April 2024 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil climbed by $4.07 (+5.0%) to $85.35/barrel in April. That increase occurred within the context of a stronger U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of February’s increase of 362,000 barrels per day (b/d) in the amount of petroleum products demanded/supplied (to 19.9 million b/d), and accumulated oil stocks that climbed seasonally higher on a monthly average basis -- (April 2024 average: 458 million barrels). 

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Selected highlights from the 3 May 2024 issue of OilPrice.com’s Oil & Energy Insider include:

“The disappointment of the money markets with yet another hotter-than-expected set of US inflation data, aggravated by higher crude inventories and slackening geopolitical risk, has triggered a notable drop in oil prices, with both WTI and Brent shedding more than $5 per barrel since last week,” OilPrice.com’s Michael Kern wrote. “Falling middle distillate and gasoline cracks have not boosted the sentiment either, so only a high-impact supply disruption could break the current bearish streak.”

TMX Starts Commercial Operations. After 12 years of waiting, Canada’s $23 billion Trans Mountain Expansion pipeline started operations this week, with the first-ever cargo to load at the Westridge Terminal in two weeks and deliver a Western Access Blend cargo to China.

EPA Rules Threaten US Power Grid Reliability. Peabody Energy, the US’ largest producer of coal, warned that the EPA has overstepped its authority with its target of cutting GHG emissions from coal by 90% by 2039, shortly after some power plants mulled a federal lawsuit.

Venezuela Exports Crack Under Pressure. Venezuela’s oil exports plunged a whopping 38% month-over-month to 545,000 b/d as demand subsided for the country’s heavy barrels on the heels of US sanctions, prompting at least six VLCCs to leave Venezuela empty in recent weeks.

US Senate Bans Russian Uranium Imports. The US Senate unanimously passed a bill banning the imports of Russian uranium, sending spot U308 uranium prices to $92 per pound again, also unlocking $2.7 billion in government support for domestic uranium mining in the United States.

Baltimore Bridge Repair to Cost $2 Billion. The Maryland Department of Transportation said the state expects the rebuild of the Francis Scott Key Bridge, wrecked after the Dali cargo ship crashed into it on March 26, to cost $1.7-1.9 billion, with completion anticipated by fall 2028.

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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.

April 2024 Currency Exchange Rates

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In April, the monthly average value of the U.S. dollar (USD) appreciated against all three of the currencies we track: Canada’s “loonie” (+1.0%), the euro (+1.4%), and the Japanese yen (+2.7%). On the broad trade-weighted index basis (goods and services) the USD strengthened by 1.2% 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.

April 2024 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 175,000 jobs in April -- well below not only the +243,000 expected but also the bottom end of the consensus range (+190,000). Also, February and March 2024 employment changes were revised down by a combined 22,000 (February: -34,000; March: +12,000).

Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up 0.1 percentage point, to 3.9%, as the unemployed (+63,000) comprised over 72% of growth in the labor force (+87,000). 

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Observations from the employment reports include:

* The two surveys were once again in relative agreement, which supports their credibility. That said, seven jobs were allegedly created for each additional person employed, which seems implausible.

* Goods-producing industries gained 14,000 jobs; service providers: +161,000. Job gains occurred in health care (56,000), social assistance (31,000), and transportation and warehousing (22,000). Job losses occurred in temporary help services (-16,400) and information (-8,000). Total nonfarm employment (158.3 million) is now 6.0 million jobs above its pre-pandemic level in February 2020 (private sector: +5.57 million; public sector: +404,000). Nonetheless, employment is perhaps 4.5 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing jobs grew (+8,000) as a gain in durable goods (+1,000) rounded out the change in nondurables (+7,000). That result seems to conflict with the change in the Institute for Supply Management (ISM) manufacturing employment subindex, which rose closer to breakeven in April. Wood products manufacturing added 1,400 jobs (ISM unchanged); paper manufacturing: +700 (ISM decreased); construction: +9,000 (ISM increased).

