increase their spending after a slow first quarter of the year.


JOLTS: Job openings dipped 3.0 percent in May as hiring picked up


The number of job openings edged down 3.0 percent to 6.6 million on the last business day of May. Over the month, hires rose 3.1 percent to 5.8 million, while separations rose 0.8 percent to 5.5 million.


Monday, July 9, 2018

The 2018 Gold Nugget Winners: High Art in Architecture, Design and Land Use


One of the things I like best about the building industry is the enormous creativity involved in every stage of the process, especially for decisions made about architecture, design and land use.  This was certainly true again for this year’s Gold Nugget winners at PCBC, ranging from rehabs which are both practical and inspiring, to master plans which seemed to effortlessly take the pulse of today’s culture while still making them relevant to future residents. Following are some profiles of winners in key categories.

There were actually two winners for Best Masterplan Community, divided among urban and suburban locations.  In Honolulu, Ward Village by Howard Hughes Corp. re-imagined a 60-acre parcel once known for heavy industry and commercial fishing into the largest certified LEED-ND Platinum (Neighborhood Development) project of its kind in the U.S.

In between the downtown area and the 30-acre Kewalo Harbor, 4,500 residential units, over one million square feet of retail space, a central plaza and rail station will emerge.  Best of all, by including scores of existing businesses in this redevelopment, Ward Village demonstrated clear respect for the local culture and history.

Yet it was Rancho Mission Viejo’s Esencia in Southern California which took multiple awards for not just Best Masterplan, but also Best Community Land Plan and Best Recreational Use Facility.  The true challenge here was how to best respect the terrain and ranching history of this 890-acre plan while still being able to develop nearly 2,750 homes, 60 acres of retail space and over 16 ranch-themed gathering places, clubhouses and Nature Center.

But the true selling point for Escenia was its integration into the 17,000 acres of an open space preserve, which will eventually become part of the 33,000-acre Southern Subregion Habitat Reserve, one of California’s largest.  The land plan itself was noted for retaining ranch elements including a yurt campground, oak groves, hillside trails and farming, all of which are intended to inspire future generations to respect the land.

In nearby Newport Coast, The New Home Company took top honors for Best Residential Detached Collection with Coral Canyon, an exclusive enclave of 27 homes offering canyon views with a resort feel.  Reportedly inspired by the easy pace of life on the Spanish island Ibiza, judges cited the way in which each home effortlessly blended into the next, creating a cohesive and memorable street scene characterized by neutral colors, bright interiors and flat roofs on all single-story elements.

For an individual, single-family home, it was Plan 9502 at Camelot Homes’ White Horse in Scottsdale, AZ which was named Home of the Year.  In this case, judges cited the way in which this plan updates the classic hacienda footprint into a modern feel, with numerous indoor-outdoor spaces to take advantage of the local climate.

Yet by orienting each of the 50 homes towards its center, the compounds created on these half-acre lots helped to mitigate noise from an adjacent six-lane highway.  The end result was a traditional-looking home outside that was more white-washed farmhouse inside, ultimately creating an unusually unique plan which judges noted “would set a future precedent for the evolution of production housing.”

Clever designs also abounded in the multi-family space, with Trumark Urban’s The Pacific winning Best Multi-Family Community due to what judges said was “transforming what was a detractor and neighborhood eyesore to an exemplary display of positive change.”  What Trumark was able to do was transform a mid-rise, 1960s-style school of dentistry in the middle of the upscale, built-out community of Pacific Heights in San Francisco into 76, LEED Gold-certified luxury condos and townhomes.

They did this by breaking up the previous, Brutalist exterior with a modern take on the classic bay window, repurposing a mechanical building on the roof into four penthouses with terraces, and masking the adjacent parking structure with ten, three-story townhomes. This lower elevation helped better tie the entire project into the lower-density neighborhood, while also improving the overall streetscape.

Finally, it was The Camden’s combination of 287 upscale apartments, a 40,000-square-foot Equinox health club and multiple gathering spaces to maximize socializing which earned this project by Camden Development top honors for Best Mixed-Use Project. 

Built on the site of Paramount Pictures’ first production building in the heart of Hollywood, CA, The Camden not only captures this entertainment-oriented history on a public art wall at the base of each tower, but intentionally markets its units to the young and local ‘industry’ types as not just a home, but also a very convenient place to network.

