November 2023 Residential Sales, Inventory and Prices

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Sales of new single-family houses in November 2023 were at a seasonally adjusted annual rate (SAAR) of 590,000 units (690,000 expected). This is 12.2% (±15.6%)* below the revised October rate of 672,000 (originally 679,000 units), but 1.4% (±19.8%)* above the November 2022 SAAR of 582,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was 0.0%. For longer-term perspectives, NSA sales were 57.5% below the “housing bubble” peak and 21.6% below the long-term, pre-2000 average.

The median sales price of new houses sold in November was $434,700 (+4.8% MoM, or $19,800). The average sales price was $488,900 (-1.9%, or $9,600). Homes priced at/above $750,000 comprised 7.3% of sales, down from the year-earlier 14.6%.

* 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 November, single-unit completions slid by 32,000 units (-3.2%). Sales fell by a greater amount (82,000 units, or -12.2%), resulting in inventory for sale expanding in both absolute (+11,000 units) and months-of-inventory terms (+1.3 months). 

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Existing home sales advanced (30,000 units or +0.8%) in November to a SAAR of 3.82 million units (3.775 million expected). The inventory of existing homes for sale contracted in both absolute (-20,000 units) and months-of-inventory (-0.1 month) terms. Because new sales retreated while resales rose, the share of total sales comprised of new homes decreased to 13.4%. The median price of previously owned homes sold in November dipped to $387,600 (-1.0% or $4,000).

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Housing affordability fell 3.1 percentage points as the median price of existing homes for sale in October retreated by $1,300 (-0.3% MoM; +3.0% YoY) to $396,100. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices decelerated to a not-seasonally adjusted monthly change of +0.2% (but +4.9% YoY).

"U.S. home prices accelerated at their fastest annual rate of the year in October,” said Brian Luke, Head of Commodities, Real & Digital assets at S&P DJI. “Our National Composite rose by 0.2% in October, marking nine consecutive monthly gains and the strongest national growth rate since 2022.

“Detroit kept pace as the fastest growing market for the second month in a row, registering an 8.1% annual gain. San Diego maintained the second spot with 7.2% annual gains, following by New York with a 7.1% gain. We are experiencing broad-based home price appreciation across the country, with steady gains seen in 19 of 20 cities. This month’s report reflects trendline growth compared to historical returns and little disparity among cities and regions.

“Each of our 10-city, 20-city and National Index, remain at all-time highs, with 8 of 20 cities registering all-time highs (Miami, Atlanta, Chicago, Boston, Detroit, Charlotte, New York and Cleveland). While Portland remains slightly down compared to last year’s gains, Phoenix and Las Vegas have flipped to year-over-year gains. The Midwest and the Northeast region are fastest growing markets, while the Southwest and West regions have lagged other regions for over a year. A solid, if unspectacular report, this month’s index reflects a rising tide across nearly all markets.

“Home prices leaned into the highest mortgage rates recorded in this market cycle and continued to push higher. With mortgage rates easing and the Federal Reserve guiding toward a slightly more accommodative stance, homeowners may be poised to see more appreciation.”

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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.

3Q2023 Gross Domestic Product: Third Estimate

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In its third estimate of 3Q2023 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) returned the headline growth rate of the U.S. economy to on par with the initial estimate -- i.e., a seasonally adjusted and annualized rate (SAAR) of +4.86% (+5.2% expected), down 0.29 percentage point (PP) from the second estimate (“3Qv2”) but +2.06PP from 2Q2023.

As can be seen in the right-hand graph above, the underlying components have shifted around quite noticeably over time. In 3Qv1 and 3Qv2, three groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), and government consumption expenditures (GCE) -- had contributed positively to the headline while net exports (NetX) detracted from it. In 3Qv3, by contrast, all four components contributed positively to the headline -- although the contribution from NetX was marginal at best.