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* The number of employment-age persons not in the labor force rose (+94,000) to 100.1 million (nearly 4.9 million above the February 2020 mark). Because the working-age civilian population expanded (+87,000) more quickly than the number of employed (+25,000), the employment-population ratio (EPR) ticked down fractionally to 60.2%, which is 0.9PP below its February 2020 level. 

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* Also, although the working-age civilian population rose by 182,000 while the labor force expanded by just 87,000, the labor force participation rate was unchanged at 62.7%. Average hourly earnings of all private employees advanced by $0.07 (to $34.75), but the year-over-year increase decelerated to +3.2%. Because the average workweek for all employees on private nonfarm payrolls shrank to 34.3 hours, average weekly earnings fell (-$1.06) to $1,191.93 (+1.7% YoY). With the consumer price index running at an annual growth rate of +3.5% in March, the average worker appears to have lost purchasing power. 

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* Full-time workers jumped (+949,000) to 133.9 million; there are now nearly 3.1 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has expanded by 8.4 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 -- rose by 161,000, while those working part time for non-economic reasons slumped (-649,000). Multiple-job holders: -93,000; there are now 362,000 more multi-job holders than in February 2020. 

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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 April decreased by $43.0 billion, to $276.3 billion (-13.6% MoM; +16.5% 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 April was up 8.3% 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.

April 2024 ISM and S&P Global Surveys

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The Institute for Supply Management‘s (ISM) monthly sentiment survey of manufacturers reflected a return to contraction in the sector during April. The PMI registered 49.2%, down 1.1 percentage points (PP) from the March 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. Prices paid accelerated (+5.1PP, to 60.9%) while customer inventories shrank more slowly (+3.8PP, to 47.8%) and production decelerated (-3.3PP, to 51.3%). 

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Concurrent activity in the services sector -- which accounts for 80% of the economy and 90% of employment -- also contracted (-2.0PP, to 49.4%). Inventories expanded (+8.1PP, to 53.7%) along with sentiment reflecting inventories are too high (+7.2PP, to 62.9%); as with manufacturing, the increase in prices paid was substantial (+5.8PP, to 59.2%).

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Changes in S&P Global‘s headline index value for manufacturing declined to 50.0%, from the March reading of 51.9%, which “points to stable business conditions at the start of 2Q.” Also, the services sector “fell for the third month running in April to 51.3 from 51.7 in March. The index pointed to a modest monthly increase in business activity, and one that was the slowest since last November.” Details from S&P Global’s surveys follow --

Manufacturing. New orders down for first time in four months.

Key findings:

• Softer rise in output amid lower new business
• Job creation sustained
• Selling price inflation at three-month low

 

Services. Slower rise in services activity amid renewed fall in new orders.

Key findings:

• Growth of activity at five-month low
• New orders fall for first time in six months
• Employment reduced for first time in 46 months

 

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

Manufacturing. “Business conditions stagnated in April, failing to improve for the first time in four months and pointing to a weak start to the second quarter for manufacturers. Order inflows into factories fell for the first time since December, meaning producers had to rely on orders placed in prior months to keep busy.

“However, there are some encouraging signs. The drop in orders appears to have been largely driven by reduced demand for semi-manufactured goods -- inputs produced for other firms -- as factories adjust their inventories of inputs. In contrast, consumer goods producers reported a further strengthening of demand, hinting that the broader consumer-driven economic upturn remains intact.

“Producers on the whole also seem confident enough in the business outlook to continue adding to payroll numbers at a pace that compares well with the average seen over the past two years, investing further in operating capacity.

“From an inflation perspective, it was also reassuring to see prices charged for goods rise at a slower rate than the 11-month high seen in March. The rate of increase nevertheless remains elevated by historical standards -- and well above the average seen in the decade prior to the pandemic -- as firms continued to pass higher commodity prices on to customers.”

