4Q2016 Gross Domestic Product: Third Estimate

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In its third estimate of 4Q2016 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) revised the growth rate of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +2.08% (above consensus expectations of 2.0%), up slightly from the +1.85% previously reported but significantly slower (-1.45 percentage points) than 3Q2016’s +3.53%.

Three of the four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), and government consumption expenditures (GCE) -- contributed to 4Q growth; net exports (NetX) detracted from it.

The improvement in the reported growth came primarily from increased consumer spending on services, with smaller increases in consumer goods spending and inventories also boosting the headline number. Offsetting those increases were continued weakening in commercial fixed investment, governmental spending and foreign trade. 

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“For the moment this closes the BEA's book on the fourth quarter of 2016,” wrote Consumer Metric Institute’s Rick Davis. “A roughly 2% growth rate is certainly acceptable, but it is not the sort of growth rate that normally generates delirious optimism in the equity markets. Next month we should begin to find out how much of that optimism is economically warranted.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

February 2017 Residential Sales, Inventory and Prices

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Sales of new single-family houses in February 2017 were at a seasonally adjusted annual rate (SAAR) of 592,000 units (565,000 expected). This is 6.1% (±17.3 percent)* above the revised January rate of 558,000 (originally 555,000) and 12.8% (±18.0 percent)* above the February 2016 SAAR of 525,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was 8.9%. For a longer-term perspective, February sales were 57.4% below the “bubble” peak and 6.3% below the long-term, pre-2000 average.

The median sales price of new houses sold in February was $296,200 (-$12,000 or -3.9%). The average sales price was $390,400 (+$35,100 or +9.9%). Starter homes (those priced below $200,000) comprised 16.3% of the total sold, up from February 2016’s 15.6%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 4.1% of those sold in February, a slight drop from February 2016’s 6.7%.

* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero. 

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As mentioned in our post about housing permits, starts and completions in February, single-unit completions fell by 52,000 units (-6.5%). Although the decrease in completions was coupled with an increase in sales, new-home inventory expanded in absolute (+4,000 units) terms but shrank in months-of-inventory (-0.2 month) terms. 

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Existing home sales tumbled by 210,000 units (-3.7%) in February, to a SAAR of 5.480 million units (SAAR), below expectations of 5.555 million. Inventory of existing homes expanded in both absolute (+70,000 units) and months-of-inventory (+0.3 months) terms. With new-home sales increasing and existing-home sales declining, the share of total sales comprised of new homes rose to 9.7%. The median price of previously owned homes sold in February increased by $1,100 (+0.5%), to $228,400. 

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Housing affordability remained essentially unchanged despite the median price of existing homes for sale in January falling by $6,000 (-2.6%; +6.4 YoY), to $228,600. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices posted a not-seasonally adjusted monthly change of +0.2% (+5.9% YoY), bringing home prices to a new all-time high.

“Housing and home prices continue on a generally positive upward trend,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The recent action by the Federal Reserve raising the target for the Fed funds rate by a quarter percentage point is expected to add less than a quarter percentage point to mortgage rates in the near future. Given the market’s current strength and the economy, the small increase in interest rates isn’t expected to dampen home buying. If we see three or four additional increases this year, rising mortgage rates could become concern.

“While prices vary month-to-month and across the country, the national price trend has been positive since the first quarter of 2012. In February, the inventory of homes in the market represented 3.7 months of sales, lower than the long-term average of six months. Tight supplies and rising prices may be deterring some people from trading up to a larger house, further aggravating supplies because fewer people are selling their homes. The prices also hurt affordability as higher prices and mortgage rates shrink the number of households that can afford to buy at current price levels. At some point, this process will force prices to level off and decline – however we don’t appear to be there yet.” 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

February 2017 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) was unchanged in February (+0.2% expected) following a 0.1 percent decrease in January. In February, manufacturing output moved up 0.5 percent (+0.4% expected) for its sixth consecutive monthly increase. Mining output jumped 2.7 percent, but the index for utilities fell 5.7 percent, as continued unseasonably warm weather further reduced demand for heating. At 104.7 percent of its 2012 average, total IP in February was 0.3 percent above its level of a year earlier.

