June 2021 Residential Sales, Inventory and Prices

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Sales of new single-family houses in June 2021 were at a seasonally adjusted annual rate (SAAR) of 676,000 units (800,000 expected). This is 6.6% (±16.5%)* below the revised May rate of 724,000 (originally 769,000 units) and 19.4% (±13.9%) below the June 2020 SAAR of 839,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was -24.1%. For longer-term perspectives, NSA sales were 51.3% below the “housing bubble” peak but 14.8% above the long-term, pre-2000 average.

The median sales price of new houses sold in June fell ($18,900 or -5.0% MoM) to $361,800; meanwhile, the average sales price slid to $428,700 ($5,300 or -1.2% MoM). Starter homes (defined here as those priced below $200,000) comprised 2.3% of the total sold, down from the year-earlier 7.6%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 were less than 0.7% of sales, down from 1.3% a year earlier.

* 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 June, single-unit completions fell by 59,000 units (-6.1%). Although sales fell by a smaller amount (48,000 units; -6.6%), inventory for sale rose in absolute (+20,000 units) and months-of-inventory (+0.8 month) terms. 

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Existing home sales edged higher in June (80,000 units or +1.4%), to a SAAR of 5.86 million units (5.900 million expected). Inventory of existing homes for sale expanded in absolute (40,000 units) and months-of-inventory (0.1 month) terms. Because resales rose while new-home sales fell, the share of total sales comprised of new homes dropped to 10.3%. The median price of previously owned homes sold in June advanced to a record $363,300 ($12,900 or +3.7% MoM).

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Housing affordability dipped by 4.1 percentage points as the median price of existing homes for sale in May rose by $10,400 (+3.0% MoM; +24.4 YoY), to $346,200. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices rose at a not-seasonally adjusted monthly change of +2.1% (+16.6% YoY).

“Housing price growth set a record for the second consecutive month in May 2021,” said Craig Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The National Composite Index marked its twelfth consecutive month of accelerating prices with a 16.6% gain from year-ago levels, up from 14.8% in April. This acceleration is also reflected in the 10- and 20-City Composites (up 16.4% and 17.0%, respectively). The market’s strength continues to be broadly-based: all 20 cities rose, and all 20 gained more in the 12 months ended in May than they had gained in the 12 months ended in April. Prices in 18 of our 20 cities now stand at all-time highs, as do the National Composite and both the 10- and 20-City indices.

“A month ago, I described April’s performance as 'truly extraordinary,' and this month I find myself running out of superlatives. The 16.6% gain is the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data. As was the case last month, five cities -- Charlotte, Cleveland, Dallas, Denver, and Seattle -- joined the National Composite in recording their all-time highest 12-month gains. Price gains in all 20 cities were in the top quartile of historical performance; in 17 cities, price gains were in top decile.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. May’s data continue to be consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question.

“Phoenix’s 25.9% increase led all cities for the 24th consecutive month, with San Diego (+24.7%) and Seattle (+23.4%) close behind. As was the case last month, prices were strongest in the West (+19.9%) and Southwest (+19.8%), but every region logged double-digit gains.”

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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.

June 2021 Residential Permits, Starts and Completions

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Builders started construction of privately-owned housing units in June at a seasonally adjusted annual rate (SAAR) of 1,643,000 units (1.68 million expected). This is 6.3% (±11.5%)* above the revised May estimate of 1,546,000 (originally 1.572 million units) and 29.1% (±11.2%) above the June 2020 SAAR of 1,273,000 units; the not-seasonally adjusted YoY change (shown in the table above) was +28.5%.

Single-family housing starts in June were at a SAAR of 1,160,000; this is 6.3% (±11.7%)* above the revised May figure of 1,091,000 units (+28.0% YoY). Multi-family: 483,000 units (+6.2% MoM; +29.7% YoY).

* 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 completions were at a SAAR of 1,324,000 units. This is 1.4% (±10.5%)* below the revised May estimate of 1,343,000 (originally 1.368 million units), but 6.5% (±13.9%)* above the June 2020 SAAR of 1,243,000 units; the NSA comparison: +5.6% YoY.

