There were a few important reports on the U.S. economy released this morning. First, data from the Federal Reserve Bank of Richmond showed that manufacturing activity in the Mid-Atlantic region of the country continued to rebound this month, with the composite index rising from +8.0 to +12.0 in January. That was the fifth monthly increase in a row for the headline index, and the highest reading since April 2016. Under the hood, current measures of shipments, new orders, and total employment all improved this month but capacity utilization, wages, and hours worked deteriorated. Surveyed manufacturers were generally optimistic about their business prospects for the next six months, and reported capital expenditure plans increased markedly. A broader gauge of U.S. manufacturing activity was also released this morning from IHS Markit, which reflected a similar strengthening of business conditions in January. Specifically, the purchasing managers' manufacturing index (PMI) lifted to 55.1 this month, the highest reading since last March and better than economists had expected. Flat export growth and a slowdown in job creation were more than offset by the sharpest rise in new orders in 28 months. Chris Williamson, chief business economist at IHS Markit added that, “The survey results suggest that faster manufacturing growth and inventory rebuilding should help boost GDP in the first quarter if current trends persist in coming months. Rising factory employment should also help improve consumer morale and spending. However, with such strong growth being signaled and price pressures rising, speculation around the next Fed rate hike will intensify.”
Elsewhere, a report from the National Association of Realtors (NAR) showed that total existing home sales in America, which account for a much larger portion of the overall U.S. housing market than new home sales (due out this Thursday), fell by 2.8 percent in December to a seasonally adjusted annual rate of 5.49 million units. That was much worse than economists had expected and the largest monthly decline since July. Lawrence Yun, NAR chief economist, added that “higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.” Over the past twelve months, though, existing-home sales totaled 5.45 million units, making 2016 the best year for sales in a decade. Regionally, home sales in December were flat in the South but fell in the Northeast (-6.2 percent) and the West (-4.8 percent), and the Midwest (-3.8 percent). Total housing inventory plunged by 10.8 percent to 1.65 million existing homes available for sale in December, and months’ supply slid to 3.6 at the current sales pace. The median selling price was $232,200 in December, a 4.0 percent gain compared to this same period last year and therefore the 58th consecutive month of annual growth.
Sources: Econoday, Bloomberg, ZH, Twitter, FRBR, IHS Markit, NAR, FRBSLPost author: Charles Couch