 

Services. “Service sector growth slowed in April to point to a sluggish start to the second quarter for the US economy. Alongside a concomitant cooling in the rate of growth of manufacturing output, the weaker service sector performance means overall business activity grew in April at the slowest rate seen so far this year. At current levels, the PMI indicates that GDP is expanding at a modest annualized rate of approximately 1.5% so far in the second quarter.

“Demand has weakened, as signaled by the first fall in new orders for goods and services for six months, in part a reflection of both businesses and households adjusting to higher costs and the prospect of higher for longer interest rates. Business optimism has likewise cooled, dropping to the lowest since November, and companies are taking a more cautious approach to staffing levels.

“From an inflation perspective, the April survey brought some good news in that prices charged for services rose at a much reduced rate, registering one of the smallest increases seen over the past four years as greater competition and lower wage growth were reported to have taken some of the heat out of price setting.”

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.

March 2024 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 March increased $1.5 billion or 0.3 percent to $583.3 billion. Durable goods shipments decreased $0.3 billion or 0.1 percent to $282.1 billion, led by transportation equipment. Meanwhile, nondurable goods shipments increased $1.9 billion or 0.6 percent to $301.2 billion, led by petroleum and coal products. Shipments of wood products rose 0.6%; paper: 0.0%.

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Inventories increased $0.4 billion or virtually unchanged to $857.7 billion. The inventories-to-shipments ratio was 1.47, unchanged from February. Inventories of durable goods decreased $0.1 billion or virtually unchanged to $527.8 billion, led by machinery. Nondurable goods inventories increased $0.5 billion or 0.2 percent to $329.9 billion, led by petroleum and coal products. Inventories of wood products expanded by 0.2%; paper: +0.2%.

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New orders increased $9.1 billion or 1.6 percent to $584.5 billion. Excluding transportation, new orders rose by $2.2 billion or 0.5% (-0.5% YoY). Durable goods orders increased $7.3 billion or 2.6 percent to $283.3 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- increased by $0.08 billion or +0.1% (-1.0% YoY). New orders for nondurable goods increased $1.9 billion or 0.6 percent to $301.2 billion.

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Unfilled durable-goods orders increased $6.1 billion or 0.4 percent to $1,397.4 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 7.19, up from 7.10 in February. Real (inflation-adjusted) unfilled orders, which -- prior to the pandemic -- had been a good litmus test for potential sector growth, show a more-muted 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 now may be breaking off the subsequent increase.

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

March 2024 Construction Spending

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Construction spending during March 2024 was estimated at a seasonally adjusted annual rate (SAAR) of $2,083.9 billion, 0.2% (±0.8%)* below the revised February estimate of $2,087.8 billion (originally $2,091.5 billion); expectations were for +0.3%. The March figure is 9.6% (±1.3%) above the March 2023 estimate of $1,901.4 billion; the not-seasonally adjusted YoY comparison (shown in the table below) is +8.7%.

During the first three months of this year, construction spending amounted to $461.0 billion, 10.6% (±1.3%) above the $416.7 billion for the same period in 2023.

* 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 $1,600.8 billion, 0.5% (±0.7%)* below the revised February estimate of $1,608.5 billion (originally $1,616.8 billion):
- Residential construction. $884.3 billion, or -0.7% (±1.3%)* of which
- Home improvement. $315.9 billion, -1.6% (-9.1% YoY);
- Nonresidential construction. $716.5 billion, or 0.2% (±0.7%).

Public Construction

Public construction spending was $483.1 billion, 0.8% (±1.5%)* above the revised February estimate of $479.3 billion (originally $480.1 billion):
- Educational. $102.7 billion, or +1.0% (±2.0%)*;
- Highway. $149.0 billion, or +0.9% (±3.9%)*.

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Click here for a discussion of March’s new residential permits, starts and completions, and 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.