June Employment Trends Index rebounded from May, up 5.2 percent year-on-year

As expected, after decreasing in May, the Employment Trends Index continued its solid path upwards in June, with positive contributions from all of its components and rising by 5.2 percent year-over-year to 108.94. The labor market will continue to tighten in the coming months, with strong employment growth outpacing the number of people entering the labor force.

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Jobs grew by 213,000 in June, unemployment rate ticked back up to 4.0 percent

Total nonfarm payroll employment increased by 213,000 in June, and the unemployment rate rose to 4.0 percent as more job seekers came off of the sidelines. Job growth occurred in professional and business services, manufacturing, and health care, while retail trade lost jobs.

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Friday, July 6, 2018

Gallup: Percent of Americans recognizing robust job market still near record high

Americans continue to recognize a robust U.S. job market, with 65% saying that it is a good time to find a "quality job," similar to 67% in May. These are the highest readings in Gallup's 17-year history of tracking this measure of Americans' views of the employment situation.

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Thursday, July 5, 2018

OECD report discusses left-behind workers in economic growth

The Organization for Economic Cooperation and Development (OECD) has a new report out which discusses why so many workers in the U.S. feel left behind even with low unemployment and healthy GDP growth.

This is important for the future as the economy continues to transition to one using more technology and robotics. How can we include today's workers in the job markets of tomorrow?

Click here for the entire report: https://lnkd.in/gtPg8GQ

Initial unemployment claims rise by 3,000 in latest report

In the week ending June 30, initial unemployment claims were 231,000, an increase of 3,000 from the previous week's revised level. The 4-week moving average was 224,500, an increase of 2,250 from the previous week's revised average.

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Mortgage applications fall 0.5 percent in weekly report

The Market Composite Index decreased 0.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 1.0 percent and refinances falling 2.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.79 percent.

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Bloomberg: Consumer comfort index reaches 17-year high

Americans' sentiment approached a 17-year high last week on increasingly upbeat views of the economy and personal finances, rising to 57.6. This was the fourth consecutive weekly advance.

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June service sector economy index rises another 0.5 points to 59.1 percent

The June NMI® registered 59.1 percent, which is 0.5 percentage point higher than the May reading of 58.6 percent. There is a continuing concern relating to tariffs, capacity constraints and delivery.

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June planned job cuts up 18 percent from May and 19.6 percent year-on-year

Job cuts announced by U.S.-based employers rose 18 percent to 37,202 in June, and were up 19.6 percent year-on-year.  Although the second quarter saw 25.3 percent fewer cuts than the previous quarter, they were still up 4 percent year-on-year.

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ADP: Private Sector Employment Increased by 177,000 Jobs in June

Private-sector employment increased by 177,000 from May to June, on a seasonally adjusted basis.  This compares with growth of 189,000 in May and 154,000 last June.

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June FOMC meeting minutes: Concern about trade tensions, flattening yield curve

U.S. central bankers discussed whether recession lurked around the corner, and expressed concerns global trade tensions could hit an economy that by most measures looked strong.   In addition, gradual rate hikes could take fed funds rate above neutral level some time next year.

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Tuesday, July 3, 2018

CoreLogic: Home prices increased nationally by 1.1 percent between April and May 2018, and were up 7.1 percent year over year.  Looking ahead, the CoreLogic HPI Forecast indicates that the national home-price index is projected to continue to increase by 0.3 percent in June and 5.1 percent over the next year.

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Durable goods orders rebounded 0.4 percent in May, up 8.7 percent YTD year-over-year

Orders for durable goods bounced back strongly in May, rising by 0.4 percent. So far in 2018, durable goods orders have risen 8.7 percent versus the same period of 2017.

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Monday, July 2, 2018

June manufacturing sector index up 1.5 points to 60.2, tariffs concerns cited for future

The June PMI® registered 60.2 percent, an increase of 1.5 percentage points from the May reading of 58.7 percent. Demand remains robust, but the nation's employment resources and supply chains continue to struggle. Respondents are overwhelmingly concerned about how tariff related activity is and will continue to affect their business.

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May construction spending rose 0.4 percent from April, up 4.5 percent year-on-year

May construction spending rose 0.4 percent from April, and was up 4.5 percent year-on-year.  For the first five months of the year, it was up 4.3 percent year-on-year.

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Friday, June 29, 2018

June Chicago PMI rose to highest level since January

The MNI Chicago Business Barometer rose 1.4 points to 64.1 in June, up from 62.7 in May, hitting the highest level since January.