Single-family housing completions were at a SAAR of 902,000 units; this is 6.1% (±10.2%)* below the revised May rate of 961,000 units (-3.8% YoY). Multi-family: 422,000 units (+10.5% MoM; +32.2% YoY).

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Total permits were at a SAAR of 1,598,000 units (1.750 million expected). This is 5.1% (±1.1%) below the revised May rate of 1,683,000 (originally 1.750 million units), but 23.3% (±0.9%) above the June 2020 SAAR of 1,296,000 units; the NSA comparison: +21.9% YoY.

Single-family permits were at a SAAR of 1,063,000; this is 6.3% (±1.4%) below the revised May figure of 1,134,000 units (+23.7% YoY). Multi-family: 535,000 units (-2.6% MoM; +18.2% YoY).

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Strong buyer demand helped to offset supply-side challenges relating to building materials, regulation and labor as builder confidence in the market for newly built single-family homes inched down one point to 80 in July, according to the NAHB/Wells Fargo Housing Market Index.

“Builders continue to grapple with elevated building material prices and supply shortages, particularly the price of oriented strand board, which has skyrocketed more than 500% above its January 2020 level,” said NAHB Chairman Chuck Fowke. “We are grateful that the White House heeded our urgent plea to hold a building materials meeting with interested stakeholders on July 16 to seek solutions to end production bottlenecks that have harmed housing affordability.”

“Builders are contending with shortages of building materials, buildable lots and skilled labor as well as a challenging regulatory environment. This is putting upward pressure on home prices and sidelining many prospective home buyers even as demand remains strong in a low-inventory environment,” said NAHB Chief Economist Robert Dietz.

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.

June 2021 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 0.4% in June (+0.7% expected) after moving up 0.7% in May. In June, manufacturing output edged down 0.1%, as an ongoing shortage of semiconductors contributed to a decrease of 6.6% in the production of motor vehicles and parts. Excluding motor vehicles and parts, factory output increased 0.4%. The output of utilities advanced 2.7%, reflecting heightened demand for air conditioning, as much of the country experienced a heat wave in June. The index for mining increased 1.4%. At 100.1% of its 2017 average, total IP in June was 9.8% above its year-earlier level but 1.2% below its pre-pandemic (February 2020) level.

For 2Q as a whole, total IP rose at an annual rate of 5.5%. Manufacturing output increased at an annual rate of 3.7% despite a drop of 22.5% for motor vehicles and parts.

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Industry Groups

In June, manufacturing output edged down less than 0.1% and was 0.8% below its pre-pandemic level (NAICS manufacturing: 0.0%, at 98.4%). Production of durable goods slipped 0.2% (including wood products: -0.7%); in addition to the drop for motor vehicles and parts, declines of more than 1.0% were recorded by nonmetallic mineral products and by electrical equipment, appliances, and components. The output of nondurable goods rose 0.2%. The largest increases were recorded by printing and support activities and by petroleum and coal products, while the largest decreases were recorded by paper (-0.9%) and by apparel and leather. The output of other manufacturing (publishing and logging) declined 0.8%.

The index for mining gained 1.4% in June and expanded at an annual rate of 25.6% in the second quarter. In June, oil and gas extraction increased 2.1%, but the index remained 6.0% below its pre-pandemic level. The index for utilities rose 2.7% in June but fell 2.2% in the second quarter.

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Capacity utilization (CU) for the industrial sector rose 0.3 percentage point (PP) in June to 75.4%, a rate that is 4.2PP below its long-run (1972–2020) average.

Manufacturing CU declined 0.1PP in June to 75.3% (NAICS manufacturing: -0.1%, to 75.5%; wood products: -0.7%; paper products: -1.0%). The operating rate for mining increased 1.1PP to 76.7%, while the operating rate for utilities rose 1.8PP to 74.5%. The rates for all three sectors remained below their long-run averages.

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Capacity at the all-industries level was unchanged MoM (0.0% YoY) at 132.8% of 2017 output. NAICS manufacturing was also unchanged (-0.1% YoY) at 130.4%. Wood products: 0.0% (+0.4% YoY) at 123.1%; paper products: +0.1% (+0.1% YoY) to 113.4%.