March 2024 Residential Sales, Inventory and Prices

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Sales of new single-family houses in March 2024 were at a seasonally adjusted annual rate (SAAR) of 693,000 units (670,000 expected). This is 8.8% (±17.2%)* above the revised February rate of 637,000 (originally 662,000 units) and 8.3% (±19.5%)* above the March 2023 SAAR of 640,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was +8.1%. For longer-term perspectives, NSA sales were 50.1% below the “housing bubble” peak but 28.2% above the pre-2000 average.

The median sales price of new houses sold in March was $430,700 (+6.0% MoM, or $24,200). The average sales price was $524,800 (+7.4%, or $36,200). Homes priced at/above $750,000 comprised 13.4% of sales, up from the year-earlier 11.3%.

* 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 March, single-unit completions fell by 111,000 units (-10.5%). Sales rose (56,000 units, or +8.8%), but inventory for sale expanded in absolute terms (+12,000 units) while shrinking in months-of-inventory terms (0.5 month). 

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Existing home sales sank (190,000 units or -4.3%) in March to a SAAR of 4.19 million units (4.18 million expected). The inventory of existing homes for sale expanded in both absolute (+50,000 units) and months-of-inventory (+0.3 month) terms. Because new sales advanced while resales retreated, the share of total sales comprised of new homes increased to 14.2%. The median price of previously owned homes sold in March jumped to $393,500 (+2.5% or $9.700).

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Housing affordability dropped by 2.7 percentage points as the median price of existing homes for sale in February climbed $5,800 (+1.5% MoM; +5.6% YoY) to $383,500. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices rose by a not-seasonally adjusted monthly change of +0.6% (+6.4% YoY).

“Following last year’s decline, U.S. home prices are at or near all-time highs,” said Brian Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices. “Our National Composite rose by 6.4% in February, the fastest annual rate since November 2022. Our 10- and 20-City Composite indices are currently at all-time highs. For the third consecutive month, all cities reported increases in annual prices, with four currently at all-time highs: San Diego, Los Angeles, Washington, D.C., and New York. On a seasonally adjusted basis, our National, 10- and 20- City Composite indices continue to break through previous all-time highs set last year.”

“Since the previous peak in prices in 2022, this marks the second time home prices have pushed higher in the face of economic uncertainty. The first decline followed the start of the Federal Reserve’s hiking cycle. The second decline followed the peak in average mortgage rates last October. Enthusiasm for potential Fed cuts and lower mortgage rates appears to have supported buyer behavior, driving the 10- and 20- City Composites to new highs.”

“The Northeast region, which includes Boston, New York, and Washington, D.C., ranks as the best performing market for over the last half year. As remote work benefited smaller (and sunnier markets) in the first part of the decade, return to office may be contributing to outperformance in larger metropolitan markets in the Northeast,” according to Luke.

“San Diego has been the best performing market following the trough in home prices observed in early 2023. With Los Angeles rising for 13 consecutive months to record another new high, Southern California has outperformed its surrounding neighbors. San Francisco has dropped 12% since its peak, while Phoenix and Las Vegas have dropped 6% and 4.5%, respectively.”

“With all markets increasing on an annual basis, similar performance was observed in the monthly return data. Eighteen markets experienced uplift in February. Tampa experienced a decline of 0.3% while Seattle has the largest monthly gain of 2.3%.”

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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.

1Q2024 Gross Domestic Product: First (“Advance”) Estimate

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The Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 1Q2024 U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate (SAAR) of +1.59% (+2.3% expected), down 1.80 percentage points (PP) from 4Q2023’s +3.39%.

On a year-over-year (YoY) basis, which should eliminate any residual seasonality distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 1Q2024 was 2.97% higher than in 4Q2023; that growth rate was slower (-0.17PP) than 4Q2023’s +3.13% relative to 4Q2022.

Three groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), and government consumption expenditures (GCE) -- contributed positively to the 1Q percent-change headline; net exports (NetX) detracted from it.

“The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment,” the BEA reported. “Imports, which are a subtraction in the calculation of GDP, increased.”

