Archive for May, 2016

  • Housing Starts, Sales, and Inventory

    New home inventories (months of supply) fall as sales soar

    - by Tom Sanderson

    Single-family new home inventories fell by 1k to 243k in April (seasonally adjusted). Inventories had been rising since August 2015 but have leveled off over the last 3 months. April’s new home inventories were 36k (17.4%) above the prior-year level of 207k. New home inventories still remain low by historical standards.

    The growth in inventories in the last year (seasonally adjusted) has been driven by homes under construction (+26k) more so than homes not yet started (+4k) or completed homes (+6k).

    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 fell to 4.7 months of supply in April, down from 4.9 months a year ago and 5.5 months in March. Sales of single-family houses soared to 619k (seasonally adjusted annual rate), up 16.6% from prior month and up 23.8% 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 above that level today.  The vertical bars in the graphs represent recessions.

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  • Housing Starts, Sales, and Inventory

    Single family housing starts continue to grow

    - by Tom Sanderson

    Housing starts totaled 1.172 million in April (seasonally adjusted annual rate – SAAR) up 6.6% from last month. Starts were 1.7% below strong April 2015 results and were above expectations. Single family starts totaled 778k (SAAR), up 3.3% from March and up 4.3% year-over-year. Total starts exceeded a 1.0 million unit annual pace for the 13th straight month.YTD total starts are up 10.2% over 2015 while single family starts are up 16.8%.

    In comparison to the last couple of years single-unit starts are growing faster than multi-unit starts. For the full year 2015, total starts were 1.112 million, up 10.8% over 2014. Single unit starts were up 10.3% in 2015, while 5+ unit starts were up 12.9%. For the full year 2014, there were 1.003 million total housing starts, up 8.8% from the 925 thousand starts during 2013. Single family starts were up 4.9% and multifamily starts were up 16.4%. Total 2013 housing starts were up a robust 18.5% from the 781k housing starts recorded in 2012 and in 2012 starts were up 28.2%.

    There remains a lot of ground for the housing sector to recover from the recession. Housing starts are still far below the average of just over 1.5 million per year over the last 40+ years, and even farther below the 2.2 million peak of the most recent housing boom. Since 1968, the U.S. population has grown from 200 million to over 300 million. Some economists believe that slower population growth and household formation in the U.S. mean that housing starts will not recover to 1.5 million units for a long time.

    Total starts reached a low point of 478k (SAAR) in April of 2009, while single unit starts bottomed out at 353k in March of 2009. A low housing starts figure not only impacts transportation demand for building products but also for appliances, furniture, and other related items, so continued improvement in the housing sector should lead to rising freight volumes. The ATA estimates that each housing start generates 8 truckloads of freight.

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  • Diesel Fuel Prices

    Diesel continues to rise, jumping 6 cents per gallon

    - by Tom Sanderson

    Weekly retail on-highway U.S. diesel prices rose 6.0 cents to $2.357 per gallon on May 23,  the 13th weekly increase over the last 14 weeks, totaling 37.7 cents. In February, diesel prices had reached their lowest level since January 2005, dropping below the recessionary trough. Diesel prices are still 55.7 cents or 19% below prior-year levels. Diesel prices had stabilized between August 24 and November 16 last year, with a high of $2.561 and a low of $2.476 during those 13 weeks, but were in steady decline since then until the last 3 months. On May 10, the Energy Information Administration (EIA) increased its pricing forecast by 16 cent to a $2.27 per gallon average for 2016. EIA is predicting 2.64 per gallon for 2017, up 31 cents from its $2.33 forecast a month earlier.

    A view of weekly prices over the last 6+ years (second chart) indicates fairly stable prices between Q2 2011 and the start of the recent slide (min of $3.65 and max of $4.16). We remain dramatically below that range. Diesel is well below the price level in each of the last six years for May.

    Diesel experienced a high but narrow pricing environment throughout 2013, fluctuating between a low of $3.817 on July 1 and the high of $4.159 on February 25. In 2014, diesel prices remained within the 2013 range until early September, but then began a steep decline.  In 2012, diesel exceeded $4 per gallon for a total of 26 weeks but only reached that level for 8 weeks during 2013, and only 4 weeks in 2014. The recessionary low price point for diesel was $2.023 in March 2009. Diesel prices peaked at $4.771 per gallon in July 2008.

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  • Auto Sales & Assemblies

    Auto assemblies fall in March, but remain above an 11-million unit annual pace

    - by Tom Sanderson

    Annualized U.S. assemblies of autos and light trucks fell 1.7% to 11.80 million units in March (seasonally adjusted), but were up 2.7% from March 2015. Seasonally adjusted assemblies have been above an 11-million unit pace in each of the last 13 months.. Our graph is a three-month moving average of seasonally adjusted annualized assemblies. Using this moving average, year-over-year growth was 5.3% in March.

