Archive for April, 2016

  • Housing Starts, Sales, and Inventory

    New home inventories continue to rise

    - by Tom Sanderson

    Single-family new home inventories increased by 4k to 240k in February (seasonally adjusted). Inventories drifted down in the first 4 months of 2015 before rising again over the last 10 months. February’s new home inventories were 36k (17.1%) above the prior-year level of 204k. New home inventories still remain very low by historical standards.

    The growth in inventories in the last year (seasonally adjusted) has been driven by homes under construction (+31k) and homes not yet started (+6k), not by completed homes (-1k).

    Inventory levels slowly increased throughout 2014, peaking at 212k in December. Inventories rose from 149k at the beginning of 2013 to 187k by December, following a year of remarkable stability in 2012 where the absolute inventory of new homes remained within a consistent range of 142k – 150k.

    Seasonally adjusted new home inventories held steady at 5.6 months of supply in February, up from 4.5 months a year ago. Sales of single-family houses increased to 512k (seasonally adjusted annual rate), up 1.9% from prior month but down 6.1% from prior year. Full year 2015 new home sales were up 14.6% to 501k. For the full year 2014, new home sales only grew by 1.9% to 437k units. The months of supply figure remained below 5 months between February 2012 and June 2013, but was 5.0 or more from that point through the end of 2014 with only one exception. In 2015, eight months were at 5.0 or greater months of supply, including each of the last 7 months. The average months of supply over the last 50 years is 6.1, so current new home inventory remains slightly below “normal” levels. For the 9-year period of 1997 through 2005, the inventory level averaged 4.1 months with relatively little volatility, despite the dot-com boom and subsequent recession, and we are well above that level today.  The vertical bars in the graphs represent recessions.

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  • Retail & Same Store Sales

    Retail sales show strong growth in February

    - by Tom Sanderson

    Seasonally adjusted real retail and food service sales were flat at $188.18 billion in February. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). February sales were 2.1% higher than the prior-year period. Nominal (unadjusted for inflation) seasonally-adjusted retail sales totaled $447.3 billion in February (second graph), down 0.1% from prior month, and up 3.1% from prior year results. The year-over-year percentage growth results were stronger than in any of the previous 12 months for nominal sales. The results were at consensus expectations. Excluding strong auto-related sales (+6.8%)  knocks a full point off the year-over-year growth rate to 2.1%. For the trailing three-month period, nominal sales were up 2.9% year-over-year.   Nominal retail and food services sales excluding gasoline were up 4.8% year-over-year. Gasoline station sales were down 15.6% year-over-year.  We focus primarily on real retail sales because they are a better indicator of freight volumes than the inflated figures.

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  • ISM Manufacturing Index

    Manufacturing expands for first time in last 6 months

    - by Tom Sanderson

    The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index increased to 51.8 in March from 49.5 in February, breaking a 5-month run of contraction in the manufacturing sector of the economy. PMI came in above expectations (50.5). The New Order Index rose 6.8 points to 58.3. The Production Index rose by 2.5 points from 52.8 to 55.3. Of 18 manufacturing industries, 12 reported monthly growth in March.

    After a slow start in January of 2014, PMI recovered, with a range of 54.3 to 58.1 for the balance of 2014. We did not see a reading above 53.9 in 2015, and that high mark was reached in January. An index over 50 indicates growth while a PMI under 50 represents contraction in the manufacturing sector of the economy. The index reached a low of 32.5 in December 2008 but then recovered more quickly than other areas of the economy.

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