Industry Groups

Manufacturing output rose 0.5 percent in February for a second consecutive month. Led by advances of more than 1 percent for nonmetallic mineral products, fabricated metal products, and machinery, the production of durables increased 0.6 percent. The electrical equipment, appliance, and component industry and the furniture and related products industry registered the only substantial losses within durables, about 1.5 percent each (wood products: -0.3%). The index for nondurables rose 0.4 percent; gains of more than 1 percent were recorded by paper (+1.4%) and by plastics and rubber products, while the only losses were posted by textile and product mills and by chemicals. The output of other manufacturing (publishing and logging) fell 0.5 percent.

The output of mining jumped 2.7 percent in February, with widespread gains among its components, after moving up 2.2 percent in January. The mining index in February was 1.8 percent higher than its year-earlier level. 

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Capacity utilization (CU) for the industrial sector declined 0.1 percentage point in February to 75.4 percent, a rate that is 4.5 percentage points below its long-run (1972–2016) average.

Manufacturing CU rose 0.3 percentage point in February to 75.6 percent, a rate that is 2.8 percentage points below its long-run average. The operating rate for durables, at 76.7 percent, is 0.2 percentage point below its long-run average (wood products: -0.4%); the rates for nondurables and for other manufacturing (publishing and logging), at 75.4 percent and 60.5 percent, respectively, remain significantly below their long-run averages (paper: +1.5%). Utilization for mining jumped 2.1 percentage points to 80.5 percent but is still well below its long-run average. The operating rate for utilities fell 4.4 percentage points to 70.9 percent, its lowest recorded level. 

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Capacity at the all-industries level nudged up 0.1% (+0.6% YoY) to 138.9% of 2012 output. Manufacturing (NAICS basis) inched up +0.1% (+0.8% YoY) to 138.4%. Wood products: +0.1% (+3.7% YoY) to 170.5%; paper: -0.1% (-1.2% YoY) to 115.9%.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

January 2017 International Trade (Softwood Lumber)

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Softwood lumber exports increased (3 MMBF or +2.1%) in January, while imports rose (46 MMBF or +3.6%). Exports were 5 MMBF (+3.7%) above year-earlier levels; imports were 52 MMBF (+4.2%) higher. As a result, the year-over-year (YoY) net export deficit was 48 MMBF (+4.2%) larger. The average net export deficit for the 12 months ending January 2017 was 23.7% higher than the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the graph above). 

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North America was the primary destination for U.S. softwood lumber exports in January (40.7%, of which Canada: 20.8%; Mexico: 20.0%). Asia (especially China: 19.9%) ranked second, with 36.7%. Year-to-date (YTD) exports to China were up 7.8% relative to the same months in 2016. Meanwhile, Canada was the source of nearly all (93.1%) softwood lumber imports into the United States; Imports from Canada are 1.9% higher YTD than the same months in 2016. Overall, YTD exports were up 3.7% compared to 2016, while imports were up 4.2%. 

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U.S. softwood lumber export activity through East Coast customs districts represented the largest proportion in January (35.5% of the U.S. total), the West Coast and Gulf districts lagged (30.8% and 26.0%, respectively); Seattle maintained a slim lead as the most active export district (18.0% of the U.S. total). At the same time, Great Lakes customs districts handled 62.9% of softwood lumber imports -- most notably Duluth, MN (27.3%) -- coming into the United States. 

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Southern yellow pine comprised 30.9% of all softwood lumber exports in January, followed by treated lumber (15.7%) and Douglas-fir (11.4%). Southern pine exports were up 1.8% YTD relative to 2016, while Doug-fir exports were down 32.6%.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

February 2017 Residential Permits, Starts and Completions

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Builders started construction of privately-owned housing units in February at a seasonally adjusted annual rate (SAAR) of 1,288,000 units (1.266 million expected). This is 3.0 percent (±13.0 percent)* above the revised January estimate of 1,251,000 (originally 1.246 million units) and 6.2 percent (±10.4 percent)* above the February 2016 SAAR of 1,213,000; the not-seasonally adjusted YoY change (shown in the table above) was +3.6%.