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.

June 2021 Consumer and Producer Price Indices (incl. Forest Products)

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Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9% in June (+0.5% expected) after rising 0.6% in May. This was the largest one-month change since June 2008 when the index rose 1.0%. The index for used cars and trucks continued to rise sharply, increasing 10.5% in June. This increase accounted for more than one-third of the seasonally adjusted all-items increase. The food index increased 0.8% in June, a larger increase than the 0.4% increase reported for May. The energy index increased 1.5% in June, with the gasoline index rising 2.5% over the month.

The index for all items less food and energy rose 0.9% in June after increasing 0.7% in May. Many of the same indexes continued to increase, including used cars and trucks, new vehicles, airline fares, and apparel. The index for medical care and the index for household furnishings and operations were among the few major component indexes which decreased in June.

The all-items index rose 5.4% for the 12 months ending June -- the largest 12-month increase since a 5.4% increase for the period ending August 2008; the CPI has been trending up every month since January, when the 12-month change was 1.4%. The index for all items less food and energy rose 4.5% over the last 12-months, the largest 12-month increase since the period ending November 1991. The energy index rose 24.5% over the last 12-months, and the food index increased 2.4%.

Producer Price Index

The Producer Price Index for final demand increased 1.0% in June (+0.6% expected). Final demand prices rose 0.8% in May and 0.6% in April. Nearly 60% of the June advance in the final demand index can be traced to a 0.8% increase in prices for final demand services. The index for final demand goods moved up 1.2%.

On a year-over-year basis, the final demand index moved up 7.3% for the 12 months ended in June, the largest advance since 12-month data were first calculated in November 2010. Prices for final demand less foods, energy, and trade services rose 0.5% in June following an increase of 0.7% in May. For the 12 months ended in June, the index for final demand less foods, energy, and trade services moved up 5.5%, the largest advance since 12-month data were first calculated in August 2014.

Final Demand

Final demand services: Prices for final demand services rose 0.8% in June, the sixth consecutive advance. Seventy percent of the broad-based increase in June is attributable to margins for final demand trade services, which moved up 2.1%. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services rose 0.3% and 0.9%, respectively.

Product detail: Twenty percent of the June increase in the index for final demand services can be traced to margins for automobiles and automobile parts retailing, which rose 10.5%. The indexes for machinery and vehicle wholesaling; hardware, building materials, and supplies retailing; guestroom rental; professional and commercial equipment wholesaling; and transportation of passengers (partial) also moved higher. Conversely, margins for apparel wholesaling fell 6.0%. The indexes for machinery and equipment parts and supplies wholesaling and for gaming receipts (partial) also declined.

Final demand goods: Prices for final demand goods increased 1.2% in June after rising 1.5% in May. Nearly 60% of the broad-based advance in June can be traced to the index for final demand goods less foods and energy, which moved up 1.0%. Prices for final demand energy and for final demand foods rose 2.1% and 0.8%, respectively.

Product detail: Within the index for final demand goods in June, prices for industrial chemicals rose 4.5%. Prices for gasoline, meats, electric power, processed poultry, and motor vehicles also moved higher. In contrast, the index for oilseeds fell 11.7%. Prices for diesel fuel and for distilled and bottled liquor (excluding brandy) also declined.

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With the exception of softwood lumber, the not-seasonally adjusted price indexes we track all rose on both MoM and YoY bases.

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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.

June 2021 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil rose by $6.21 (+9.5%), to $71.38 per barrel in June. That increase occurred within the context of a weaker U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of April’s increase of 255,000 barrels-per-day (BPD) in the amount of petroleum products demanded/supplied (to 18.3 million BPD, and a continued decline in accumulated oil stocks (June average: 463 million barrels).

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From the 28 June 2021 issue of The Energy Bulletin:

Oil: Prices posted their fifth straight weekly gain, the longest winning streak since December, as demand recovers, and supplies continue to tighten in the US and China. Futures in New York rose 3.4% last week to the highest level since October 2018. Demand continues to rebound while the market expects output will only get a modest increase from the OPEC+ alliance, which meets this week to discuss supply policy.