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Personal income rose faster than spending in May, leading to a rise in personal savings rate

In May, both personal income and disposable personal income rose 0.4 percent, while personal consumption expenditures (PCE) rose 0.2 percent, leading to a rise in the personal savings rate from 3.0 to 3.2 percent.

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Inflation update: PCE Price Index rose 0.2 percent in May and 2.3 percent year-on-year

The PCE price index increased 0.2 percent in May and was up 2.3 percent year-on-year. Excluding food and energy, the PCE price index increased 0.2 percent and was up 2.0 percent year-on-year.

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Consumer sentiment retreated in late June due to concerns about tariffs

Consumer sentiment retreated in late June to just above the May reading largely due to concerns about the potential impact of tariffs on the domestic economy, although the falloff was minor. Consumers also anticipated an uptick in inflation during the year ahead, partly due to rising energy prices and partly due to tariffs.

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Thursday, June 28, 2018

Initial unemployment claims rise 9,000 in weekly report

In the week ending June 23, initial unemployment claims were 227,000, an increase of 9,000 from the previous week's unrevised level of 218,000. The 4-week moving average was 222,000, an increase of 1,000 from the previous week's unrevised average of 221,000.

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Mortgage applications decline by nearly five percent in weekly survey

The Market Composite Index decreased 4.9 percent on a seasonally adjusted basis from one week earlier, with refinances falling 4.0 percent and purchase loans down 6.0 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.84 percent from 4.83 percent.

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Bloomberg: Consumer comfort rose for third straight week to 2-month high

Americans' sentiment improved to the best level in two months on brighter views of the economy and personal finances.  The Bloomberg Consumer Comfort Index rose for the third straight week to 57.3 from 56.5.

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First quarter 2018 corporate profits rose $39.5 billion vs. a loss of $1.1 billion in 4Q 2017

Profits from current production  increased $39.5 billion in the first quarter, in contrast to a decrease of $1.1 billion in the fourth quarter.

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First quarter 2018 GDP growth revised down to 2.0 percent in third and final estimate

Real gross domestic product (GDP) increased at an annual rate of 2.0 percent in the first quarter of 2018 according to the "third" estimate released by the Bureau of Economic Analysis, down from 2.2 percent in the second estimate. The GDP estimate released today is based on more complete source data. In the fourth quarter, real GDP increased 2.9 percent.

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Wednesday, June 27, 2018

May durable goods orders fell for second straight month as trade disputes potentially increase uncertainty

Orders for durable goods fell 0.6% in May following a revised 1% decline in April, led by the biggest drop in new orders for cars and trucks since 2015.  This is perhaps a sign that intensifying trade disputes between the Trump administration and other countries are causing businesses to hesitate.

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May U.S. trade deficit for goods narrowed for third straight month as exports rose

The US trade deficit in goods narrowed for the third consecutive month in May to -$64.8 billion as improved export performance outweighed a modest rise in imports during the month. This is also the smallest deficit for the economy since last September.

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May pending home sales down 0.5 percent from April and 2.2 percent year-on-year

Pending home sales decreased 0.5 percent in May and have now fallen on an annualized basis for the fifth straight month. A larger decline in contract activity in the South offset gains in the Northeast, Midwest and West.

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April Case-Shiller Index up 1.0 percent from March and 6.4 percent year-on-year

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported a 6.4% annual gain in April, down from 6.5% in the previous month. Before seasonal adjustment, the National Index posted a month-over-month gain of 1.0% in April.

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Tuesday, June 26, 2018

June State Street Investor Confidence Index slips 2.1 points as global tensions rise

The Global Investor Confidence Index decreased to 101.7, down 2.1 points from May's revised reading of 103.8. Escalating trade tensions across the globe, increasing protectionism, and diverging monetary policy between the major central banks have coincided with more cautious investor positioning.

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June consumer confidence declines 2.4 points but still at historically high level

Consumer confidence declined in June by 2.4 points after improving in May. Consumers' assessment of present-day conditions was relatively unchanged, suggesting that the level of economic growth remains strong. The modest curtailment in optimism suggests that consumers do not foresee the economy gaining much momentum in the months ahead.

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April Case-Shiller Index up 1.0 percent from March and 6.4 percent year-on-year

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported a 6.4% annual gain in April, down from 6.5% in the previous month. Before seasonal adjustment, the National Index posted a month-over-month gain of 1.0% in April.

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Monday, June 25, 2018

Chicago Fed's National Activity Index dipped to -0.15 from +.42 in April

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to -0.15 in May from +0.42 in April.