This report “primarily reflected a downward revision to consumer spending,” the BEA wrote. “Imports, which are a subtraction in the calculation of GDP, were revised down,” resulting in NetX moving ever so slightly into positive territory.

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As for details (billions of chained 2017 dollars; all relative to 3Qv2) --

PCE (-$18.1B):

• Goods (+$2.3B). Spending on durable goods retreated ($0.6B), led by motor vehicles and parts (-$0.5B). However, nondurable goods increased ($2.8B), led by gasoline and other energy goods (+$3.2B).
• Services (-$19.9B). Household consumption expenditures tumbled ($24.1B), led other services (-$16.0B).

PDI (-4.4B):

• Fixed investment (+$2.3B). Gains in nonresidential investment (+$1.4B) were led by structures (+$6.2B) but largely offset by equipment (-$2.8B) and intellectual property products (-$3.3B). Residential fixed investment was revised by +$0.8B.
• Inventories (-$6.1B). Nonfarm inventories (-$5.5B) led the drop in this category.

NetX (+$4.7B):

• Exports (-$3.4B). Services (-$3.4B) led the downward revision in this category.
• Imports (-$8.2B). Here, too, services (-$6.9B) dominated. Because imports are a subtraction in the calculation of GDP, the downward revision nudged NetX up relative to 3Qv2.

GCE (+$2.5B):

• Federal (+$0.9B). National defense consumption expenditures (+$0.4B) led this category.
• State and local (+$1.9B). Gross investment (+$1.9B) dominated here.

The BEA’s change in real final sales of domestic product -- which ignores inventories -- was revised to +3.60% (-0.16PP from 3Qv2), a level 1.54PP above the 2Q2023 estimate. QoQ growth in gross domestic income, by contrast, was unchanged at a less “zippy” +1.5%, up from +0.5% in 1&2Q2023.

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“Nothing here was sufficient to change the economy’s overall trajectory nor the expectation that growth slowed in the fourth quarter,” said chief economist Joshua Shapiro of MFR Inc.

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.

November 2023 Residential Permits, Starts and Completions

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Builders started construction of privately-owned housing units in November at a seasonally adjusted annual rate (SAAR) of 1,560,000 units (1.360 million expected). This is 14.8% (±14.0%) above the revised October estimate of 1,359,000 (originally 1.372 million units) and 9.3% (±14.6%)* above the November 2022 SAAR of 1,427,000 units; the not-seasonally adjusted YoY change (shown in the table above) was +8.5%.

Single-family housing starts in November were at a SAAR of 1,143,000; this is 18.0% (±12.9%) above the revised October figure of 969,000 units (+43.7% YoY). Multi-family: 417,000 units (+6.9% MoM; -32.8% 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 1,447,000. This is 5.0% (±15.1%)* above the revised October estimate of 1,378,000 (originally 1.410 million units) but 6.2% (±15.2%)* below the November 2022 SAAR of 1,543,000 units; the NSA comparison: -6.1% YoY.

Single-family housing completions were at a SAAR of 960,000; this is 3.2% (±13.2%)* below the revised October rate of 992,000 units (-14.0% YoY). Multi-family: 487,000 units (+26.2% MoM; +15.4% YoY).

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Total permits were at a SAAR of 1,460,000 units (1.470 million expected). This is 2.5% below the revised October rate of 1,498,000 (originally 1.463 million units) but 4.1% above the November 2022 SAAR of 1,402,000 units; the NSA comparison: +2.3% YoY.

Single-family authorizations were at a SAAR of 976,000; this is 0.7% above the revised October figure of 969,000 units (+23.2% YoY). Multi-family: 484,000 units (-8.5% MoM; -21.8% YoY).

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Press release from NAHB’s Robert Dietz:

“Falling mortgage rates helped end a four-month decline in builder confidence, and recent economic data signal improving housing conditions heading into 2024.

“Builder confidence in the market for newly built single-family homes rose three points to 37 in December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). With mortgage rates down roughly 50 basis points over the past month, builders are reporting an uptick in traffic. The housing market appears to have passed peak mortgage rates for this cycle, and this should help to spur home buyer demand in the coming months, with the HMI component measuring future sales expectations up six points in December.

