There were two important reports on the U.S. economy released this morning. First, sales of new single-family homes in America fell by 7.8 percent in January to a seasonally adjusted annual rate of 593K units, according to new data from the U.S. Census Bureau. That was significantly worse than expected, the second monthly decline in a row, and the lowest headline reading since August. Regionally, new home sales fell in the Northeast (-33.3 percent) and the South (-14.2 percent) last month but rose in the Midwest (+15.4 percent) and the West (+1.0 percent). The inventory of new single-family homes in January rose by 2.4 percent, and months’ supply lifted to 6.1 based on the current (slower) sales pace. The median selling price of new houses sold in January was $323,000, 2.5 percent higher compared to this same period last year. The sales weakness seen last month is a reflection of continued supply constraints and higher mortgage rates, and it will be worth monitoring this trend going forward since new home sales tend to head sharply lower ahead of a recession.
Elsewhere, a new report from the Federal Reserve Bank of Dallas (FRBD) showed that manufacturing activity in the southern region of the country expanded at a faster pace this month. Specifically, the 11th Fed district’s general business activity gauge rose to 37.2 in February, a 13-year high and helped by large improvements in surveyed managers’ views of production, capacity utilization, shipments, total employment, worker compensation, and capital expenditures. Inflation and margin strain remain a big concern, though, as prices paid continue to rise much faster than prices received. One surveyed manager even said that “Last quarter our labor costs soared, as expected. Controlling for inflation is beginning to creep into our decision-making processes, as we think the economy is headed for a soft landing late this year.”
Sources: Econoday, U.S. Census Bureau, FRBD, FRBSLPost author: Charles Couch