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May new home sales rebounded 6.7 percent from April, up 14.1 percent year-on-year

Sales of new single-family houses in May 2018 were at a seasonally adjusted annual rate of 689,000. This is 6.7 percent above the revised April rate of 646,000 and is 14.1 percent above the May 2017 estimate of 604,000.

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Friday, June 22, 2018

Markit Flash: Private sector remains strong in June despite dip in manufacturing growth

June data indicated that U.S. private sector firms experienced a strong end to the second quarter of 2018, driven by another robust contribution from service providers. In contrast, manufacturing production growth slowed for the second month running, to its weakest since September 2017.

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Thursday, June 21, 2018

Initial unemployment claims dip 3,000 in latest report

In the week ending June 16, initial unemployment claims were 218,000, a decrease of 3,000 from the previous week's revised level. The previous week's average was revised up by 750 from 224,250 to 225,000.

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Bloomberg: June consumer comfort rises to highest level since 2002, weekly index up to 7-week high

Americans' expectations for the economy advanced for a second month in June to match the highest level since 2002, with the monthly gauge rising from 54.5 to 56. The weekly consumer comfort index rose to seven-week high of 56.5 from 55.8.

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April FHFA House Price Index up 0.1 percent from March and 6.4 percent year-on-year

The FHFA House Price Index (HPI) reported a 0.1 percent increase in U.S. house prices in April from the previous month. From April 2017 to April 2018, house prices were up 6.4 percent.

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May Leading Economic Index growth dipped to 0.2 percent, indicating moderating trend

While May's 0.2 percent increase in the U.S. LEI was slower than in recent months, the improvements in a majority of its components offset the declines in leading indicators of labor markets and residential construction. The U.S. LEI still points to solid growth but the current trend, which is moderating, indicates that economic activity is not likely to accelerate.

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Wednesday, June 20, 2018

May housing starts rebound to near 7-hear high, up 20.3 percent year-on-year

Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,350,000. This is 5.0 percent above the revised April estimate of 1,286,000 and is 20.3 percent above the May 2017
rate of 1,122,000.

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May existing home sales dip 0.4 percent from April, down 3.0 percent year-on-year

Total existing-home sales decreased 0.4 percent to a seasonally adjusted annual rate of 5.43 million in May from downwardly revised 5.45 million in April. With last month's decline, sales are now 3.0 percent below a year ago and have fallen year-over-year for three straight months.

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Mortgage applications rise 5.1 percent weekly survey, rates flat

The Market Composite Index increased 5.1 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 4.0 percent and refinances rising 6.0 percent. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 4.83 percent.

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Tuesday, June 19, 2018

June builder confidence dips 2 points to 68 due to higher lumber prices

Builder confidence in the market for newly-built single-family homes fell two points to 68 in June, and was due in large part to sharply elevated lumber prices, adding nearly $9,000 to the price of a new single-family home since January 2017.The index measuring current sales conditions fell to 75, the component gauging expectations in the next six months dropped to 76, and the metric charting buyer traffic edged down to 50.

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May building permits down 4.6 percent from April but still up 8.0 percent year-on-year

Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,301,000. This is 4.6 percent below the revised April rate of 1,364,000, but is 8.0 percent above the May 2017 rate of 1,205,000.

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Friday, June 15, 2018

May industrial production edged down 0.1 percent but still up 3.5 percent year-on-year

Industrial production edged down 0.1 percent in May after rising 0.9 percent in April. At 107.3 percent of its 2012 average, total industrial production was 3.5 percent higher in May than it was a year earlier. Capacity utilization for the industrial sector decreased 0.2 percentage point in May to
77.9 percent, a rate that is 1.9 percentage points below its long-run (1972-2017) average.

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Consumer sentiment rises to 99.3 in mid-June reading, inflation becoming a concern

Consumer sentiment rose slightly in early June to 99.3 due to consumers' more favorable assessments of their current financial situation and more favorable views of current buying conditions for household durables. The Expectations Index, in contrast, declined to its lowest level since the start of the year due to less favorable prospects for the overall economy. The sharpest divide was between the record number of households who mentioned recent income gains and the highest expected year-ahead inflation rate since 2015.

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Thursday, June 14, 2018

Initial unemployment claims fall 4,000 in latest update

In the week ending June 9, initial unemployment claims were 218,000, a decrease of 4,000 from the previous week's unrevised level of 222,000. The 4-week moving average was 224,250, a decrease of 1,250 from the previous week's unrevised average of 225,500.