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As for details (all values are billions of chained 2017 dollars; all comparisons to 4Q2023) --

PCE (+96.8):

• Goods (-5.8). Spending on durable goods fell (-6.3) led by motor vehicles and parts (-13.9). Growth in spending on nondurable goods was absent (0.0), as a drop in gasoline and other energy goods (-9.2) was offset by other line items.
• Services (+99.5). Gains were led by health care (+35.9) and financial services and insurance (+20.2).

PDI (+32.3):

• Fixed investment (+52.3). This increase was led by residential investment (+24.6), with nonresidential investment close behind (+23.7) -- particularly software (+20.2) and information processing equipment (+14.2). Transportation equipment showed the largest loss (-18.5).
• Inventories (-19.5). Nonfarm inventories contracted (-18.8); farm: -0.7.

NetX (-54.7):

• Exports (+5.8). Goods exports rose by 3.7; services: +2.0.
• Imports (+60.4). Goods imports increased by 47.1; services: +13.0. Recall that the net change in imports is inversely related to the change in the GDP headline.

GCE (+11.5): State and local consumption expenditures (+10.2) led this category. Federal expenditures declined (-0.9) but this ignores outlays via transfer payments.

Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories, was +1.94% (down 1.92PP from 4Q).

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Despite the slowdown, “the economy was on solid ground,” wrote MarketWatch’s Jeffry Bartash. “Consumer spending, the main engine of the growth, rose at a healthy 2.5% clip to lead the way. Business spending was also stronger than expected.

“What’s more, there’s little evidence the economy is headed for tougher times. While early data for April have been somewhat soft, very few economists think a recession is likely.” If his forecast proves true, it will be primarily attributable to 2024 being an election year.

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.

March 2024 Residential Permits, Starts and Completions

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Builders started construction of privately-owned housing units March at a seasonally adjusted annual rate (SAAR) of 1,321,000 units (1.480 million expected). This is 14.7% (±9.9%) below the revised February estimate of 1,549,000 (originally 1.521 million units) and 4.3% (±9.4%)* below the March 2023 SAAR of 1,380,000 units; the not-seasonally adjusted YoY change (shown in the table above) was -2.7%.

Single-family housing starts in March were at a SAAR of 1,022,000; this is 12.4% (±12.5%)* below the revised February figure of 1,167,000 units (+22.0% YoY). Multi-family: 299,000 units (-21.7% MoM; -44.1% 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 1,469,000. This is 13.5% (±11.0%) below the revised February estimate of 1,698,000 (originally 1.729 million units) and 3.9% (±13.5%)* below the March 2023 SAAR of 1,528,000 units; the NSA comparison: -4.0% YoY.

Single-family completions were at a SAAR of 947,000; this is 10.5% (±10.1%) below the revised February rate of 1,058,000 units (-8.6% YoY). Multi-family: 522,000 units (-18.4% MoM; +6.4% YoY).

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Total permits were at a SAAR of 1,458,000 units (1.510 million expected). This is 4.3% below the revised February rate of 1,523,000 (originally 1.518 million units) but 1.5% above the March 2023 SAAR of 1,437,000 units; the NSA comparison: -5.9% YoY.

Single-family permits were at a SAAR of 973,000; this is 5.7% below the revised February figure of 1,032,000 units (+6.2% YoY). Multi-family: 485,000 units (-1.2% MoM; -24.5% YoY).

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Press release from NAHB’s Robert Dietz:

“Builder sentiment was flat in April as mortgage rates remained close to 7% over the past month and the latest inflation data failed to show improvement during the first quarter of 2024.

“Builder confidence in the market for newly built single-family homes was 51 in April, unchanged from March, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This breaks a four-month period of gains for the index, which nonetheless remains above the key breakeven point of 50.

“April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed. With the markets now adjusting to rates being somewhat higher due to recent inflation readings, we still anticipate the Federal Reserve will announce future rate cuts later this year, and that mortgage rates will moderate in the second half of 2024.

