December 2023 Residential Sales, Inventory and Prices

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Sales of new single-family houses in December 2023 were at a seasonally adjusted annual rate (SAAR) of 664,000 units (650,000 expected). This is 8.0% (±24.2%)* above the revised November rate of 615,000 (originally 590,000 units) and 4.4% (±20.6%)* above the December 2022 SAAR of 636,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was +6.4%. For longer-term perspectives, NSA sales were 52.2% below the “housing bubble” peak and 4.4% below the long-term, pre-2000 average.

An estimated 668,000 new homes were sold in 2023. This is 4.2% (±5.2%)* above the 2022 figure of 641,000.

The median sales price of new houses sold in December 2023 was $413,200 (-3.0% MoM, or $12,800). The average sales price was $487,300 (+0.4%, or $1,800). Homes priced at/above $750,000 comprised 8.0% of sales, down from the year-earlier 17.0%.

* 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 December, single-unit completions rose by 82,000 units (+8.4%). Sales advanced by a smaller amount (49,000 units, or +8.0%), resulting in inventory for sale expanding in absolute terms (+4,000 units) but shrinking in months-of-inventory terms (-0.6 month). 

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Existing home sales retreated (40,000 units or -1.0%) in December to a SAAR of 3.78 million units (3.80 million expected). The inventory of existing homes for sale contracted in both absolute (-130,000 units) and months-of-inventory (-0.3 month) terms. Because new sales advanced while resales fell, the share of total sales comprised of new homes increased to 14.9%. The median price of previously owned homes sold in December dipped to $382,600 (-1.3% or $5,100).

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Housing affordability rose 2.8 percentage points as the median price of existing homes for sale in November retreated by $3,900 (-1.0% MoM; +3.5% YoY) to $392,100. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices fell to a not-seasonally adjusted monthly change of -0.2% (but +5.1% YoY).

“U.S. home prices edged downward from their all-time high in November,” says Brian Luke, Head of Commodities, Real & Digital Assets at S&P DJI. “The streak of nine monthly gains ended in November, setting the index back to levels last seen over the summer months. Seattle and San Francisco reported the largest monthly declines, falling 1.4% and 1.3%, respectively.”

“November’s year-over-year gain saw the largest growth in U.S. home prices in 2023, with our National Composite rising 5.1% and the 10-city index rising 6.2%. Detroit held its position as the best performing market for the third month in a row, accelerating to an 8.2% gain. San Diego notched an 8% annual gain, retaining its second spot in the nation. Barring a late surge from another market, those cities will vie for the ‘housing market of the year’ as the best performing city in our composite.”   

“Six cities registered a new all-time high in November (Miami, Tampa, Atlanta, Charlotte, New York, and Cleveland). Portland remains the lone market in annual decline. The Northeast and Midwest recorded the largest gains with returns of 6.4% and 6.3%, respectively. Other regions are not far behind with the slowest gains in the West of 3%. This month’s report revealed the narrowest spread of performance across the nation since the first quarter of 2021.”

“The tight disparity speaks to a rising tide across the country, with less evidence of micro-markets bucking the trend. The days of markets in the South rising double digits with markets in the Midwest remaining flat are over. The house price decline came at a time where mortgage rates peaked, with the average Freddie Mac 30-year fixed rate mortgage nearing 8%, according to Federal Reserve data. The rate has since fallen over 1%, which could support further annual gains in home prices.”

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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.

4Q2023 Gross Domestic Product: First (“Advance”) Estimate

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The Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 4Q2023 U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate (SAAR) of +3.28% (+2.0% expected), down 1.59 percentage points (PP) from 3Q2023’s +4.87%.

On a year-over-year (YoY) basis, which should eliminate any residual seasonality distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 4Q2023 was 3.11% higher than in 4Q2022; that growth rate was faster (+0.18PP) than 3Q2023’s +2.93% relative to 3Q2022.

All four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX), and government consumption expenditures (GCE) -- contributed positively to the 4Q percent-change headline.

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As for details (billions of chained 2017 dollars; all comparisons to 3Q2023) --

PCE (+$108.4B):

* Goods (+$50.8B). Spending on durable goods rose (+$23.2B), led by recreational goods and vehicles (+$20.9B). Growth in spending on nondurable goods was even stronger (+$28.1B), led by other nondurable goods (+$17.5B).

