Friday June 23 2017
US New Home Sales Beat Forecasts
US Census Bureau | Joana Taborda |

Sales of new single-family houses in the United States increased 2.9 percent to a seasonally adjusted annual rate of 610 thousand in May of 2017 from an upwardly revised 593 thousand in April. The figure came above market expectations of 597 thousand, as sales rose in the South and the West.

Sales rose the most in the West (13.3 percent to 162 thousand), followed by the South (6.2 percent to 360 thousand) while declines were seen in the Northeast (-10.8 percent to 33 thousand) and the Midwest (-25.7 percent to 55 thousand).

The median sales price of new houses sold was $345,800 higher than $310,200 in the previous month. The average sales price was $406,400, well above $367,700 in April.

The stock of new houses for sale went up to 268 thousand from 264 thousand in both April and March. This represents a supply of 5.3 months at the current sales rate.

Year-on-year, new home sales jumped 8.9 percent.

Figures for April were revised sharply higher to 593 thousand from an initial estimate of 569 thousand. The March figure was also revised up by 2 thousand to 644 thousand, remaining the highest since October of 2007.

Friday June 23 2017
US Factory Growth At 9-Month Low: PMI
Markit | Joana Taborda |

The IHS Markit US Manufacturing PMI fell to 52.1 in June of 2017 from 52.7 in May and well below market expectations of 53, flash estimates showed. It is the lowest reading since September of 2016 as output and new business growth slowed, offsetting stronger contributions from job creation and inventory building.

Meanwhile, latest survey data revealed a marked slowdown in input price inflation to its weakest since March 2016. Lower cost pressures led to a moderation in factory gate price inflation in June. The latest rise in manufacturers’ output charges was the least marked since September 2016.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said: 
“The economy ended the second quarter on a softer note. The June PMI surveys showed some pay-back after a strong May, indicating the second weakest expansion of business activity since last September.

“The average expansion seen in the second quarter is down on that seen in the first three months of the year, indicating a slowing in the underlying pace of economic growth. While official GDP data are expected to turn higher in the second quarter after an especially weak start to the year (our recent GDP tracker based on various official and survey data points to 3.0% growth), the relatively subdued PMI readings suggest there are some downside risks to the extent to which GDP will rebound. 

“Historical comparisons of the PMI against GDP indicates that the PMI is running at a level broadly consistent with the economy growing at a 0.4% quarterly rate (1.5% annualized) in the second quarter, or just over 2% once allowance is made for residual seasonality in the official GDP data.

“There are signs, however, that growth could pick up again: new orders showed the largest monthly rise since January, business optimism about the year ahead perked up and hiring remained encouragingly resilient. The survey is indicative of non-farm payroll growth of approximately 170,000.

“Average prices charged for goods and services meanwhile showed one of the largest rises in the past two years, pointing to improved pricing power amid healthy demand.” 

Thursday June 22 2017
US Jobless Claims Rise More Than Expected
DOL | Joana Ferreira |

The number of Americans filing for unemployment benefits increased by 3 thousand to 241 thousand in the week ended June 17th from the previous week's revised level of 238 thousand and above market expectations of 240 thousand.

Claims have now been below 300,000 for 120 straight weeks, the longest such stretch since 1970.

The 4-week moving average, which removes week-to-week volatility, rose 1,500 to 244,750 last week, the highest since early April. The previous week's average was revised up by 250 from 243,000 to 243,250.

The advance seasonally adjusted insured unemployment rate was 1.4 percent for the week ending June 10, unchanged from the previous week's unrevised rate. 

The continuing claims drawn by workers for more than a week (the advance number for seasonally adjusted insured unemployment) during the week ending June 10 was 1,944,000, an increase of 8,000 from the previous week's revised level. The previous week's level was revised up 1,000 from 1,935,000 to 1,936,000. The 4-week moving average was 1,932,000, an increase of 5,000 from the previous week's revised average. The previous week's average was revised up by 250 from 1,926,750 to 1,927,000. 

Friday June 16 2017
US Consumer Sentiment Falls To 7-Month Low
University of Michigan | Joana Taborda |

The University of Michigan's consumer sentiment for the United States went down to 94.5 in June of 2017 from 97.1 in May and well below market expectations of 97. It is the lowest reading in seven months as both present and future expectations declined, preliminary estimates showed. The recent erosion of confidence was due to more negative perceptions of the proposed economic policies among Democrats and the reduced likelihood of passage of these policies among Republicans.

The barometer for current economic conditions fell to 109.6 from 11.7 and the gauge of future expectations declined to 84.7 from 87.7.

Americans expect the inflation rate to be 2.6 percent next year, the same as in May and 2.6 percent in the next 5 years (2.4 percent in May).