“The April HMI survey also revealed that 22% of builders cut home prices this month, down from 24% in March and 36% in December 2023. However, the average price reduction in April held steady at 6% for the 10th straight month. Meanwhile, the use of sales incentives ticked down to 57% in April from a reading of 60% in March.”

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.

March 2024 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 0.4% in March (+0.4% expected) but declined at an annual rate of 1.8% in the first quarter. Manufacturing output increased 0.5% in March, boosted in part by a gain of 3.1% in motor vehicles and parts; factory output excluding motor vehicles and parts moved up 0.3%. The index for mining fell 1.4%, and the index for utilities gained 2%. At 102.7% of its 2017 average, total industrial production in March was unchanged compared with its year-earlier level. 

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Market Groups

Most major market groups recorded growth in March. The production of consumer durables gained 1.9%, bolstered by a 3.2% increase in the output of automotive products. Elsewhere, there were significant gains in the indexes of nondurable consumer goods (1.0%), defense and space equipment (0.9%), and business supplies (0.8%). In contrast, the production of energy materials decreased 0.3%, and the index for construction supplies declined 1.0%.

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Industry Groups

Industry groups within durable manufacturing posted mixed results in March. Significant gains were recorded in motor vehicles and parts (3.1%), aerospace and miscellaneous transportation equipment (1.2%), and wood products (+0.7%). In contrast, the indexes for nonmetallic mineral products, for furniture, and for primary metals fell 1.8%, 1.0%, and 0.7%, respectively. Within nondurables, gains in the output of petroleum and coal products (4.8%) and chemicals (0.7%) were partially offset by a decline of 0.5% in the output of food, beverage, and tobacco products (paper: +0.6%).

Mining output decreased 1.4% in March and fell at an annual rate of 12.3% in the first quarter. Declines in the output of oil and gas extraction, mining (except oil and gas), and support services for mining all contributed to the first quarter drop in mining output. In March, the output of utilities increased 2%, as both electric and natural gas utilities moved up.

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Capacity utilization (CU) moved up to 78.4% in March, a rate that is 1.2 percentage points (PP) below its long-run (1972–2023) average.

Manufacturing CU moved up 0.3PP in March to 77.4%, a rate that is 0.8PP below its long-run average (wood products: +0.6%; paper: +0.7%). The operating rate for mining fell 1.3PP to 91.0%, while the operating rate for utilities increased 1.2PP to 69.1%. The rate for mining was 4.5PP above its long-run average, while the rate for utilities remained substantially below its long-run average.

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Capacity at the all-industries level edged up by 0.1% MoM (+1.4% YoY) to 130.9% of 2017 output. Manufacturing also increased by 0.1% (+1.5% YoY) to 129.9%. Wood products: +0.1% (+0.4% YoY) to 120.4%; paper products: unchanged (-1.0% YoY) at 105.3%.

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.

March 2024 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 0.4% in March (+0.3% expected), the same increase as in February. Over the last 12 months, the all-items index increased 3.5% before seasonal adjustment.

The index for shelter rose in March, as did the index for gasoline. Combined, these two indexes contributed over half of the monthly increase in the index for all items. The energy index rose 1.1% over the month. The food index rose 0.1% in March. The food at home index was unchanged, while the food away from home index rose 0.3% over the month.

The index for all items less food and energy rose 0.4% in March, as it did in each of the 2 preceding months. Indexes which increased in March include shelter, motor vehicle insurance, medical care, apparel, and personal care. The indexes for used cars and trucks, recreation, and new vehicles were among those that decreased over the month.

The all-items index rose 3.5% for the 12 months ending March, a larger increase than the 3.2% increase for the 12 months ending February. The index for all items less food and energy rose 3.8% over the last 12 months. The energy index increased 2.1% for the 12 months ending March, the first 12-month increase in that index since the period ending February 2023. The food index increased 2.2% over the last year.