US crude inventories fell by 7.6 million barrels in the week to June 18th to 459.1 million barrels, their lowest since March 2020. The draw was nearly double analysts' expectations. Crude oil inventories in America's largest storage hub could fall to historically low levels by the end of September as the demand rebound continues to outpace production. US refining capacity last year fell 4.5% to 18.13 million b/d from a record 18.98 million a year earlier. It was the first annual decline since 2018.

The chief executive officers of Royal Dutch Shell and TotalEnergies joined major commodity traders and banks in predicting that oil could go as high as $100 a barrel. However, they also said volatile markets could drive prices back down again. Low investment is “going to exacerbate supply and demand tightness as the economies pick back up again, and then in time we'll see supply pick up and rebalance,” Exxon Mobil CEO Darren Woods said at the Qatar Economic Forum Tuesday.

OPEC: Oil inventories are falling, and market forecasters warn of a supply crunch this summer if OPEC and its allies do not agree to pump more crude imminently. OPEC+ ministers may oblige when they meet this week to discuss production quotas for August and possibly beyond. But how much crude to produce and for how long are the key questions. Many analysts expect a tempered short-term rise of perhaps 500,000 b/d to 700,000 b/d. Members will be keen to capture some of the rising oil demand without pushing prices down, while they also await the outcome of the stalled US-Iran nuclear deal negotiations.

Shale Oil: Activity in the US oil and gas sector continued growing strongly in the second quarter, with higher capital spending and significant cost pressures, according to the Dallas Fed survey of 152 energy companies released June 23rd. The oil production index jumped 18.7 points to 35 points for Q2, its second-highest reading since the survey started in 2016. The natural gas production index rose 19 points to 35. Executives expect the WTI crude oil prices to be $70/b at year's end and the Henry Hub natural gas price at $3.10/MMBtu

With oil trading above $70 per barrel while investment activity remains low, the world's publicly traded exploration and production companies are set to generate record-breaking free cash flows (FCF) in 2021, Rystad Energy reports. Their combined FCF is expected to surge to $348 billion this year, with the previous high being $311 billion back in 2008. In addition, Rystad Energy estimates that total gross revenue for all public upstream companies is expected to increase by almost $500 billion in 2021, or 55% compared to last year. At the same time, the investment level of these companies is only expected to grow by around 2% in 2021, resulting in significantly higher profits.

Prognosis:  Underinvestment and a focus on the energy transition will create a global oil supply shortage in two to four years, according to three-quarters of US oil and natural gas executives surveyed by the Federal Reserve Bank of Dallas. One upstream executive said policies focused on limiting oil and gas growth, restrained capital budgets in favor of free-cash-flow generation, and continued consolidation could lead to an undersupply vs. growing demand. “OPEC is back in the driver's seat,” the executive said. “If they can balance market share with high prices, they'll take it.”

Another respondent said only one of 400 institutional investors their company has worked with is currently willing to give new capital to the oil and gas sector. And the same is true for public companies and international exploration, the executive said. “This underinvestment coupled with steep shale declines will cause prices to rocket in the next two to three years,” the respondent said. “I don't think anyone is prepared for it, but US producers cannot increase capital expenditures: the OPEC+ sword of Damocles still threatens another oil price collapse the instant that large publics announce capital expenditure increases.”

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Selected highlights from the 2 June 2021 issue of OilPrice.com’s Oil & Energy Insider include:

The OPEC+ meeting resulted in some unexpected 11th-hour drama, delaying a decision that was expected on Thursday. Oil prices slipped on the news.

But the outcome could still be a bullish one. The size of the proposed production increase was lower than most analysts had expected, coming in at an average monthly addition of 400,000 bpd, whereas expectations had been for 500,000 bpd. But there is also a possibility that OPEC+ might not add any barrels to production. The group meets again on Friday.

UAE delays decision. The UAE delayed a deal as it demanded a higher production quota. “Negotiations today will be difficult as OPEC+ knows that if the UAE is allowed to produce from a different base, other members may protest,” Rystad Energy said in a note.