The modest early June drop of 2.6 points in the Sentiment Index masks a much larger decline since June 8th. Prior to that date the Sentiment Index had averaged 97.7, but since June 8th, the Index fell to 86.7, a decline of 11.0 points. While this break corresponds with James Comey's testimony, only a few consumers spontaneously referred to him or his testimony when asked to explain their views. Importantly, the decline was observed across all political parties, but the loss in confidence among self-identified Republicans since June 8th was larger than among Democrats (9.2 vs. 6.8 Index-points), with Independents showing the greatest falloff (11.5 Index-points). The size of the partisan difference between Democrats and Republicans in the Expectations Index, however, was largely unchanged (55.6 Index-points prior to June 8th, and 51.2 after). The recent erosion of confidence was due to more negative perceptions of the proposed economic policies among Democrats and the reduced likelihood of passage of these policies among Republicans. Fortunately, a strong job market, improved household income and wealth have provided a financial buffer against rising uncertainties. Nonetheless, consumers have become less optimistic about the future course of the domestic economy. Even with the expected bounce back in spending in the current quarter, personal consumption is expected to advance by 2.3% for all of 2017.

Friday June 16 2017
US Housing Starts At 8-Month Low
U.S. Census Bureau | Joana Taborda |

Housing starts in the United States slumped 5.5 percent from the previous month to a seasonally adjusted annualized rate of 1092 thousand in May of 2017, following a downwardly revised 1156 thousand in the previous month and compared to market expectations of a 4.1 percent rise. It is the weakest construction activity in eight months as starts plunged in the Midwest and the South.

Single-family starts, the largest segment of the market declined 3.9 percent to 794 thousand and the volatile multi-family segment shrank 9.8 percent to 284 thousand. Starts slumped in the Midwest (-9.2 percent to 168 thousand) and the South (-8.8 percent to 526 thousand) and were flat in the Northeast at 87 thousand. In contrast, starts rose 1.3 percent to 311 thousand in the West.  

Also, building permits dropped 4.9 percent to a seasonally adjusted annualized rate of 1168 thousand from 1228 thousand in April and way below market expectations of 1247 thousand. It is the lowest figure since April last year, as single-family authorizations declined 1.9 percent to 779 thousand and authorizations of units in buildings with five units or more fell 10.1 percent to 358 thousand. Among regions, building permits decreased in the West (-13.1 percent to 293 thousand), the Midwest (-9.4 percent to 174 thousand) and the South (-0.3 percent to 577 thousand) but rose in the Northeast (3.3 percent to 124 thousand).

Thursday June 15 2017
US Industrial Output Unchanged In May
Federal Reserve | Joana Taborda |

Industrial production in the United States was flat month-over-month in May of 2017, following an upwardly revised 1.1 percent rise in April and compared to market expectations of a 0.2 percent gain. Manufacturing went down 0.4 percent, offsetting a 1.6 percent rise in mining and a 0.4 percent gain in utilities.

The index for durables fell 0.8 percent in May, while the index for nondurables edged up 0.1 percent; the output of other manufacturing (publishing and logging) moved up 0.3 percent. Almost all major industry groups within durables posted declines; within nondurables, a large gain in chemicals outweighed declines in most other industries.  

Mining has increased about 1.5 percent per month, on average, so far this year. Even so, output in May was still 10.0 percent below its peak in December 2014. The index for utilities advanced 0.4 percent, as higher output for gas utilities more than offset a small decrease for electric utilities.

Capacity utilization for manufacturing declined 0.3 percentage point in May to 75.5 percent, a rate that is 2.9 percentage points below its long-run average. Durables recorded a decrease in utilization, while nondurables and other manufacturing (publishing and logging) each posted increases. The operating rate for each group remained below its respective long-run average; the greatest shortfall was for other manufacturing. Utilization for mining moved up 1.1 percentage points to 84.3 percent but remained below its long-run average. The operating rate for utilities rose 0.3 percentage point to 76.6 percent.

Year-on-year, industrial production increased 2.2 percent, following a downwardly revised 2.1 percent rise in April. It is the biggest annual increase since January of 2015 as mining jumped 8.3 percent, manufacturing rose 1.4 percent and utilities edged up 0.1 percent. 

Thursday June 15 2017
US Jobless Claims Fall to 237K
Anna |

The number of Americans filing for unemployment benefits decreased by 8 thousand to 237 thousand in the week ended June 10th 2017, compared to market expectations of 242 thousand. The four-week moving average, considered a better measure of labor market trends as it removes out week-to-week volatility, rose 1,000 to 243,000 in last week.

Jobless claims have now been below 300,000, a threshold associated with a healthy labor market, for 119 straight weeks, the longest such stretch since 1970.  The labor market is near full employment, with the jobless rate at a 16-year low of 4.3 percent.