“It is worth noting that single-family builder sentiment has separated somewhat from recent starts/permits data. Our statistical analysis indicates that temporary and outsized differences between builder sentiment and starts occur after short-term interest rates rise dramatically, increasing the cost of land development and builder loans used by private builders. In turn, higher financing costs for home builders and land developers add another headwind for housing supply in a market low on resale inventory. While the Federal Reserve is fighting inflation, state and local policymakers could also help by reducing the regulatory burdens on the cost of land development and home building, thereby allowing more attainable housing supply to the market. Looking forward, as rates moderate, this temporary difference between sentiment and construction activity will decline.

“But with mortgage rates still running above 7% throughout November, per Freddie Mac data, many builders continue to reduce home prices to boost sales. In December, 36% of builders reported cutting home prices, tying the previous month’s high point for 2023. The average price reduction in December remained at 6%, unchanged from the previous month. Meanwhile, 60% of builders provided sales incentives of all forms in December, the same as November but down slightly from 62% in October.”

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.

November 2023 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 0.2% in November (+0.3% expected), and manufacturing output rose 0.3%. The increase in manufacturing output was more than accounted for by a 7.1% bounceback in motor vehicles and parts production following the resolution of strikes at several major automakers. The index for manufacturing excluding motor vehicles and parts decreased 0.2%. The output of utilities moved down 0.4%, and the output of mines moved up 0.3%. Total industrial production in November was 0.4% below its year-earlier level. 

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Market Groups

The output of major market groups was mixed in November, with the rebound in motor vehicles contributing to most areas of strength. A 7.5% increase in the index for automotive products contributed to a gain of 3.5% in consumer durables, while the production of consumer nondurable goods decreased 0.8%. The output of business equipment moved up 0.9% primarily because of an increase in the index for transit equipment. Defense and space equipment registered a gain of 1.2%. The indexes for construction supplies and for business supplies were unchanged relative to October. An increase of 0.3% in materials output was buoyed by a large increase in the index for consumer parts (2.7%) as motor vehicle parts production also rebounded in November.

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Industry Groups

Within durable manufacturing, the output of motor vehicles and parts rebounded 7.1% after a strike-induced drop of 9.9% in October. Elsewhere in durable manufacturing, increases of around 1.0% were seen in the indexes for computer and electronic products as well as for aerospace and miscellaneous transportation equipment. Decreases of around 1.0% occurred in the indexes for wood products and for miscellaneous. Within nondurable manufacturing, the only increase was seen in the index for printing and support (0.2%). The remaining categories receded (e.g., paper: -1.1%), with the largest declines observed in the indexes for textile and product mills (1.9%) and for apparel and leather (3.4%).

Mining output moved up 0.3% in November and was 2.3% above its year-earlier level. The index for utilities stepped down 0.4% in November and was 1.0% below its year-earlier level.

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Capacity utilization (CU) moved up 0.1 percentage point (PP) to 78.8% in November, a rate that is 0.9PP below its long-run (1972–2022) average.

Manufacturing CU edged up 0.2PP to 77.2% in November, a rate that is 1.0PP below its long-run (1972–2022) average; wood products: -1.1%; paper: -1.0%. The operating rate for mining rose 0.3PP to 93.7%, a rate that is 7.3PP above its long-run average. The operating rate for utilities moved down 0.5PP to 70.8%, well below its long-run average.

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Capacity at the all-industries level increased by 0.1% MoM (+1.5% YoY) to 130.3% of 2017 output. Manufacturing also edged up by 0.1% (+1.4% YoY) to 129.2%. Wood products: less than +0.1% (+0.5% YoY) at 120.1%; paper products: -0.1% (-1.1% YoY) to 105.4%.

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.