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Mortgage applications dip 1.5 percent, rates rise 8 basis points

The Market Composite Index decreased 1.5 percent on a seasonally adjusted basis from one week earlier, with both purchase loans and refinances dipping 2.0 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.83 percent from 4.75 percent.

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Bloomberg: Consumer comfort index rebounds to five-week high

U.S. consumer confidence advanced to a five-week high, rising one full point from 54.8 to 55.8, as resilient job growth boosted Americans' views of the economy.

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May retail sales up 0.8 percent, largest jump in six months

Retail sales jumped 0.8 percent in May, or the biggest advance since November 2017, suggesting stronger growth for 2Q 2018. Data for April was revised up to show sales rising 0.4 percent instead of the previously reported 0.2 percent gain.

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Wednesday, June 13, 2018

Fed hikes rate to highest rate since 2008, indicates two more increases in 2018

The Federal Reserve increased the target range for its benchmark interest rate by 0.25% to a range of 1.75%-2%, the highest since September 2008. In raising its benchmark interest rate, the Fed cited an economy that is growing at a "solid" rate and would likely include two more rate hikes in 2018.

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The Rise of the New Single-Family Rental Home: A Hedge Against Real Estate Cycles

In September of 2015, I wrote a column about the introduction of a new product type to the home building marketplace:  the single-family home for rent, otherwise known as build-to-rent (B2R).  At that time, just a few builders including Lennar and Toll Brothers had dipped their toes into these waters, but today it’s being seen as a clever hedge against the boom-and-bust real estate cycles which can test even the best-run companies.

To be sure, it’s not just home builders getting into this game. Wall Street-backed companies like Invitation Homes and AmericanHomes4Rent started the trend by buying up cheap, existing single-family homes in foreclosure back in 2012 when home prices were near their lowest, eventually assembling a portfolio of 200,000 units across the country.  Even with that rapid growth, their holdings still represent just 1.4 percent of the estimated 14 million single-family rental homes, with most owned by small, ‘Mom and Pop’ operators.

Today, with this business throwing off stable cash flow and maintaining low vacancy rates, more builders are entering this space, with some focused entirely on the B2R model.

According to a recent NAHB analysis of Census Bureau data, during the 12 months ending with the first quarter of 2018, there were 37,000 single-family homes started for rent, up from 33,000 during the previous four quarters. Of this total, 7,000 were started in the first quarter alone. While that annual market share of 4.3 percent is down from the 5.8 percent share of five years ago, it’s still significantly higher than the 2.7 percent average noted during the prior 20-year period of 1992-2012.

Not surprisingly, builders of new single-family homes for rent also enjoy some significant advantages over the typical corporate model of offering only existing homes. These benefits include fewer maintenance issues associated with newly built units, the ability to standardize features and amenities across a portfolio (and charge premiums for upgrades), and the higher management efficiencies which come with concentrating multiple units in the same location. Indeed, one of the most common complaints cited by tenants of these corporate rental home behemoths is that their widely dispersed maintenance operations depend on local contractors, often resulting in long delays for even essential issues.

Like builders of homes for sale, rental home builders also have divided product lines by quality of amenities and services.  In some cases, such as when a builder of both rental and for-sale homes include the two options scattered across the same neighborhood, community amenities might be more basic with no on-site management.

In other cases, such as in a neighborhood of only homes for rent, the leasing experience might be similar to that of a traditional for-sale community, with several model homes from which to choose and full-time leasing agents plus on-site maintenance and gardening services.  For those renters wanting to experience the benefits of a resort-style apartment community in a single-family home (and willing to pay more), community amenities could also include pool and spa areas, parks and gated entrances.

While it’s not easy to quantify the exact depth of demand for single-family rentals, a combination of economic and demographic factors do provide some considerable tailwinds for the foreseeable future.

On the economic side, high levels of student loan debt and the challenges of saving for a down payment versus a tight job market mean more young families are willing to test-drive living in single-family neighborhoods. According to the American Community Survey, 56 percent of gains in the nation’s rental housing stock between 2005 and 2015 were for single-family homes, while the number of households living in all rental properties grew from 33 to 36 percent, or more than an additional 544,000 per year.

On the demographic side, millennials are now increasingly reaching milestones delayed by the Great Recession, with more moving back to the suburbs they once avoided.  While partly due to bedroom count limitations in most apartments, it’s also due to changing lifestyle preferences.  In many cases, although many younger renters in their 30s have sufficient incomes to quality for mortgages, the ability to live in a single-family home without the commitment of a purchase is steadily gaining popularity.