The number of people still receiving benefits after an initial week of aid increased by 6,000 to 1.94 million in the week ended June 3rd. The continuing claims have now been below 2 million for nine straight weeks. The last time they were consistently under 2 million was in 1973.

Wednesday June 14 2017
Fed Raises Rate To 1.25%
Fed | Joana Taborda |

The Federal Reserve raised the target range for its federal funds rate by 25bps to 1 percent to 1.25 percent during its June 2017 meeting, in line with market expectations. Policymakers kept forecasts for three rate hikes this year while increasing growth projections and lowering inflation expectations. In addition, details on how the central bank will start reducing its USD 4.5 trillion portfolio were also provided.

GDP growth forecasts for 2017 were increased to 2.2 percent from 2.1 percent in the March projection. The PCE inflation is seen lower at 1.6 percent this year (1.9 percent in the March projection) and unemployment is expected at 4.3 percent (4.5 percent in the March projection).

The so-called dot plot showed most FOMC members see the federal funds rate between 1.25 percent and 1.5 percent by the end of the year, suggesting another rate hike for 2017. 

Excerpts from FOMC Statement:

Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has continued to expand. On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Near term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated. This program, which would gradually reduce the Federal Reserve's securities holdings by decreasing reinvestment of principal payments from those securities, is described in the accompanying addendum to the Committee's Policy Normalization Principles and Plans.

Wednesday June 14 2017
US Retail Sales Fall The Most In 16 Months
US Census Bureau | Yekaterina Guchshina |

Retail sales in the United States decreased by 0.3 percent month-over-month in May of 2017, following a 0.4 percent rise in April and missing market expectations of a 0.1 percent gain. It was the biggest decline since January of 2016, driven by lower sales of motor vehicles, electronics & appliance stores, gasoline stations, sporting goods, hobby, book & music stores and general merchandise stores. On a year-on-year basis, retail sales rose 3.8 percent.

7 out of 13 major retail categories declined in May while 4 increased and 2 were unchanged. 

Motor vehicle sales fell by 0.2 percent in May after rising by 0.5 percent in the previous month.

Additional decreases were recorded at: electronics & appliance stores (-2.8 percent from 2.2 percent); gasoline stations (-2.4 percent from 0 percent); sporting goods, hobby, book and music stores (-0.6 percent from 0.4 percent); general merchandise stores (-0.3 percent from 0.7 percent); miscellaneous store retailers (-1.3 percent from 0.7 percent) and food services & drinking places (-0.1 percent from -0.2 percent).

In contrast, retail sales rose at: clothing stores (0.3 percent from 0.2 percent); furniture and home furniture stores (0.4 percent from -0.3 percent); food and beverages stores (0.1 percent from 0.2 percent) and nonstore retailers (0.8 percent from 0.9 percent). 

Meanwhile, sales were flat at health and personal care stores (from 0.8 percent in April) and building material stores (from 0.6 percent).

Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged after rising by an upwardly revised 0.6 percent in April.

Compared to April last year retail sales were up 3.8 percent. 

Wednesday June 14 2017
US Inflation Rate Falls To 6-Month Low Of 1.9%
BLS | Joana Taborda |

Consumer prices in the United States increased 1.9 percent year-on-year in May of 2017, easing from a 2.2 percent rise in April and below market expectations of 2 percent. It is the lowest inflation rate since November last year although it was still above the 1.6 percent average over the past 10 years. Core inflation slowed further to a 2-year low of 1.7 percent.

Year-on-year, energy prices rose 5.4 percent, lower than 9.3 percent in April. In addition, inflation slowed for services less energy (2.6 percent from 2.7 percent in April), namely shelter (3.3 percent from 3.5 percent), transportation services (2.9 percent from 3.1 percent) and medical care (2.5 percent from 3.1 percent). In contrast, prices went up faster for food (0.9 percent from 0.5 percent). 

Annual core inflation, which excludes food and energy eased to 1.7 percent from 1.9 percent in the previous month. It is the lowest core inflation since May of 2015 and below market expectations of 1.9 percent.

On a monthly basis, consumer prices fell 0.1 percent, following a 0.2 percent rise in April and compared to market expectations of a 0.1 percent gain. Energy cost fell 2.7 percent, mainly due to a 6.4 percent slump in gasoline prices and was the main downward contributor. The food index rose 0.2 percent, due to increases in four of the six major grocery store food group indexes. 

Excluding food and energy, consumer prices rose 0.1 percent, the same as in April and lower than expectations of 0.2 percent. The shelter index increased 0.2 percent while declines were recorded for apparel, airline fares, communication and medical care services.