India’s demand back to 90%. India’s gasoline consumption has rebounded to 90% of pre-virus levels as motorists took back to the roads with Covid-19 curbs being eased.

Americans face higher gas prices. Heading into the holiday weekend, American motorists face the highest average gasoline prices in seven years.

Shadow lenders take over U.S. shale patch. Banks have started to cut their exposure to the U.S. shale patch. While traditional lenders are cutting their losses and de-risking energy loan portfolios, alternative capital providers are stepping up to scoop up U.S. energy debt at a discount and take part in debt or equity transactions that could give them returns sooner than a loan would for a bank.

Canadian oil sands expected to grow. The 590,000 b/d Trans Mountain Pipeline expansion and the 370,000 b/d Line 3 expansion by Enbridge (NYSE: ENB) opens up room for the increase in Canadian oil sands production, according to IHS Markit. The 10-year forecast still calls for 3.6 million b/d, up 22% from the fully restored, post-Covid-19 pace of 2.95 million b/d.

Utilities need $500 billion to make grid resilient. The heat dome led to blackouts in the Pacific Northwest, in a preview of what is to come with rising temperatures. One study says that U.S. utilities need to invest $500 billion to upgrade the electric grid and harden it for a warming world.

$3.2 trillion needed for renewables. IRENA, based in Abu Dhabi, says that private lenders and capital markets will need a fourfold increase in funding for renewables to as much as $3.2 trillion this decade.

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.

June 2021 Currency Exchange Rates

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In June, the monthly average value of the U.S. dollar (USD) appreciated versus Canada’s “loonie” (+0.8%), the euro (+0.8%) and Japanese yen (+0.9%). On the broad trade-weighted index basis (goods and services), the USD strengthened by 0.3% 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.

June 2021 ISM and Markit Surveys

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The Institute for Supply Management‘s (ISM) monthly sentiment survey showed a slight decrease in the proportion of U.S. manufacturers reporting expansion in June. The PMI registered 60.6%, a dip of 0.6 percentage point (PP) from the May reading. (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. The sub-indexes for imports (+7.0PP), order backlogs (-6.1PP) and input prices (+4.1PP) exhibited the largest changes.

“Companies and suppliers continue to struggle to meet increasing levels of demand,” observed Timothy Fiore, Chair of ISM’s Manufacturing Business Survey Committee. “Record-long raw-material lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to parts shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.”

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The services sector -- which accounts for 80% of the economy and 90% of employment -- retreated from May’s all-time high of service-sector respondents reporting expansion (-3.9PP, to 60.1%). The most noteworthy changes in the sub-indexes included exports (-9.3PP), imports (+7.8PP) and employment (-6.0PP).

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Of the industries we track, Real Estate and Ag & Forestry contracted. Respondent comments included the following:

Construction. “COVID-19 continues to cause troubles for all of our deliveries, as well as short supply a lot of materials. (Shortages of) lumber, copper, and steel continue, which is driving up pricing and lead times.”

 

Findings of IHS Markit‘s June survey results were generally consistent with their ISM counterparts.

Manufacturing. Output growth eases as supply-chain disruption worsens, despite marked rise in client demand

Key findings:

* Pressure on capacity weighs on production growth
* Supplier delivery times lengthen to greatest extent on record
* Input cost inflation hits fresh series record

 

Services. Strong business activity growth rounds off best quarter in PMI survey history

Key findings:

* Expansions in output and new orders ease but remain robust
* Further substantial increases in cost burdens
* Pressure on capacity builds amid hiring difficulties

 

Commentary by Chris Williamson, Markit’s chief business economist:

Manufacturing. “June saw surging demand drive another sharp rise in manufacturing output, with both new orders and production growing at some of the fastest rates recorded since the survey began in 2007.

“The strength of the upturn continued to be impeded by capacity constraints and shortages of both materials and labor, however, meaning concerns over prices have continued to build.

“Supplier delivery times lengthened to the greatest extent yet recorded as suppliers struggled to keep pace with demand and transport delays hindered the availability of inputs. Factories were increasingly prepared, or forced, to pay more to secure sufficient supplies of key raw materials, resulting in the largest jump in costs yet recorded.