Joining these younger renters are baby boomers looking to downsize not necessarily in space, but in the financial commitment required. By renting the same type of single-family home product they once owned, they can not only avoid spending down retirement savings into a down payment, but enjoy the freedom associated with a more transient lifestyle.

That’s a hedge from which both builder and renter can benefit.

Tuesday, June 12, 2018

Firms' inflation expectations for the year ahead remain flat at 2.1 percent

Despite rising inflation noted in May, firms' inflation expectations in June were roughly unchanged at 2.1 percent over the year ahead.

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May Small Business Optimism Index rose 3 points to near-record level

The Small Business Optimism Index increased in May by three points to 107.8, to the second-highest level in the NFIB survey's 45-year history. Respondents reported high numbers in several key areas including compensation, profits, and sales trends.

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PPI rose 0.5 percent in May, up 3.1 percent year-on-year

The Producer Price Index for final demand rose 0.5 percent in May, seasonally adjusted. On an unadjusted basis, the final demand index moved up 3.1 percent for the 12 months ended in May, the largest 12-month increase since climbing 3.1 percent in January 2012.

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CPI rose 0.2 percent in May, up 2.8 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in May on a seasonally adjusted basis after rising 0.2 percent in April. Over the last 12 months, the all items index rose 2.8 percent before seasonal adjustment.

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CPI rose 0.2 percent in May, up 2.8 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in May on a seasonally adjusted basis after rising 0.2 percent in April. Over the last 12 months, the all items index rose 2.8 percent before seasonal adjustment.

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Monday, June 11, 2018

CoreLogic: Equity in mortgaged homes has more than doubled in past 5 years

The amount of equity in mortgaged real estate increased by $1 trillion in Q1 2018 from Q1 2017, an annual increase of 13.3 percent, and has more than doubled in five years. The nationwide negative equity share for Q1 2018 was 4.7 percent of all homes with a mortgage, more than 20 percentage points lower than the peak negative equity share - 26 percent - recorded in Q4 2009.

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April wholesale inventories rose 0.1 percent, sales up 0.8 percent

Wholesale inventories rose 0.1 percent in April, although it was still the weakest gain in six months.  Sales rose 0.8 percent, well above forecasts, and rising for the third straight month.

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Thursday, June 7, 2018

Initial unemployment claims fall 1,000 in weekly report

In the week ending June 2, initial unemployment claims were 222,000, a decrease of 1,000 from the previous week's revised level. The 4-week moving average was 225,500, an increase of 2,750 from the previous week's revised average.

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Bloomberg: Weekly consumer comfort index drops to five-month low of 54.8

Americans' sentiment cooled as a gauge of views on the economy fell to a five-month low, with the Bloomberg Consumer Comfort Index falling from 55.2 to 54.8 in weekly survey.

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1Q 2018 service sector revenue dipped 1.2 percent from previous quarter but still up 5.2 percent year-on-year

U.S. selected services total revenue for the first quarter of 2018 fell 1.2 percent from the fourth quarter of 2017 to $3,746 billion, but were up 5.2 percent year-on-year.

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April trade deficit fell to 7-month low as exports rose to record high

The U.S. trade deficit fell to a seven-month low in April, falling 2.1 percent from March to $46.2 billion. Exports rose to a record high, lifted by an increase in shipments of industrial materials and soybeans.

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Wednesday, June 6, 2018

May Service Sector Index rose 1.8 points to 58.6, but uncertainty remains

The NMI® registered 58.6 percent, which is 1.8 percentage points higher than the April reading of 56.8 percent. There continue to be concerns about the uncertainty surrounding tariffs, trade agreements and the impact on cost of goods sold.

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May Manufacturing Index rose 1.4 points to 58.7, but pricing pressure now increasing

The May PMI® registered 58.7 percent, an increase of 1.4 percentage points from the April reading of 57.3 percent. Demand remains robust, but the nation's employment resources and supply chains continue to struggle. Respondents say price pressure at their companies is causing price-increase discussions.

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Labor Productivity up 0.4 percent in 1Q 2018 and 1.3 percent year-on-year

Nonfarm business sector labor productivity increased 0.4 percent during the first quarter of 2018, as output increased 2.7 percent and hours worked increased 2.3 percent. From the first quarter of 2017 to the first quarter of 2018, productivity increased 1.3 percent, reflecting a 3.6-percent increase in output and a 2.3-percent increase in hours worked.