* Services (+$58.7B). Gains were led by health care (+$21.8B) and food services and accommodations (+$19.5B).

PDI (+$21.0B):

* Fixed investment (+17.2B). This increase was broadly distributed among nonresidential structures (+$5.1B), equipment (+$3.0B), and intellectual property products (+$7.3B); residential investment (+$1.9B) was quite modest, while transportation equipment (-$17.6B) showed the largest loss.

* Inventories (+$4.9B). Nonfarm inventories expanded (+$5.6B); farm: -$0.5B.

NetX (+$22.5B):

* Exports (+$38.3B). Goods exports rose by $19.5B; services: +$18.7B.

* Imports (+$15.8B). Goods imports increased by $5.4B; services: +$9.8B. Recall that the net change in imports is inversely related to the change in the GDP headline.

GCE (+31.0B): State and local consumption expenditures (+$11.8B) led this category, followed by state and local gross investment: +$9.6B).

Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories, was +3.21% (down 0.39PP from 3Q).

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Joe Brusuelas, chief economist at the tax and consulting firm RSM, said he thinks consumer spending may have been even stronger than indicated -- primarily because the report “did not adequately capture” increased holiday splurging on travel and other services. On the other hand, the Chicago Fed's National Activity Index (CFNAI) was negative in December. A CFNAI value of zero has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth; and positive values with above-average growth.

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.

December 2023 Residential Permits, Starts and Completions

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Builders started construction of privately-owned housing units in December at a seasonally adjusted annual rate (SAAR) of 1,460,000 units (1.425 million expected). This is 4.3% (±12.5%)* below the revised November estimate of 1,525,000 (originally 1.560 million units), but 7.6% (±17.6%)* above the December 2022 SAAR of 1,357,000 units; the not-seasonally adjusted YoY change (shown in the table above) was +6.9%.

Single-family starts in December were at a rate of 1,027,000; this is 8.6% (±11.2%)* below the revised November figure of 1,124,000 units (+14.4% YoY). Multi-family: 433,000 units (+8.0% MoM; -6.8% YoY).

An estimated 1,413,100 housing units were started in 2023. This is 9.0% (±2.5%) below the 2022 figure of 1,552,600.

* 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 1,574,000. This is 8.7% (±19.9%)* above the revised November estimate of 1,448,000 (originally 1.447 million units) and 13.2% (±17.7%)* above the December 2022 SAAR of 1,390,000 units; the NSA comparison: +15.0% YoY.

Single-family completions were at a SAAR of 1,056,000; this is 8.4% (±18.5%)* above the revised November rate of 974,000 units (+8.3% YoY). Multi-family: 518,000 units (+9.3% MoM; +33.5% YoY).

An estimated 1,452,500 housing units were completed in 2023. This is 4.5% (±3.8%) above the 2022 figure of 1,390,500.

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Total permits were at a SAAR of 1,495,000 units (1.478 million expected). This is 1.9% above the revised November rate of 1,467,000 (originally 1.460 million units) and 6.1% above the December 2022 SAAR of 1,409,000 units; the NSA comparison: -2.2% YoY.

Single-family authorizations in December were at a rate of 994,000; this is 1.7% above the revised November figure of 977,000 units (+26.9% YoY). Multi-family: 501,000 units (+2.2% MoM; -28.3% YoY).

An estimated 1,469,800 housing units were authorized by building permits in 2023. This is 11.7% below the 2022 figure of 1,665,100.

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Press release from NAHB’s Robert Dietz:

“Mortgage rates well under 7% over the past month have led to a sharp increase in builder confidence to begin the new year.

“Builder confidence in the market for newly built single-family homes climbed seven points to 44 in January, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This second consecutive monthly increase in builder confidence closely tracks with a period of falling interest rates.

“Mortgage rates have decreased by more than 110 basis points since late October per Freddie Mac, lifting the future sales expectation component in the HMI into positive territory for the first time since August. Lower interest has improved housing affordability and brought some buyers back into the market. However, as home building expands in 2024, the market will see growing supply-side challenges in the form of higher prices and/or shortages of lumber, lots and labor.

“Even as mortgage rates have fallen below 7% over the past month, many builders continue to reduce home prices to boost sales. In January, 31% of builders reported cutting home prices, down from 36% during the previous two months and the lowest rate since last August. The average price reduction in January remained at 6%, unchanged from the previous month. Meanwhile, 62% of builders provided sales incentives of all forms in January. This share has remained stable between 60% and 62% since 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.