“Strong customer demand in turn meant producers were often able to pass these higher costs on to customers, pushing prices charged for goods up at a rate unbeaten in at least 14 years.

“Capacity needs to be boosted and supply chains need to improve to help alleviate some of the inflationary pressures. However, companies reported increasing difficulties filling vacancies in June, and raising COVID-19 infection waves in Asia threaten to add to supply chain issues.”

 

Services. “June saw another month of impressive output growth across the manufacturing and services sectors of the US economy, rounding off the strongest quarterly expansion since data were first available in 2009.

“The rate of growth cooled compared to May’s record high, however, adding to signs that the economy’s recovery bounce peaked in the second quarter.

“Some of the easing in the rate of expansion reflects payback after especially strong expansions in prior months as the economy opened up from pandemic-related restrictions, especially in consumer-facing companies. However, many firms reported that business activity had been constrained either by shortages of supplies or difficulties filling vacancies. Backlogs of uncompleted orders are consequently rising at a rate unprecedented in the survey’s history, underscoring how demand is outstripping supply of both goods and services.

“These capacity constraints are not only stifling growth, but also driving prices sharply higher. June saw the second-steepest rise in average prices charged for goods and services in the survey’s 12-year history, though some encouragement can be gleaned from the rate of inflation easing in the service sector compared to May.”

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.

May 2021 International Trade (Softwood Lumber)

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Softwood lumber exports fell (11 MMBF or -9.5%) in May, while imports rose (83 MMBF or +5.7%). Exports were 21 MMBF (+24.7%) above year-earlier levels; imports were 456 MMBF (+41.7%) higher. As a result, the year-over-year (YoY) net export deficit was 435 MMBF (+43.2%) larger. Also, the average net export deficit for the 12 months ending May 2021 was 17.6% larger 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 (57.0%; of which Canada: 33.0%; Mexico: 23.9%), Asia (14.8%; especially China: 3.0%; and Japan: 3.8%), and the Caribbean: 22.9% especially the Dominican Republic: 6.2%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were -56.5% relative to the same months in 2020. Meanwhile, Canada was the source of most (85.9%) of softwood lumber imports into the United States. Imports from Canada were 19.2% higher YTD than the same months in 2020. Overall, YTD exports were up 6.0% compared to 2020; imports: +19.9%.

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U.S. softwood lumber export activity through the West Coast customs region represented 36.6% of the U.S. total; Gulf: 24.4%, and Eastern: 25.5%. Seattle (19.7% of the U.S. total) was the single most-active district, followed by Mobile (14.6%) and San Diego (14.3%). At the same time, Great Lakes customs region handled 56.4% of softwood lumber imports -- most notably the Duluth, MN district (23.1%) -- coming into the United States. 

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Southern yellow pine comprised 19.0% of all softwood lumber exports; Douglas-fir (14.2%) and treated lumber (19.3%) were also significant. Southern pine exports were down 18.5% YTD relative to 2020, while Doug-fir: +1.5%; and treated: +14.0%.

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.

June 2021 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added 850,000 jobs in June (exceeding consensus expectations of 675,000). April and May employment changes were revised up by a combined 15,000 (April: -9,000; May: +24,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up by 0.1 percentage point, to 5.9%, as the number of employed shrank slightly (-18,000) and the civilian labor force expanded (+151,000). 

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Observations from the employment reports include:

* Goods-producing industries gained 20,000 jobs; service-providers: +830,000. Notable job gains occurred in leisure and hospitality (+343,000), public and private education (+268,300), professional and business services (+72,000), retail trade (+67,100), and other services (+56,000). Manufacturing added 15,000 jobs. That result contradicts the change in the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which contracted in June. Wood Products employment dropped by 2,600 (ISM unchanged); Paper and Paper Products: +1,500 (ISM unchanged); Construction: -7,000 (ISM not yet published).

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* The number of employment-age persons not in the labor force was essentially unchanged (-22,000) at 100.3 million. Consequently, the employment-population ratio (EPR) remained at 58.0%; i.e., nearly six out of 10 in the employment-age population are presently employed. 