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Mortgage applications rise 4.1 percent in latest survey, rates dip 9 basis points

The Market Composite Index increased 4.1 percent on a seasonally adjusted basis from one week earlier, with both purchase loans and refinances up 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.75 percent.

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Tuesday, June 5, 2018

May job openings rose to 6.7 million, 302,000 more than number of job seekers

The number of open jobs in May rose by one percent from April to another series high of 6.7 million.  This number exceeds the number of jobless by over 300,000.  At the same time, hiring rose 1.7 percent to 5.6 million, and the quits rose 1.6 percent to 5.4 million.

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Monday, June 4, 2018

April factory goods orders dip 0.8 from March, but YTD orders up 8.3 percen

Factory goods orders decreased 0.8 percent from March to April, due largely to lower orders for aircraft. However, YTD through April, orders were up 8.3 percent.

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Friday, June 1, 2018

April construction spending up 7.6 percent year-on-year, supported largely by new homes

April spending on new home construction rise by its highest amount in 24 years (+4.5%), and overall construction spending rose to a record level of $1.31 trillion.  This new spending level was up 7.6% year-on-year and 1.8% from the previous month.

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May job growth rebounded sharply to 223,000, unemployment rate edged down to 3.8 percent

Total nonfarm payroll employment increased by 223,000 in May, and the unemployment rate edged down to 3.8 percent. Employment continued to trend up in several industries, including retail trade, health care, and construction.

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Thursday, May 31, 2018

Initial unemployment claims fall 13,000 in latest report

In the week ending May 26, initial unemployment claims were 221,000, a decrease of 13,000 from the previous week's unrevised level of 234,000. The 4-week moving average was 222,250, an increase of 2,500 from the previous week's unrevised average of 219,750.

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Mortgage applications dip 2.9 percent, interest rates down slightly

The Market Composite Index decreased 2.9 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 2.0 percent and refinances falling 5.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.84 percent.

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Bloomberg: Consumer comfort unchanged in weekly reading at 55.2

The consumer comfort index held unchanged in the May 27 week at 55.2. Consumer confidence measures, supported by the strong labor market, remain very solid.

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April PCE price index up 0.2 percent from March and 2.0 percent year-on-year

The April PCE price index increased 0.2 percent from March and 2.0 percent year-on-year. Excluding food and energy, the PCE price index increased 2.0 percent and 1.8 year-on-year.

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April personal spending rose double the growth rate in income, savings rate dipped

In April, personal income rose 0.3 percent, disposable income rose 0.4 percent, and personal consumption expenditures (PCE) increased 0.6 percent, resulting in a decline in the savings rate from 3.0 to 2.8 percent.

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May planned job cuts down 12.6 percent from April, but YTD cuts still up 6.2 percent year-on-year

Job cuts announced by U.S.-based employers in May fell 12.6 percent from April, and were also down 4.8 percent year-on-year. So far this year, however, announced job cuts are up 6.2 percent year-on-year, with those in the retail sector rising by 24 percent.

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April pending home sales down 1.3 percent from March and 2.1 percent year-on-year

Due to tight inventory, the Pending Home Sales Index  declined 1.3 percent to 106.4 in April from an upwardly revised 107.8 in March. With last month's decrease, the index is down on an annualized basis (2.1 percent) for the fourth straight month.

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Wednesday, May 30, 2018

Federal Reserve beige book: moderate expansion with Dallas District speeding up


Economic activity expanded moderately in late April and early May with few shifts in the pattern of growth. The Dallas District was an exception, where overall economic activity sped up to a solid pace:
  • Manufacturing shifted into higher gear with more than half of the Districts reporting a pickup in industrial activity and a third of the Districts classifying activity as "strong." Fabricated metals, heavy industrial machinery, and electronics equipment were noted as areas of strength.  Rising goods production led to higher freight volumes for transportation firms.
  • By contrast, consumer spending was soft. Nonauto retail sales growth moderated somewhat and auto sales were flat, although there was considerable variation by District and vehicle type.
  • In banking, demand for loans ticked higher and banks reported that increased competition had led to higher deposit rates. Delinquency rates were mostly stable at low levels.
  • Homebuilding and home sales increased modestly, on net, and nonresidential construction continued at a moderate pace.
  • Contacts noted some concern about the uncertainty of international trade policy. Still, outlooks for near term growth were generally upbeat.