Single-family housing starts in February were at a SAAR of 872,000; this is 6.5 percent (±10.9 percent)* above the revised January figure of 819,000. The February SAAR for multi-family starts was 416,000.

* 90% confidence interval (CI) is not statistically different from zero. The Census Bureau does not publish CIs for the entire multi-unit category. 

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Total housing completions in February were at a SAAR of 1,114,000 units. This is 5.4 percent (±9.6 percent)* above the revised January estimate of 1,057,000 and 8.7 percent (±12.1 percent)* above the February 2016 SAAR of 1,025,000; the NSA comparison: +5.2% YoY.

Single-family housing completions were at a SAAR of 754,000; this is 6.5 percent (±9.7 percent)* below the revised January rate of 806,000. Multi-family completions: 360,000 (+43.4% MoM). 

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Total building permits were at a SAAR of 1,213,000 (1.267 million expected). This is 6.2 percent (±1.8 percent) below the revised January rate of 1,293,000 units (originally 1.285 million), but 4.4 percent (±1.3 percent) above the February 2016 SAAR of 1,162,000; the non-seasonally adjusted YoY comparison was +0.0%.

Single-family permits: 832,000; this is 3.1 percent (±1.5 percent) above the revised January figure of 807,000. Multi-family: 381,000 (-21.6% MoM). 

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Builder confidence in the market for newly-built single-family homes jumped six points to a level of 71 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest reading since June 2005.

“Builders are buoyed by President Trump’s actions on regulatory reform, particularly his recent executive order to rescind or revise the waters of the U.S. rule that impacts permitting,” said NAHB Chairman Granger MacDonald.

“While builders are clearly confident, we expect some moderation in the index moving forward,” said NAHB Chief Economist Robert Dietz. “Builders continue to face a number of challenges, including rising material prices, higher mortgage rates, and shortages of lots and labor.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

February 2017 Consumer and Producer Price Indices (incl. Forest Products)

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Consumer Price Index

The seasonally adjusted consumer price index for all urban consumers (CPI-U) increased 0.1% (as expected) in February -- the smallest MoM rise since July 2016. The gasoline index declined, partially offsetting increases in several indexes, including food, shelter, and recreation. The energy index fell 1.0%, with the decline in gasoline outweighing increases in the other energy component indexes. The food index increased 0.2% over the month, its largest rise since September 2015.

The index for all items less food and energy rose 0.2% in February. The indexes for shelter, recreation, apparel, airline fares, motor vehicle insurance, education, and medical care were among those that increased in February. Indexes that declined include communication, used cars and trucks, new vehicles, and household furnishings and operations. 

The all-items index rose 2.7% for the 12 months ending February; the 12-month increase has been trending upward since a July 2016 trough of 0.8%. The index for all items less food and energy rose 2.2% over the last 12 months; this was the fifteenth straight month the 12-month change remained in the range of 2.1 to 2.3%. The energy index rose 15.2% over the last year, while the food index was unchanged. Rent rose by 3.9% YoY, and medical services: +3.4%.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) increased 0.3% (+0.1% expected) in February. Final demand prices rose 0.6% in January and 0.2% in December. Over 80% of the advance in the final demand index is attributable to a 0.4% increase in prices for final demand services; final demand goods moved up 0.3%.

Prices for final demand less foods, energy, and trade services rose 0.3% in February, the largest increase since a 0.3% advance in April 2016. For the 12 months ended in February, the index for final demand less foods, energy, and trade services climbed 1.8%.

The final demand index climbed 2.2% for the 12 months ended February 2017, the largest YoY advance since a 2.4% increase in March 2012.

