by Calculated Risk on 3/05/2019 12:11:00 PM

The BEA released their estimate of February vehicle sales. The BEA estimated sales of 16.53 million SAAR in February 2019 (Seasonally Adjusted Annual Rate), down 0.8% from the January sales rate, and down 2.3% from February 2018.

2019 is off to a slow start for vehicle sales; averaging 16.6 million through February (average of seasonally adjusted rate).


Click on graph for larger image.

This graph shows annual light vehicle sales since 1976.   Source: BEA.

Sales for 2018 were the fourth best ever, but 2019 is off to a slow start.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate of 16.53 million SAAR.

A small decline in sales this year isn't a concern - I think sales will move mostly sideways at near record levels.

This means the economic boost from increasing auto sales is over (from the bottom in 2009, auto sales boosted growth every year through 2016).

by Calculated Risk on 3/05/2019 10:46:00 AM

The February ISM Non-manufacturing index was at 59.7%, up from 56.7% in January. The employment index decreased in February to 55.2%, from 57.8%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: February 2019 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in February for the 109th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: “The NMI® registered 59.7 percent, which is 3 percentage points higher than the January reading of 56.7 percent. This represents continued growth in the non-manufacturing sector, at a faster rate. The Non-Manufacturing Business Activity Index increased to 64.7 percent, 5 percentage points higher than the January reading of 59.7 percent, reflecting growth for the 115th consecutive month, at a faster rate in February. The New Orders Index registered 65.2 percent, 7.5 percentage points higher than the reading of 57.7 percent in January. The Employment Index decreased 2.6 percentage points in February to 55.2 percent from the January reading of 57.8 percent. The Prices Index decreased 5 percentage points from the January reading of 59.4 percent to 54.4 percent, indicating that prices increased in February for the 21st consecutive month. According to the NMI®, all 18 non-manufacturing industries reported growth. The non-manufacturing sector’s growth rate rebounded in February after cooling off in January. Respondents are concerned about the uncertainty of tariffs, capacity constraints and employment resources; however, they remain mostly optimistic about overall business conditions and the economy.”
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This suggests faster expansion in February than in January.

by Calculated Risk on 3/05/2019 10:15:00 AM

Note: This release is for December (this was delayed due to the government shutdown). The January report is scheduled for March 14th.

The Census Bureau reports New Home Sales in December were at a seasonally adjusted annual rate (SAAR) of 621 thousand.

The previous three months were revised down significantly.

"Sales of new single‐family houses in December 2018 were at a seasonally adjusted annual rate of 621,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.7 percent above the revised November rate of 599,000, but is 2.4 percent below the December 2017 estimate of 636,000.

An estimated 622,000 new homes were sold in 2018. This is 1.5 percent above the 2017 figure of 613,000."
emphasis added

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the last several years, new home sales are still somewhat low historically.

The second graph shows New Home Months of Supply.

The months of supply decreased in December to 6.6 months from 6.7 months in November.

The all time record was 12.1 months of supply in January 2009.

This is above the normal range (less than 6 months supply is normal).

"The seasonally‐adjusted estimate of new houses for sale at the end of December was 344,000. This represents a supply of 6.6 months at the current sales rate."

  On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still somewhat low, and the combined total of completed and under construction is a little low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In December 2018 (red column), 44 thousand new homes were sold (NSA). Last year, 45 thousand homes were sold in December.

The all time high for December was 87 thousand in 2005, and the all time low for December was 23 thousand in 1966 and 2010.

This was above expectations of 591,000 sales SAAR, however the previous months were revised down. I'll have more later today.

by Calculated Risk on 3/05/2019 08:33:00 AM

Notes: This CoreLogic House Price Index report is for January. The recent Case-Shiller index release was for December. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports January Home Prices Increased by 4.4 Percent Year Over Year

CoreLogic® ... today released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for January 2019, which shows home prices rose both year over year and month over month. Home prices increased nationally by 4.4 percent year over year from January 2018. On a month-over-month basis, prices increased by 0.1 percent in January 2019. (December 2018 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results each month.)

Looking ahead, the CoreLogic HPI Forecast indicates that the 2019 annual average home price will increase 3.4 percent above the 2018 annual average. On a month-over-month basis, home prices are expected to decrease by 0.9 percent from January 2019 to February 2019. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

“The spike in mortgage interest rates last fall chilled buyer activity and led to a slowdown in home sales and price growth,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Fixed-rate mortgage rates have dropped 0.6 percentage points since November 2018 and today are lower than they were a year ago. With interest rates at this level, we expect a solid home-buying season this spring.”
emphasis added

CR Note: The CoreLogic YoY increase had been in the 5% to 7% range for the last few years. This is the slowest twelve-month home-price growth rate since August 2012.

The year-over-year comparison has been positive for almost seven consecutive years since turning positive year-over-year in February 2012.

by Calculated Risk on 3/04/2019 09:25:00 PM

Note: This is New Home sales for December - they are still catching up after the government shutdown.

