There were two important reports on the U.S. economy released this morning. First, data from the U.S. Census Bureau showed that sales of new single-family homes in America rose by 6.1 percent in February to a seasonally adjusted annual rate of 595K units. That was much better than economists had expected and the largest monthly gain since July of last year. Regionally, home sales in February fell in the Northeast (-21.4 percent) but rose in the Midwest (+30.9 percent), the West (+7.5%), and the South (+3.6 percent). The inventory of new single-family homes lifted for the seventh month in a row in February, and months’ supply slid to 5.4 based on the current sales pace. The median selling price of new houses sold fell to $296,200 in February and was down 4.9 percent compared to this same period last year, the first negative reading on annual growth since July. It is worth noting that new home sales are extremely volatile and account for a relatively small portion of the housing market. However, this metric is still worth keeping close track of because historically new home sales tend to head sharply lower ahead of a recession, something which has yet to happen during the current cycle.
Elsewhere, the Federal Reserve Bank of Kansas City’s composite manufacturing index showed that activity in the Midwestern region of the country continued to expand at an elevated rate this month. Specifically, the headline index jumped to +20.0 in March, the highest reading since 2011. Under the hood, gauges of new orders, production, shipments, and inventories all improved this month but employment moderated slightly. Outlooks on future factory activity strengthened to record highs, and comments from surveyed managers in the 10th Fed district were generally positive this month:
- “January was best month for January sales since 2012 and February was better than January. Orders continue to flow in and backlog of orders are increasing.”
- “We continue to evaluate investments that generate labor efficiencies because of the cost, lack of availability and regulations associated with labor.”
- “We cannot find reliable entry level workers for less than $10.00/hour and speculate that a significant working block receives enough government assistance that they aren't willing to work for the difference.”
Sources: Econoday, Bloomberg, ZH, Twitter, U.S. Census Bureau, FRBKC, FRBSLPost author: Charles Couch