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* Although the civilian labor force expanded by 151,000 in June, the labor force participation rate was stable at 61.6%. Average hourly earnings of all private employees increased by $0.10 (to $30.40), and the year-over-year increase jumped back to +3.6%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.10, to $25.68 (+3.7% YoY). Since the average workweek for all employees on private nonfarm payrolls inched down (-0.1 hour) to 34.7 hours, average weekly earnings increased by $0.44, to $1,058.88 (+4.2% YoY). With the consumer price index running at an annual rate of +5.0% in May, even those who are employed are -- on average – not keeping up with the official inflation rate.

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* Full-time jobs fell (-183,000) to 126.2 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work – dropped by 644,000, whereas those working part time for non-economic reasons jumped by nearly 1.2 million; multiple-job holders retreated by 160,000.

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For a “sanity test” of the job numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in June jumped by $30.8 billion, to $241.2 billion (+14.6% MoM; +27.5% YoY). To reduce some of the monthly 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 May was 25.0% above the year-earlier average.

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.

May 2021 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments in May increased $3.3 billion or 0.7% to $490.4 billion. Durable goods shipments increased $0.9 billion or 0.4% to $248.3 billion, led by machinery. Meanwhile, nondurable goods shipments increased $2.4 billion or 1.0% to $242.1 billion, led by petroleum and coal products. Shipments of wood products rose by 2.7%; paper: +0.1%.

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Inventories increased $6.6 billion or 0.9% to $731.6 billion. The inventories-to-shipments ratio was 1.49, unchanged from April. Inventories of durable goods increased $3.1 billion or 0.7% to $445.5 billion, led by primary metals. Nondurable goods inventories increased $3.5 billion or 1.2% to $286.1 billion, led by petroleum and coal products. Inventories of wood products rose by 0.9%; paper: 0.0%.

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New orders increased $8.1 billion or 1.7% to $495.5 billion. Excluding transportation, new orders rose by $2.8 billion or 0.7% (+23.8% YoY). Durable goods orders increased $5.8 billion or 2.3% to $253.4 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- increased by $0.1 billion or 0.1% (+24.0% YoY). New orders for nondurable goods increased $2.4 billion or 1.0% to $242.1 billion.

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Unfilled durable-goods orders increased $9.6 billion or 0.8% to $1,209.5 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.95, up from 6.88 in April. Real unfilled orders, which had been a good litmus test for sector growth, show a more-negative picture; in real terms, unfilled orders in June 2014 were back to 103% of their December 2008 peak. Real unfilled orders then jumped to 109% of the prior peak in July 2014, thanks to the largest-ever batch of aircraft orders. Except for the year-long run up during 2019, real unfilled orders have been trending lower since November 2014.

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.

May 2021 Construction Spending

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Construction spending during May 2021 was estimated at a seasonally adjusted annual rate (SAAR) of $1,545.3 billion, 0.3% (±1.0%)* below the revised April estimate of $1,549.5 billion (originally $1,524.2 billion); consensus expectations were for +0.6%. The May figure is 7.5% (±1.3%) above the May 2020 SAAR of $1,437.7 billion; the not-seasonally adjusted YoY change (shown in the table below) was +7.4%.

During the first five months of this year, construction spending amounted to $594.8 billion, 4.6% (±1.0%) above the $568.5billion for the same period in 2020.

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

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Private Construction

Spending on private construction was at a SAAR of $1,203.3 billion, 0.3% (±0.8%)* below the revised April estimate of $1,206.8 billion (originally $1,180.7 billion):
- Residential. $751.7 billion, +0.2% (±1.3%)*; of which
- Home improvement. $250.2 billion, -0.6% (+8.7% YoY);
- Nonresidential. $451.6 billion, +1.1% (±0.8%).

Public Construction

Public construction spending was $342.0 billion, 0.2% (±1.8%)* below the revised April estimate of $342.7 billion (originally $343.5 billion):
- Educational. $82.0 billion, -1.9% (±1.8%);
- Highway. $98.6 billion, +1.4% (±6.1%)*.

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Click here for a discussion of May’s new residential permits, starts and completions. Click here for a discussion of new and existing home sales, inventories and prices.

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.