From Matthew Graham at Mortgage News Daily: Mortgage Rates Remain Steady, But That's a Victory Today

[30YR FIXED 4.375 - 4.5%]
emphasis added

Tuesday:
• At 8:00 AM ET: Corelogic House Price index for January.

• At 10:00 AM: New Home Sales for December from the Census Bureau. The consensus is for 591 thousand SAAR, down from 657 thousand in November.

• At 10:00 AM: the ISM non-Manufacturing Index for February.

by Calculated Risk on 3/04/2019 05:31:00 PM

Here is another monthly update on framing lumber prices.   Lumber prices declined from the record highs in early 2018, and are now down about 25% year-over-year.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through February 22, 2019 (via NAHB), and 2) CME framing futures.

Click on graph for larger image in graph gallery.

Right now Random Lengths prices are down 26% from a year ago, and CME futures are  down 25% year-over-year.

There is a seasonal pattern for lumber prices, and usually prices will increase in the Spring, and peak around May, and then bottom around October or November - although there is quite a bit of seasonal variability.

by Calculated Risk on 3/04/2019 01:22:00 PM

The BEA has released the underlying details for the Q4 initial GDP report.

The BEA reported that investment in non-residential structures decreased at a 4.2% annual pace in Q4.  Investment in petroleum and natural gas exploration increased in Q4 compared to Q3, and has increased substantially recently (although this may change with the recent decline in oil prices).

Without the increase in petroleum and natural gas exploration, non-residential investment would only be up about 5% year-over-year.

Click on graph for larger image.

The first graph shows investment in offices, malls and lodging as a percent of GDP.

Investment in offices increased in Q4, and is up 12% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 15% year-over-year in Q4.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment increased in Q4, and lodging investment is up 16% year-over-year.

The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Home improvement was the top category for five consecutive years following the housing bust ... but now investment in single family structures has been back on top for the last six years - although single family investment has been down a little recently.

However - even though investment in single family structures has increased from the bottom - single family investment is still very low, and still below the bottom for previous recessions as a percent of GDP. I expect some further increase.

Investment in single family structures was $278 billion (SAAR) (about 1.3% of GDP), and was down in Q4 compared to Q3.

Investment in multi-family structures increased in Q4.

Investment in home improvement was at a $270 billion Seasonally Adjusted Annual Rate (SAAR) in Q4 (about 1.3% of GDP).  Home improvement spending has been solid.

by Calculated Risk on 3/04/2019 10:10:00 AM

From the Census Bureau reported that overall construction spending decreased in December:

Construction spending during December 2018 was estimated at a seasonally adjusted annual rate of $1,292.7 billion, 0.6 percent below the revised November estimate of $1,300.6 billion. The December figure is 1.6 percent above the December 2017 estimate of $1,272.6 billion.

The value of construction in 2018 was $1,297.7 billion, 4.1 percent above the $1,246.0 billion spent in 2017.

Both private and public spending decreased:

Spending on private construction was at a seasonally adjusted annual rate of $991.2 billion, 0.6 percent below the revised November estimate of $997.1 billion. ...

In December, the estimated seasonally adjusted annual rate of public construction spending was $301.5 billion, 0.6 percent below the revised November estimate of $303.5 billion.
emphasis added

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending had been increasing - although has declined  recently - and is still 21% below the bubble peak.

Non-residential spending is 10% above the previous peak in January 2008 (nominal dollars).

Public construction spending is now 7% below the peak in March 2009, and 15% above the austerity low in February 2014.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is down 1%. Non-residential spending is up 3% year-over-year. Public spending is up 4% year-over-year.

This was below consensus expectations, however spending for October and November were revised up.

by Calculated Risk on 3/03/2019 07:34:00 PM

Weekend:
• Schedule for Week of March 3, 2019

Monday:
• All day, Light vehicle sales for February. The consensus is for light vehicle sales to be 17.0 million SAAR in February, down from 16.6 million in January (Seasonally Adjusted Annual Rate).

• At 10:00 AM ET,: Construction Spending for December. The consensus is for a 0.6% increase in construction spending.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 11 and DOW futures are up 105 (fair value).

Oil prices were down over the last week with WTI futures at $56.01 per barrel and Brent at $65.22 per barrel.  A year ago, WTI was at $62, and Brent was at $66 - so WTI oil prices are down about 10% year-over-year, and Brent is down slightly.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.43 per gallon. A year ago prices were at $2.52 per gallon, so gasoline prices are down 9 cents per gallon year-over-year.

by Calculated Risk on 3/03/2019 12:21:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 23 February

The U.S. hotel industry reported mixed year-over-year results in the three key performance metrics during the week of 17-23 February 2019, according to data from STR.

In comparison with the week of 18-24 February 2018, the industry recorded the following:

• Occupancy: -1.7% to 64.7%
• Average daily rate (ADR): +1.7% to US$129.05
• Revenue per available room (RevPAR): flat at US$83.43
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2019, dash light blue is 2018, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

A decent start for 2019 - about the same as the previous 4 years..

Seasonally, the occupancy rate will increase over the next month or so into the Spring travel season.

Data Source: STR, Courtesy of HotelNewsNow.com