Final Demand

Final demand services: The index for final demand services moved up 0.4% in February, the largest advance since a 0.4% increase in June 2016. Nearly 70% of the February rise can be traced to prices for final demand services less trade, transportation, and warehousing, which climbed 0.5%. The indexes for final demand trade services and for final demand transportation and warehousing services advanced 0.4% and 0.3%, respectively.

Product detail: In February, a major factor in the increase in prices for final demand services was the index for traveler accommodation services, which rose 4.3%. The indexes for chemicals and allied products wholesaling; legal services; apparel wholesaling; health, beauty, and optical goods retailing; and architectural and engineering services also moved higher. In contrast, the index for automotive fuels and lubricants retailing fell 10.0%. Prices for wireless telecommunication services and for securities brokerage, dealing, and investment advice also decreased.

Final demand goods: Prices for final demand goods moved up 0.3% in February, the sixth consecutive rise. Over half of the broad-based February increase can be traced to the index for final demand energy, which advanced 0.6%. Prices for final demand foods and for final demand goods less foods and energy moved up 0.3% and 0.1%, respectively.

Product detail: Nearly 70% of the February increase in prices for final demand goods is attributable to the index for electric power, which climbed 1.6%. Prices for fresh and dry vegetables, jet fuel, liquefied petroleum gas, pharmaceutical preparations, and residual fuels also rose. Conversely, the index for gasoline fell 2.5%. Prices for beef and veal and for search, detection, navigation, and guidance systems and equipment also decreased. 

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Virtually all of the not-seasonally adjusted price indexes we track rose on a MoM basis, and all moved higher on a YoY basis. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

February 2017 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment added 235,000 jobs in February -- considerably above expectations of +195,000. Combined December 2016 and January 2017 employment gains were revised up by 9,000 (December: -2,000; January: +11,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) edged down to 4.7% as growth in the number of employed (+447,000) outpaced that of people (re)entering the labor force (+340,000). 

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Observations from the employment reports include:

* For once, most details “under the hood” supported the headline numbers. “This was a clean report with the cuffs and collars matching,” commented analyst Steven Hansen. “Consider this an excellent jobs report.” We have often been critical of the BLS’s seeming to “plump” the headline numbers with favorable adjustment factors; it would be difficult to make that case about the February report, however. Imputed jobs from the CES (business birth/death model) adjustment were a bit above average (70^th percentile) for the month of February since 2000. However, the BLS also applied the most negative seasonal adjustment to the base data of any February since 2000; had average adjustments been applied, headline jobs gains could have exceeded 300,000.

* As to industry details, Manufacturing added 28,000 jobs in February. That result is somewhat consistent with the Institute for Supply Management’s manufacturing employment sub-index, which expanded at a slower pace in February. Both Wood Products and Paper and Paper Products employment rose by 1,500 jobs. Construction employment jumped by 58,000 -- which seems consistent with both recent residential building activity and construction employment trends in ISM’s services report. 

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* The number of employment-age persons not in the labor force (NILF) declined by 176,000 -- to 94.2 million. Nonetheless, February’s NILF estimate is within 1.0% of December’s record high. Meanwhile, the employment-population ratio (EPR) edged up to 60.0%; thus, for every five people being added to the population, only three are employed. 

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* Like the EPR, the labor force participation rate (LFPR) also rose fractionally to 63.0%, still comparable to levels seen in the late-1970s. Average hourly earnings of all private employees increased by $0.06, to $26.09, resulting in a 2.8% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $0.04, to $21.86 (+2.5% YoY). Since the average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours, average weekly earnings increased by $2.07, to $897.50 (+2.5% YoY). 

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* Full-time jobs rose by 326,000. In addition, those employed part time for economic reasons (PTER) -- e.g., slack work or business conditions, or could find only part-time work -- fell by 132,000. There are now over 3.2 million more full-time jobs than the pre-recession high; for perspective, however, the non-institutional, working-age civilian population has risen by 21.1 million). Those holding multiple jobs jumped to 7.8 million (+260,000), but still below September 2016’s post-recession peak of 7.9 million. 