December 2023 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) moved up 0.1% in December (-0.1% expected) and declined 3.1% at an annual rate in the fourth quarter. Manufacturing output edged up 0.1% in December after increasing 0.2% in November. The index for utilities declined 1.0% in December, while the index for mining rose 0.9%. At 102.5% of its 2017 average, total industrial production in December was 1% above its year-earlier level. 

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Market Groups

The major market groups posted mixed results in December. The production of consumer goods moved up 0.2%, largely from gains in durable consumer goods; the production of nondurable consumer goods was flat. The indexes of business equipment, construction supplies, and business supplies all registered slight declines in December. The output of defense and space equipment rose 0.5% in December and recorded a gain of 9.1% at an annual rate for the fourth quarter. Materials output edged up in December, as a slight decline in its non-energy component was more than offset by a gain of 0.5% in its energy component.

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Industry Groups

Manufacturing output ticked up 0.1% in December but declined 2.2% (annual rate) in the fourth quarter. Excluding motor vehicles and parts, factory output declined 0.1% in December and 0.3% (annual rate) in the fourth quarter. In December, the index for durable manufacturing fell 0.4%, while the index for nondurable manufacturing rose 0.6%. The index for other manufacturing (publishing and logging) declined 1.1%. Within durables, declines of more than 1% were recorded by wood products (-1.9%), by fabricated metal products, by machinery, and by electrical equipment, appliances, and components. Motor vehicles and parts as well as furniture and related products posted gains of more than 1%. Within nondurables, most industries registered gains with the exception of paper (-1.3%) and of printing and support.

In December, mining output increased 0.9%, and the output of utilities decreased 1.0%. For the fourth quarter, the output of mines fell 3.4% (annual rate) after increasing in the previous two quarters. The index for utilities dropped 8.2% (annual rate) in the fourth quarter after jumping over 15% in the previous quarter.

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Capacity utilization (CU) was unchanged in December at 78.6%, a rate that is 1.1 percentage points (PP) below its long-run (1972–2022) average.

Manufacturing CU remained unchanged at 77.1%, a rate that is 1.1PP below its long-run average (wood products: -1.9%; paper: -1.2%). The operating rate for mining moved up 0.9PP to 93.8%, a rate that is 7.4PP above its long-run average. The operating rate for utilities moved down 0.9PP to 70.0%, well below its long-run average.

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Capacity at the all-industries level increased by 0.1% MoM (+1.4% YoY) to 130.4% of 2017 output. Manufacturing also edged up by 0.1% (+1.4% YoY) to 129.4%. Wood products: less than +0.1% (+0.4% YoY) at 120.1%; paper products: -0.1% (-1.1% YoY) to 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.

December 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 0.3% in December on a seasonally adjusted basis (+0.2% expected), after rising 0.1% in November. Over the last 12 months, the all-items index increased 3.4% before seasonal adjustment.

The index for shelter continued to rise in December, contributing over half of the monthly all-items increase. The energy index rose 0.4% over the month as increases in the electricity index and the gasoline index more than offset a decrease in the natural gas index. The food index increased 0.2% in December, as it did in November. The index for food at home increased 0.1% over the month and the index for food away from home rose 0.3%.

The index for all items less food and energy rose 0.3% in December, the same monthly increase as in November. Indexes which increased in December include shelter, motor vehicle insurance, and medical care. The index for household furnishings and operations and the index for personal care were among those that decreased over the month.

The all-items index rose 3.4% for the 12 months ending December, a larger increase than the 3.1% increase for the 12 months ending November. The index for all items less food and energy rose 3.9% over the last 12 months, after rising 4.0% over the 12 months ending November. The energy index decreased 2.0% for the 12 months ending December, while the food index increased 2.7% over the last year.

 

Producer Price Index

The Producer Price Index for final demand (PPI-FD) was unchanged in November, seasonally adjusted (+0.2% 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.

The Producer Price Index for final demand fell 0.1% in December, seasonally adjusted (+0.2% expected). Final-demand prices moved down 0.1% in November and 0.4% in October. On an unadjusted basis, the index for final demand rose 1.0% in 2023 after increasing 6.4% in 2022.

The December decrease in the index for final demand is attributable to a 0.4% drop in prices for final-demand goods. The index for final-demand services was unchanged.