First quarter GDP growth revised down to 2.2 percent in second estimate

Real gross domestic product (GDP) increased at an annual rate of 2.2 percent in the first quarter of 2018 according to the "second" estimate released by the Bureau of Economic Analysis. In the advance estimate, the increase was 2.3 percent. In the fourth quarter of 2017, real GDP increased 2.9 percent.

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ADP: May private job growth rose 9.4 percent from April to 178,000

Private-sector employment increased by 178,000 jobs in May, on a seasonally adjusted basis.  This compares to 163,000 jobs last month and 202,000 jobs the same month of 2017.

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Tuesday, May 29, 2018

Case-Shiller: March home prices up 6.5 percent year-on-year, unchanged from February


The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported a 6.5% annual gain in March, the same as the previous month.  After seasonal adjustment, the National Index recorded a 0.4% month-over-month increase in March.


Investor Confidence Index drops nearly 12 points in May due to higher perceived global risks

The Global Investor Confidence Index decreased to 103.5, down nearly 12 points from April’s revised reading of 115.3. After a strong consensus in risk-seeking appetite last month, global investors now have a more subdued willingness to allocate to risk. Although remaining above 100, the ICI reading for May reflects a range of factors weighing on investor sentiment, including growing inflationary pressures, higher interest rates and geopolitical concerns that have undoubtedly tempered enthusiasm.

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Consumer confidence rebounds in May, suggests Q2 growth may have risen from Q1


Consumer confidence increased in May after a modest decline in April. Consumers’ assessment of current conditions increased to a 17-year high, suggesting that the level of economic growth in Q2 is likely to have improved from Q1. Consumers’ short-term expectations improved modestly, suggesting that the pace of growth over the coming months is not likely to gain any significant momentum.


Friday, May 25, 2018

April durable goods orders dipped 1.7 percent due to decline in aviation

Although durable-goods orders fell 1.7% April, that decline was mostly due to falling orders for planes.  Orders minus transportation rose 0.9%, for the third consecutive monthly gain.

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May consumer sentiment slips to 98.0 on smaller expected income gains


Consumer sentiment slipped by less than an Index-point from last month. Since Trump's election, the Sentiment Index has meandered in a tight eight-point range from 93.4 to 101.4, with the small month-to-month variations indicating no emerging trend.

Consumers have remained focused on expected gains in jobs and incomes as well as anticipated increases in interest rates and inflation during the year ahead. As past expansions have shown, rising interest rates do not suppress spending gains as long as they are accompanied by more substantial increases in incomes.

The May survey, however, found that consumers anticipated smaller income gains than a month or year ago, even though they anticipate the unemployment rate to stabilize at its current eighteen year low. Importantly, references to discounted prices for durables, vehicles, and homes fell to decade lows.


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Thursday, May 24, 2018

Initial unemployment claims rise 11,000 in most recent week

In the week ending May 19, initial unemployment claims were 234,000, an increase of 11,000 from the previous week's revised level. The 4-week moving average was 219,750, an increase of 6,250 from the previous week's revised average.

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Mortgage applications fall 2.6 percent, rates rise to highest level since April 2011

The Market Composite Index decreased 2.6 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 2.0 percent and refinances falling 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to its highest level since April 2011, 4.86 percent.

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Bloomberg: Consumer comfort rebounds for first time in five weeks

U.S. household sentiment improved for the first time in five weeks on more upbeat views about personal finances and the economy, with the index rising from 54.6 to 55.2.

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FOMC meeting minutes indicate more interest rate hikes ahead in 2018

After assessing current conditions and the outlook for economic activity, the labor market, and inflation, members agreed to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. They noted that the stance of monetary policy remained accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

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FHFA: First quarter 2018 home prices rose 1.7 percent, up 6.9 percent year-on-year

U.S. house prices rose 1.7 percent in the first quarter of 2018 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI).   House prices rose 6.9 percent from the first quarter of 2017 to the first quarter of 2018. FHFA's seasonally adjusted monthly index for March was up 0.1 percent from February.

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April existing home sales slipped again year-on-year due to lack of supply

Total existing-home sales decreased 2.5 percent to a seasonally adjusted annual rate of 5.46 million in April from 5.60 million in March. With last month's decline, sales are now 1.4 percent below a year ago and have fallen year-over-year for two straight months.

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Wednesday, May 23, 2018

Gallup: Optimism about finding quality jobs hits 17-year high

Sixty-seven percent of Americans believe that now is a good time to find a quality job in the U.S., the highest percentage in 17 years of Gallup polling. Optimism about the availability of good jobs has grown by 25 percentage points since Donald Trump was elected president.

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