November 2023 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 0.1% in November on a seasonally adjusted basis (0.0% expected), after being unchanged in October. Over the last 12 months, the all-items index increased 3.1% before seasonal adjustment.

The index for shelter continued to rise in November, offsetting a decline in the gasoline index. The energy index fell 2.3% over the month as a 6.0-percent decline in the gasoline index more than offset increases in other energy component indexes. The food index increased 0.2% in November, after rising 0.3% in October. The index for food at home increased 0.1% over the month and the index for food away from home rose 0.4%.

The index for all items less food and energy rose 0.3% in November, after rising 0.2% in October. Indexes which increased in November include rent, owners' equivalent rent, medical care, and motor vehicle insurance. The indexes for apparel, household furnishings and operations, communication, and recreation were among those that decreased over the month.

The all-items index rose 3.1% for the 12 months ending November, a smaller increase than the 3.2-percent increase for the 12 months ending October. The index for all items less food and energy rose 4.0% over the last 12 months, as it did for the 12 months ending October. The energy index decreased 5.4% for the 12 months ending November, while the food index increased 2.9% over the last year.

 

Producer Price Index

The Producer Price Index for final demand (PPI-FD) was unchanged in November, seasonally adjusted (+0.1% expected). Final-demand prices decreased 0.4% in October and rose 0.4% in September. On an unadjusted basis, the index for final demand increased 0.9% for the 12 months ended in November.

In November, the indexes for both final-demand goods and for final-demand services were unchanged.

The index for final demand less foods, energy, and trade services edged up 0.1% in November, the sixth consecutive advance. For the 12 months ended in November, prices for final demand less foods, energy, and trade services rose 2.5%.

Final Demand

Final-demand goods: The index for final-demand goods was unchanged in November after dropping 1.4% in October. In November, price increases of 0.6% for final-demand foods and 0.2% for final-demand goods less foods and energy offset a 1.2-percent decrease in the index for final-demand energy.

Product detail: Within final-demand goods in November, prices for chicken eggs jumped 58.8%. The indexes for fresh fruits and melons, utility natural gas, electric power, and carbon steel scrap also moved higher. In contrast, prices for gasoline fell 4.1%. The indexes for processed poultry, industrial chemicals, jet fuel, and liquefied petroleum gas also moved lower.

Final-demand services: The index for final-demand services remained unchanged in November, the same as in October. In November, prices for final-demand services less trade, transportation, and warehousing edged up 0.1%. Conversely, the indexes for final-demand trade services and for final-demand transportation and warehousing services declined, 0.2% and 0.5%, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Within the index for final-demand services in November, prices for traveler accommodation services rose 4.0%. The indexes for deposit services (partial); health, beauty, and optical goods retailing; food and alcohol wholesaling; and apparel, footwear, and accessories retailing also advanced. In contrast, margins for automobile retailing (partial) declined 5.1%. The indexes for chemicals and allied products wholesaling, portfolio management, furniture retailing, and truck transportation of freight also fell.

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The not-seasonally adjusted price indexes we track were mostly lower on a MoM basis and all lower YoY.

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

November 2023 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 199,000 jobs in November (+180,000 expected). Also, September and October 2023 employment changes were revised down by a combined 35,000 (September: -35,000; October unchanged). Except for July and October, job gains of all months in 2023 have been revised lower.

Meanwhile, the unemployment rate (based upon the BLS’s household survey) edged down to 3.7%, as growth in the number of employed (+747,000) exceeded that of the labor force (+532,000). 

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Observations from the employment reports include:

* For a change, the two surveys moved in parallel, which augments their credibility. Also, the CES (business birth/death model) adjustment (+4,000) was very modest, and the seasonal adjustment was slightly smaller than the average November of the prior decade. It is worth noting, however, that the numbers included about 47,000 formerly striking auto and motion picture workers returning to work.