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For a “sanity check” of the employment numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in February fell by $14.1 billion, to $203.8 billion (-6.5% MoM and -1.7% YoY). To reduce some of the volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending February was 4.1% above the year-earlier average, well off the peak of +13.8% set back in September 2013.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

January 2017 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments increased $1.1 billion or 0.2% to $478.3 billion in January. Shipments of durable goods increased $0.1 billion or virtually unchanged to $238.8 billion, led by fabricated metal products. Meanwhile, nondurable goods shipments increased $1.0 billion or 0.4% to $239.5 billion, led by petroleum and coal products. Shipments of Wood and Paper both fell by 0.7%. 

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Inventories increased $1.0 billion or 0.2% to $627.9 billion. The inventories-to-shipments ratio was 1.31, unchanged from December. Inventories of durable goods increased $0.3 billion or 0.1% to $384.1 billion, led by computers and electronic products. Nondurable goods inventories increased $0.8 billion or 0.3% to $243.8 billion, led by petroleum and coal products. Inventories of Wood and Paper both expanded by 0.1%. 

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New orders increased $5.5 billion or 1.2% to $470.2 billion. Excluding transportation, new orders rose by 0.3% (and +7.5% YoY -- the fourth month of year-over-year increases out of the past 24). Durable goods orders increased $4.5 billion or 2.0% to $230.7 billion, led by transportation equipment. New orders for nondurable goods increased $1.0 billion or 0.4% to $239.5 billion. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- edged down by 0.1% (but +2.6% YoY). Business investment spending contracted on a YoY basis during all but four months since January 2015 (inclusive).

As can be seen in the graph above, real (inflation-adjusted) new orders were essentially flat between early 2012 and mid-2014, recouping on average 70% of the losses incurred since the beginning of the Great Recession. With July 2014’s transportation-led spike an increasingly distant memory, the recovery in new orders is back to just 52% of the ground given up in the Great Recession. 

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Unfilled durable-goods orders decreased $4.0 billion or 0.4% to $1,114.1 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.57, down from 6.59 in December. Real unfilled orders, which had been a good litmus test for sector growth, show a much different picture; in real terms, unfilled orders in June 2014 were back to 97% of their December 2008 peak. Real unfilled orders jumped to 122% of the prior peak in July 2014, thanks to the largest-ever batch of aircraft orders. Since then, however, real unfilled orders have moved mostly sideways; not only are they back below the December 2008 peak, but they are also diverging further below the January 2010-to-June 2014 trend-growth line.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

February 2017 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil pressed higher ($0.94 or 1.8%) in February, to $53.44 per barrel. The increase coincided with a weaker U.S. dollar, the lagged impacts of a 324,000 barrel-per-day (BPD) rise in the amount of oil supplied/demanded in November (to 20.0 million BPD), and a new record of over 520 million barrels of accumulated oil stocks. 

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Futures traders appear to be questioning the potential for higher prices, especially in the wake of bearish data releases from the Energy Information Administration (EIA). Besides the record crude inventories mentioned above, U.S. oil production figures jumped to 9.032 million BPD during the last week of February. Moreover, preliminary data indicate flagging U.S. demand for gasoline; since late January, gasoline demand has been running 5-6% lower YoY, according to the EIA's weekly estimates. “Historically, that sort of drop has only happened when there’s been a recession or a huge spike in prices,” observed Bloomberg.com columnist Liam Denning.

“Data for February is in,” wrote Oilprice.com Editor Evan Kelly, “and it shows that OPEC increased its compliance rate. Saudi Arabia took on the additional burden, cutting deeper than it promised as part of the November deal. The oil kingdom cut output by 90,000 bpd in February from January levels, taking output down to 9.78 million barrels per day. Reuters puts the compliance rate at 94%, while Bloomberg has it at 104%. Saudi Arabia is making up for a handful of countries that are falling short on their commitments, including Iraq, the UAE, Angola and Venezuela. Plus, this does not take into account rising output from Libya, Nigeria and Iran. When included, OPEC is producing 415,000 BPD above its target. Moreover, Russia has not slashed its production beyond the 100,000 BPD reduction in January.”