 

Producer Price Index

The Producer Price Index for final demand (PPI-FD) rose 0.2% in March (+0.3% expected). Final demand prices moved up 0.6% in February and 0.4% in January. On an unadjusted basis, the index for final demand increased 2.1% for the 12 months ended in March, the largest advance since rising 2.3% for the 12 months ended April 2023.

The March increase in the index for final demand is attributable to a 0.3% rise in prices for final demand services. In contrast, the index for final demand goods edged down 0.1%.

The index for final demand less foods, energy, and trade services moved up 0.2% in March after rising 0.3% in February. For the 12 months ended in March, prices for final demand less foods, energy, and trade services increased 2.8%.

Final Demand

Final demand services: The index for final demand services moved up 0.3% in March, the third consecutive rise. Leading the broad-based March increase, prices for final demand services less trade, transportation, and warehousing advanced 0.2%. The indexes for final demand trade services and for final demand transportation and warehousing services moved up 0.3% and 0.8%, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: A major factor in the March increase in prices for final demand services was the index for securities brokerage, dealing, investment advice, and related services, which rose 3.1%. The indexes for professional and commercial equipment wholesaling; airline passenger services; investment banking; deposit services (partial); and computer hardware, software, and supplies retailing also moved higher. Conversely, prices for traveler accommodation services decreased 3.8%. The indexes for automobiles retailing (partial) and for machinery and equipment parts and supplies wholesaling also fell.

Final demand goods: Prices for final demand goods decreased 0.1% in March after rising 1.2% in February. The decline is attributable to the index for final demand energy, which moved down 1.6%. In contrast, prices for final demand foods and for final demand goods less foods and energy advanced 0.8% and 0.1%, respectively.

Product detail: Leading the March decline in the index for final demand goods, prices for gasoline decreased 3.6%. The indexes for chicken eggs, carbon steel scrap, jet fuel, and fresh fruits and melons also fell. Conversely, prices for processed poultry jumped 10.7%. The indexes for fresh and dry vegetables, residential electric power, and motor vehicles also moved higher.

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The not-seasonally adjusted price indexes we track were all higher on a MoM basis except for intermediate materials, but 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.

February 2024 International Trade (Softwood Lumber)

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With February exports of goods and services at $263.0 billion (+2.3% MoM; +4.1% YoY) and imports at $331.9 billion (+2.2% MoM; +2.8% YoY), the net trade deficit was $68.9 billion (+1.9% MoM; -1.7% YoY). 

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Softwood lumber exports rose (10 MMBF or +10.2%) in February, along with imports (99 MMBF or +8.9%). Exports were 14 MMBF (+14.3%) above year-earlier levels; imports: 127 MMBF (+11.6%) higher. As a result, the year-over-year (YoY) net export deficit was 113 MMBF (+11.4%) higher. Also, the average net export deficit for the 12 months ending February 2024 was 7.5% 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 (56.9% of total softwood lumber exports -- of which Mexico: 36.7%; Canada: 20.2%), Asia (15.1% -- especially India: 3.5%; Japan: 2.2%; China: 4.0%), and the Caribbean (21.0% -- especially the Dominican Republic: 10.7%; Bahamas: 2.1%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were 9.9% lower than the same month(s) of the prior year. Meanwhile, Canada was the source of most (83.4%) softwood lumber imports into the United States. Imports from Canada were 8.6% higher YTD/YTD. Overall, YTD exports were up 7.9% compared to the prior year; imports: +0.4%.

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U.S. softwood lumber export activity through the Gulf customs region represented 40.2% of the U.S. total; West Coast: 28.2%, and Eastern: 22.0%. Mobile (18.8% of the U.S. total), San Diego (14.9%) Seattle (12.0%), and Laredo (15.7%) were the most active districts. At the same time, the Great Lakes customs region handled 57.1% of softwood lumber imports -- most notably the Duluth, MN district (16.9%) -- coming into the United States. 

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Southern yellow pine comprised 30.7% of all softwood lumber exports; other pine (12.1%), Douglas-fir (12.9%), treated lumber (12.1%), and finger-jointed (9.7%) 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.