* Goods-producing industries gained 29,000 jobs; service providers: +170,000. Job gains occurred in health care (+76,800) and government (+49,000). Employment also increased in manufacturing (+28,000), reflecting the return of workers from a strike. Employment in retail trade declined (-38,400). Total nonfarm employment (157.1 million) is now 4.7 million jobs above its pre-pandemic level in February 2020 (private sector: +4.6 million; public sector: +96,000). Nonetheless, employment is perhaps 5.1 million below its potential if accounting for growth in the working-age population since January 2006.

As mentioned above, manufacturing added 49,000 jobs (led by durable goods: +36,000), thanks to an increase of 30,000 in motor vehicles and parts consistent with the end of strike activity. That result disagrees with the change in the Institute for Supply Management (ISM) manufacturing employment subindex, which contracted further (to 45.8) in November. Wood products manufacturing gained 1,000 jobs (ISM was unchanged); paper manufacturing: -500 (ISM decreased); construction: +2,000 (ISM increased).

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* The number of employment-age persons not in the labor force fell (-352,000) to 99.6 million; that level is 4.4 million higher than in February 2020. Because the working-age civilian population expanded (+180,000) more slowly than the number of employed (+747,000), the employment-population ratio (EPR) rose to 60.5%, which is 0.6PP below its February 2020 level. 

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* Also, because the working-age civilian population grew by 180,000 while the labor force expanded by 532,000, the labor force participation rate increased fractionally to 62.8%. Average hourly earnings of all private employees nudged up by $0.12 (to $34.10), and the year-over-year increase was unchanged at +4.0%. Because the average workweek for all employees on private nonfarm payrolls edged up to 34.4 hours, average weekly earnings rose (+$7.53) to $1,173.04 (+4.0% YoY). With the consumer price index running at an annual rate of +3.2% in October, the average worker appears likely to have gained a bit of purchasing power. 

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* Full-time workers rose (+347,000) to 134.8 million; there are now 4.1 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has risen by 8.2 million during that period. 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 -- fell by 295,000, while those working part time for non-economic reasons jumped (+323,000); multiple-job holders: -15,000. 

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For a “sanity test” of the job numbers, we consult employment withholding/FICA taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in November retreated by $11.8 billion, to $240.7 billion (-4.7% MoM; +1.3% 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 November was up 1.0% from 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.

October 2023 International Trade (Softwood Lumber)

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With October exports of goods and services at $258.8 billion (-1.0% MoM; +1.3% YoY) and imports at $323.0 billion (+0.2% MoM; -3.2% YoY), the net trade deficit was $64.3 billion (+5.1% MoM; -18.0% YoY). 

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Softwood lumber exports ticked up (15 MMBF or +13.9%) in October, while imports rose (76 MMBF or +6.4%). Exports were 16 MMBF (+14.5%) above year-earlier levels; imports: 45 MMBF (-3.4%) lower. As a result, the year-over-year (YoY) net export deficit was 61 MMBF (-5.0%) smaller. Also, the average net export deficit for the 12 months ending October 2023 was 7.6% below the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the lumber-trade graph above).

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North America (55.6% of total softwood lumber exports -- of which Mexico: 39.4%; Canada: 16.2%), Asia (16.5% -- especially Japan; 2.1%; China: 6.1%), and the Caribbean (23.2% -- especially the Dominican Republic: 8.1%; Jamaica: 6.3%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were 69.5% higher than the same month of the prior year. Meanwhile, Canada was the source of most (82.8%) softwood lumber imports into the United States. Imports from Canada were 8.6% lower YTD/YTD. Overall, YTD exports were down 1.9% compared to the prior year; imports: -7.7%.

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U.S. softwood lumber export activity through the Gulf customs region represented 38.2% of the U.S. total; West Coast: 33.9%, and Eastern: 20.0%. Mobile (17.9% of the U.S. total), San Diego (19.1%) Laredo (14.5%), and Seattle (9.0%) were the most active districts. At the same time, the Great Lakes customs region handled 57.4% of softwood lumber imports -- most notably the Duluth, MN district (18.1%) -- coming into the United States. 