“With the rig count continuing to rise, estimates as to how much U.S. shale oil production will increase this year are popping up all over the financial press,” wrote Peak Oil Review Editor Tom Whipple.  “Some expect U.S. oil production to increase this year by 400,000 BPD while others are talking about a million. The EIA says U.S. oil production is already up by 400,000 BPD in the last six months. Most of this production is coming from newly opened off-shore production that was started many years ago and had too much money invested to slow during the recent price collapse.”

“If U.S. producers can increase production by anything close to 1 million BPD this year and if the Libyans manage to get their production back to anywhere near pre-uprising levels, we could see prices in nearly the same trading range or lower by the end of the year,” Whipple concluded. Predictions range all over board regarding prices later this year -- from the $30s to the $70s.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

February 2017 ISM and Markit Reports

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The Institute for Supply Management’s (ISM) monthly opinion survey showed that the expansion in U.S. manufacturing accelerated during February to its fastest pace since August 2014. The PMI registered 57.7%, or +1.7 percentage points from January. (50% is the breakpoint between contraction and expansion.) ISM’s manufacturing survey represents under 10% of U.S. employment and about 20% of the overall economy. Growth in employment slowed, however, despite faster new orders and production. 

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The pace of growth in the non-manufacturing sector -- which accounts for 80% of the economy and 90% of employment -- gained 1.1 percentage points, rising to 57.6% (the highest reading since February 2015). No sub-index value fell below 50. 

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Only Real Estate contracted. “U.S. construction labor is tight,” commented one Construction respondent.

Relevant commodities --
* Priced higher: Corrugate, corrugated boxes, lumber and paper.
* Priced lower: None.
* Prices mixed: Diesel and gasoline.
* In short supply: Construction labor.

Consistency between ISM’s and IHS Markit’s surveys was mixed: Whereas both of ISM’s surveys showed faster expansion, Markit’s manufacturing and services PMIs both decelerated slightly -- while remaining safely in expansion.

Commenting on the data, Chris Williamson, Markit’s chief business economist said:

Manufacturing -- “The February survey points to a modest cooling in the rate of expansion of the manufacturing sector, but it remains too early to tell if this is the start of a more prolonged slowdown.

“Even with the latest slowing, the goods-producing sector is still on course for its best quarter for two years, representing a markedly improved picture compared to this time last year.

“Growth is being driven by robust domestic demand, stemming in turn from buoyant consumers and increased investment spending by the energy sector in particular.

“Manufacturing is far from booming, however, as the strong dollar means near-stagnant exports continue to act as a drag on growth.”

Services -- “Taken together, the PMI survey readings for the first two months of the year suggest the economy is growing in the first quarter at a respectable annualized rate approaching 2.5%.

“The burning question is whether the February slowdown merely represents some pay-back after a strong start to the year for U.S. businesses, or whether it’s the start of a more entrenched slowdown.

“A warning clue rests with the business expectations index, which indicates that business optimism has mellowed back to its post-election level, suggesting that companies are becoming more cautious with regard to spending and hiring.

“However, companies continue to report buoyant domestic demand, especially from consumers, and continue to take on staff in reasonable numbers, the rate of hiring having slowed only modestly. The February survey is broadly consistent with 175,000 payroll jobs being added, which represents a pace of hiring that will do little to deter the Fed from delaying its next rate hike.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

February 2017 Currency Exchange Rates

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In February the monthly average value of the U.S. dollar again depreciated against all three major currencies we track. The greenback retreated by 0.6% against Canada’s “loonie,” 0.2% against the euro and 1.6% against the yen. On a trade-weighted index basis, the dollar weakened by 1.4% against a basket of 26 currencies. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.