The index for final demand less foods, energy, and trade services rose 0.2% in December after edging up 0.1% in both November and October. Prices for final demand less foods, energy, and trade services climbed 2.5% in 2023 following a 4.7% increase in 2022.

Final Demand

Final-demand goods: The index for final-demand goods fell 0.4% in December, the third consecutive decline. In December, nearly 60% of the decrease can be traced to a 1.2% drop in prices for final-demand energy. The index for final-demand foods moved down 0.9%, while prices for final-demand goods less foods and energy were unchanged.

Product detail: In December, half of the decrease in the index for final-demand goods is attributable to prices for diesel fuel, which dropped 12.4%. The indexes for jet fuel; eggs for fresh use; non-carbonated soft drinks; passenger cars; and hay, hayseeds, and oilseeds also moved lower. In contrast, prices for gasoline rose 2.1%. The indexes for carbonated soft drinks and for nonferrous scrap also increased.

Final-demand services: The index for final-demand services remained unchanged in December, the same as in both November and October. In December, prices for final-demand services less trade, transportation, and warehousing rose 0.4%. Conversely, the indexes for final-demand trade services and for final-demand transportation and warehousing services fell 0.8% and 0.4%, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Within the index for final-demand services in December, prices for securities brokerage, dealing, and investment advice increased 3.3%. The indexes for consumer loans (partial), application software publishing, airline passenger services, and fuels and lubricants retailing also moved higher. In contrast, margins for machinery and vehicle wholesaling decreased 5.5%. The indexes for guestroom rental, long-distance motor carrying, automobiles and parts retailing, and apparel wholesaling 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.

December 2023 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 216,000 jobs in December (+164,000 expected). Also, October and November 2023 employment changes were revised down by a combined 71,000 (October: -45,000; November: -26,000). Except for July, job gains of all months in 2023 have been revised lower.

Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 3.7%, as a drop in the number of employed (-683,000) was essentially matched by a contraction of the labor force (-676,000). 

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Observations from the employment reports include:

* Once again, the two surveys diverged, which erodes their credibility. While the employment report showed the addition of 216,000 jobs, the household report indicated the number of employed fell by 683,00.

* Goods-producing industries gained 22,000 jobs; service providers: +194,000. Employment continued to trend up in government (+52,000), health care (+38,000), social assistance (+21,000), and construction (+17,000), while transportation and warehousing lost jobs (-23,000). Total nonfarm employment (157.2 million) is now nearly 4.9 million jobs above its pre-pandemic level in February 2020 (private sector: +4.73 million; public sector: +132,000). Nonetheless, employment is perhaps 5.1 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing added 6,000 jobs (led by durable goods: +8,000, of which miscellaneous manufacturing; 3,200). That result may agree with the change in the Institute for Supply Management (ISM) manufacturing employment subindex, which moved closer to breakeven (48.1) in December. Wood products manufacturing shed 2,100 jobs (ISM was unchanged); paper manufacturing: -100 (ISM decreased); construction: +17,000 (ISM increased).

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* The number of employment-age persons not in the labor force jumped (+845,000) to 100.5 million -- the highest since March 2021 and 5.3 million above February 2020. Because the working-age civilian population expanded (+169,000) while the number of employed fell (-683,000), the employment-population ratio (EPR) declined to 60.1%, which is 1.0PP below its February 2020 level. 

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* Also, because the working-age civilian population grew by 169,000 while the labor force shrank by 676,000, the labor force participation rate fell to 62.5%. Average hourly earnings of all private employees nudged up by $0.15 (to $34.27), and the year-over-year increase edged up fractionally to +4.1%. Because the average workweek for all employees on private nonfarm payrolls decreased to 34.3 hours, average weekly earnings rose (+$1.73) to $1,175.46 (+4.4% YoY). With the consumer price index running at an annual rate of +3.1% in November, the average worker appears likely to have gained a bit of purchasing power. 

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* Full-time workers slumped (-1.5 million) to 133.2 million; there are now nearly 2.4 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has risen 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 217,000, while those working part time for non-economic reasons jumped (+579,000); total part-timers are at their highest since March 2018. Multiple-job holders: +222,000 -- to a record 8.6 million. 

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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 December spiked by $50.0 billion, to $290.6 billion (+20.8% MoM; but -14.5% 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 December was down 4.9% 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.