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Southern yellow pine comprised 24.0% of all softwood lumber exports; Douglas-fir (12.3%), treated lumber (15.5%), other pine (15.7%) and finger-jointed (11.4%) were also significant.

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.

November 2023 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil fell by $7.95 (-9.3%) to $77.69/barrel in November. That retreat occurred within the context of a weaker U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of August’s dec6rease of 789,000 barrels per day (b/d) in the amount of petroleum products demanded/supplied (to 20.1 million b/d), and accumulated oil stocks that continued an upward trend -- to near the midpoint of the five-year average range (November 2023 average: 443 million barrels). 

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Selected highlights from the 01 December 2023 issue of OilPrice.com’s Oil & Energy Insider include:

“Oil markets were left both confused and underwhelmed by the OPEC+ decision to cut 2.2 million b/d in 1Q2024, with oil prices falling toward a weekly loss,” wrote editor Michael Kern. “Oil markets welcomed the new OPEC+ deal that pledged 2.2 million b/d in voluntary cuts for 1Q2024 in a very lukewarm manner, with Brent erasing all its earlier gains and dropping back to $81 per barrel. With even the most seasoned industry watchers starting to lose track of which country will be cutting what amount against which reference level, the production target confusion was aggravated by the fact that markets expected deeper cuts, going over and above what Saudi Arabia or Russia have already curbed from their output.

OPEC+ Cuts Production Further. Members of the OPEC+ oil group agreed to voluntary production cuts totaling 2.2 million b/d for Q1 2024 as the group’s de facto leader Saudi Arabia rolled over its current voluntary cut of 1 million b/d and Russia widened its pledge to 500,000 b/d.

Brazil to Become Member of OPEC+ Family. South America’s largest oil producer Brazil is set to officially become a member of OPEC+ [as an observer] from January 2024 even though it would not join the oil group’s ongoing round of production cuts, seeing output soar to all-time highs in recent months.

Referendum Raises the Specter of a Venezuela-Guyana War. Venezuela will carry out a referendum [since approved] on its territorial dispute with Guyana over the contested oil-rich Essequibo territory on December 3, leading to a notable uptick in military activities in the wider region.

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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.

November 2023 ISM and S&P Global Surveys

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The Institute for Supply Management‘s (ISM) monthly sentiment survey of U.S. manufacturers reflected no change in the rate of contraction in the sector during November. The PMI registered 46.7%, unchanged from October’s 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. Only the customer inventories index remained above 50; the largest changes occurred among prices paid (+4.8 percentage points), exports (-3.4PP), and order backlogs (-2.9PP). 

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Concurrent activity in the services sector -- which accounts for 80% of the economy and 90% of employment -- accelerated (+0.9PP, to 52.7%). Inventory sentiment (+7.8PP), imports (-6.3PP), and inventories (+5.9PP) exhibited the largest changes.

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Respondent comments included the following –

Wood Products. “Elevated financing costs have dampened demand for residential investment. Our business has been negatively impacted through reduced new orders for our products and services. We are purchasing less for production and finished goods inventories.”

Construction. “Opportunities across the construction industry remain strong. The labor market for skilled trades workers is tight.”

 

Changes in S&P Global’s headline index value for manufacturing declined whereas services increased. Details from S&P Global’s surveys follow --

Manufacturing. Renewed decline in US manufacturing performance as demand wanes.

Key findings:

• New orders contract with output growth slowing in response
• Input cost inflation eases notably
• Employment falls for second month running

Services. Renewed upturn in new business supports output growth in November.

Key findings:

• Slight expansions in new orders and activity
• Employment growth slows to fractional rate
• Cost inflation weakest since October 2020

 

Commentary by Chris Williamson, S&P Global’s chief business economist --

Manufacturing. “US manufacturers reported yet another tough month in November. Output barely rose as inflows of new work showed a renewed decline, hinting at little – if any – contribution to fourth quarter GDP from the goods-producing sector.