    The auto industry has come a long way since assemblies bottomed out at a 3.6 million-unit annual pace (seasonally adjusted) in January 2009. Average monthly seasonally adjusted assemblies were 11.4 million from January of 2001 through December of 2007, and we have been at or above that level in each of the last 13 months

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  • ISM Manufacturing Index

    Manufacturing grows in April, but at a slower pace than March and slower than expected

    - by Tom Sanderson

    The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index fell to 50.8 in April from 51.8 in March. March broke 5 consecutive months of contraction in the manufacturing sector of the economy. PMI came in below expectations (51.5). The New Order Index fell 2.5  points to 55.8. The Production Index fell by 1.1 points from 55.3 to 54.2. Of 18 manufacturing industries, 15 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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  • Housing Starts, Sales, and Inventory

    New home inventories continue to rise; sales slow down

    - by Tom Sanderson

    Single-family new home inventories increased by 5k to 246k in March (seasonally adjusted). Inventories have been rising since August 2015. March’s new home inventories were 41k (20.0%) above the prior-year level of 205k. New home inventories still remain low by historical standards.

    The growth in inventories in the last year (seasonally adjusted) has been driven by homes under construction (+33k) more so than homes not yet started (+3k) or completed homes (+5k).

    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 rose to 5.8 months of supply in March, up from 5.1 months a year ago. Sales of single-family houses fell to 511k (seasonally adjusted annual rate), down 1.5% from prior month but up 5.4% 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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  • Housing Starts, Sales, and Inventory

    Housing starts fall in March but show strong year-over-year growth

    - by Tom Sanderson

    Housing starts totaled 1.089 million in March (seasonally adjusted annual rate – SAAR) down 8.8% from last month. Starts were 14.2% above the March 2015 rate and were below expectations. Single family starts totaled 764k (SAAR), down 9.2% from February and up 22.6% year-over-year. Total starts exceeded a 1.0 million unit annual pace for the 12th straight month.YTD total starts are up 14.5% over 2015 while single family starts are up 22.2%.

    In comparison to the last couple of years single-unit starts are growing faster than multi-unit starts. For the full year 2015, total starts were 1.112 million, up 10.8% over 2014. Single unit starts were up 10.3% in 2015, while 5+ unit starts were up 12.9%. For the full year 2014, there were 1.003 million total housing starts, up 8.8% from the 925 thousand starts during 2013. Single family starts were up 4.9% and multifamily starts were up 16.4%. Total 2013 housing starts were up a robust 18.5% from the 781k housing starts recorded in 2012 and in 2012 starts were up 28.2%.

    There remains a lot of ground for the housing sector to recover from the recession. Housing starts are still far below the average of just over 1.5 million per year over the last 40+ years, and even farther below the 2.2 million peak of the most recent housing boom. Since 1968, the U.S. population has grown from 200 million to over 300 million. Some economists believe that slower population growth and household formation in the U.S. mean that housing starts will not recover to 1.5 million units for a long time.

    Total starts reached a low point of 478k (SAAR) in April of 2009, while single unit starts bottomed out at 353k in March of 2009. A low housing starts figure not only impacts transportation demand for building products but also for appliances, furniture, and other related items, so continued improvement in the housing sector should lead to rising freight volumes. The ATA estimates that each housing start generates 8 truckloads of freight.

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  • Retail & Same Store Sales

    Retail sales drop in March, slow annual growth

    - by Tom Sanderson

    Seasonally adjusted real retail and food service sales fell to $187.8 billion in March. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). March sales were 0.9% higher than the prior-year period. Nominal (unadjusted for inflation) seasonally-adjusted retail sales totaled $446.9 billion in March (second graph), down 0.3% from prior month, and up 1.7% from prior year results. The year-over-year percentage growth results were weaker than in any of the previous 3 months for nominal sales.

    The results were below consensus expectations. For the trailing three-month period, nominal sales were up 2.8% year-over-year.   Nominal retail and food services sales excluding gasoline were up 3.3% 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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  • Diesel Fuel Prices

    Diesel reaches highest price level of 2016

    - by Tom Sanderson

    Weekly retail on-highway U.S. diesel prices rose 6.8 cents to $2.266 per gallon on May 2nd,  the 10th weekly increase over the last 11 weeks, totaling 28.6 cents. In February, diesel prices had reached their lowest level since January 2005, dropping below the recessionary trough. Diesel prices are still 58.8 cents or 21% below prior-year levels. Diesel prices had stabilized between August 24 and November 16 last year, with a high of $2.561 and a low of $2.476 during those 13 weeks, but were in steady decline since then until the last 11 weeks. On April 12, the Energy Information Administration (EIA) dropped its pricing forecast by 1 cent to a $2.11 per gallon average for 2016.,EIA is predicting 2.33 per gallon for 2017.

    A view of weekly prices over the last 6+ years (second chart) indicates fairly stable prices between Q2 2011 and the start of the recent slide (min of $3.65 and max of $4.16). We remain dramatically below that range. Diesel is well below the price level in each of the last six years for May.

    Diesel experienced a high but narrow pricing environment throughout 2013, fluctuating between a low of $3.817 on July 1 and the high of $4.159 on February 25. In 2014, diesel prices remained within the 2013 range until early September, but then began a steep decline.  In 2012, diesel exceeded $4 per gallon for a total of 26 weeks but only reached that level for 8 weeks during 2013, and only 4 weeks in 2014. The recessionary low price point for diesel was $2.023 in March 2009. Diesel prices peaked at $4.771 per gallon in July 2008.

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