“Orders have in fact risen in only three of the past 18 months, reflecting a prolonged period of subdued post-pandemic demand, in turn linked to consumers switching their spending to services such as travel and recreation, and business customers reducing excess inventories which had been accumulated during the supply concerns of the pandemic.

“Encouragingly, there are some signs of the inventory cycle starting to turn, with producers of intermediate goods (inputs supplied to other firms) now reporting modest order book growth.

“US producers nevertheless continue to focus on cost cutting by trimming headcounts, and have now taken the knife to payroll numbers for two consecutive months. Barring the early months of the pandemic, the survey has not seen such a back-to-back monthly fall in factory employment since 2009.

“The decline in employment could feed through to weaker consumer spending, but will also reduce wage bargaining power.

“Lower wage pressures, combined with a marked cooling of raw material input cost inflation, have already fed through to a lowering of average factory selling price inflation for goods to a rate below the average seen in the decade prior to the pandemic, the rate of increase dipping again in November to help further lower consumer price inflation in the months ahead.”

 

Services. “The latest PMI data point to a further cooling of inflation pressures, but the surveys also signal only modest economic growth and near-stagnant employment, with the risk of the expansion losing further momentum as we head towards 2024.

“While service sector businesses continued to report further output gains in November, growth remains considerably weaker than seen earlier in the year, and forward-looking indicators point to growth slowing in the months ahead.

“Firms providing both goods and services have become increasingly concerned about excessive staffing levels in the face of weakened demand, resulting in the smallest overall jobs gain recorded by the survey since the early pandemic lockdowns of 2020.

“The cooling jobs market has been accompanied by lower wage growth which, combined with recent oil price falls, helped pull business cost growth down to its lowest for three years, dropping in November to a level indicative of inflation approaching the Fed’s 2% target in the coming month.”

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.

November 2023 Currency Exchange Rates

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In November, the monthly average value of the U.S. dollar (USD) was unchanged relative to Canada’s “loonie,” depreciated against the euro (-2.3%), and appreciated versus the Japanese yen (+0.1%). On the broad trade-weighted index basis (goods and services) the USD weakened by 1.8% 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.

October 2023 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 October decreased $8.2 billion or 1.4% to $577.8 billion. Durable goods shipments decreased $2.2 billion or 0.8% to $280.4 billion, led by transportation equipment. Meanwhile, nondurable goods shipments decreased $5.9 billion or 1.9% to $297.3 billion, led by petroleum and coal products. Shipments of wood products decreased 0.2%; paper: +0.4%.

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Inventories increased $0.5 billion or 0.1% to $857.0 billion. The inventories-to-shipments ratio was 1.48, up from 1.46 in September. Inventories of durable goods increased $1.3 billion or 0.3% to $524.8 billion, led by transportation equipment. Nondurable goods inventories decreased $0.8 billion or 0.2% to $332.2 billion, led by petroleum and coal products. Inventories of wood products expanded by 0.3%; paper: -0.1%.

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New orders decreased $21.8 billion or 3.6% to $576.8 billion. Excluding transportation, new orders fell by $6.0 billion or 1.2% (-1.4% YoY). Durable goods orders decreased $15.9 billion or 5.4% to $279.4 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- retreated by $0.2 billion or 0.3% (+0.8% YoY). New orders for nondurable goods decreased $5.9 billion or 1.9% to $297.3 billion.

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Unfilled durable-goods orders increased $4.0 billion or 0.3% to $1,356.8 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.90, up from 6.88 in September. Real (inflation-adjusted) unfilled orders, which -- prior to the pandemic -- had been a good litmus test for potential sector growth, show a less-positive picture; in real terms, unfilled orders in June 2014 were back to 104% of their December 2008 peak. Real unfilled orders then jumped to 110% of the prior peak in February 2015, thanks to the largest-ever batch of aircraft orders. Real unfilled orders trended lower through 2020, but have since exhibited a modest upward trend.

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.