December 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 a slower rate of contraction in the sector during December. The PMI registered 47.4%, up 0.7 percentage point (PP) from November’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. The largest changes occurred among order backlogs (+6.0PP) prices paid (-4.7PP), and exports (+3.9PP). 

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Concurrent activity in the services sector -- which accounts for 80% of the economy and 90% of employment -- decelerated (-2.1PP, to 50.6%). Employment (-7.4PP), inventory sentiment (-6.9PP), and inventories (-5.8PP) exhibited the largest changes.

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Respondent comments included the following –

Wood Products. “Higher financing costs have diminished demand for residential investment. Customers are delaying a portion of their plans until borrowing costs are reduced. We are impacted with reduced new orders, diminished backlog of orders and uncertain short-term demand for products and services.”

Construction. “Congestion at the Panama Canal is expected to continue for the next several months. The effect of this is rerouting marine cargoes at the expense of cost and schedule.”

 

Changes in S&P Global‘s headline index value for manufacturing declined (for a faster rate of contraction) whereas services increased (although still only barely in expansion). Details from S&P Global’s surveys follow --

Manufacturing. US manufacturing performance declines at sharper pace as demand conditions weaken.

Key findings:

• Renewed contraction in output as orders fall at sharper pace
• Rates of inflation pick up
• Joint-fastest drop in employment since June 2020

 

Services. Service sector expansion picks up, but demand conditions remain historically subdued.

Key findings:

• Fastest upturn in new business since June spurs rise in activity
• Employment growth joint-quickest in six months
• Price pressures intensify but charges rise at slower pace

 

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

Manufacturing. “US manufacturers ended the year on a sour note, according to S&P Global’s PMI survey. Output fell at the fastest rate for six months as the recent order-book decline intensified. Manufacturing will therefore likely have acted as a drag on the economy in the fourth quarter.

“The slowdown is spreading to the labor market. Payrolls were cut for a third month running as increasing numbers of firms grew concerned about the development of excess operating capacity. The fourth quarter has consequently seen factories reduce employment at a pace not seen since 2009 barring only the early pandemic lockdown months.

“With factories also cutting back sharply on their purchases of inputs in December, suppliers were also less busy on average, again hinting at the development of spare capacity.

“While there was some uplift in the rate of both raw material and factory gate selling price inflation, firms’ costs notably continued to rise at a pace below the survey’s long-run average to hint at historically subdued industrial price pressures.

“Given current order book trends, the overall picture from the survey is one of supply exceeding demand for many goods, which points to downside risks to production, employment and prices as we head into 2024. Potential supply chain disruptions need to be monitored, however, notably in terms of shipping, as the survey has clearly demonstrated in the past how supply chain tensions quickly feed through to higher prices.”

 

Services. “Some New Year cheer is provided by the PMI signaling an acceleration of growth in the vast services economy, which reported its largest rise in output for five months in December. The improvement overshadows a downturn recorded in manufacturing to indicate that the overall pace of US economic growth likely accelerated slightly at the end of the year.

“Some support to financial services in particular is coming from the recent loosening of financial conditions amid growing hopes of interest rate cuts in 2024. Growth nevertheless remains subdued by standards seen over the spring and summer, with the struggling manufacturing sector dampening demand for business-to-business services and consumers remaining far less inclined to spend on luxuries such as travel and recreation than earlier in the year.

“The more challenging demand environment has dampened firms’ pricing power, squeezing service sector selling price inflation to the lowest for over three years on average during the fourth quarter. With sticky service sector inflation being a key area of concern among Fed policymakers, the slower rate of price increase in December is welcome news.”

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 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 November increased $2.7 billion or 0.5% to $580.7 billion. Durable goods shipments increased $2.8 billion or 1.0% to $283.1 billion, led by transportation equipment. Meanwhile, nondurable goods shipments decreased $0.1 billion or virtually unchanged to $297.6 billion, led by petroleum and coal products. Shipments of wood products increased 0.1%; paper: +0.1%.

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Inventories increased $0.6 billion or 0.1% to $857.1 billion. The inventories-to-shipments ratio was 1.48, unchanged from October. Inventories of durable goods increased $0.4 billion or 0.1% to $524.8 billion, led by transportation equipment. Nondurable goods inventories increased $0.2 billion or 0.1% to $332.3 billion, led by petroleum and coal products. Inventories of wood products shrank by 0.5%; paper: less than +0.1%.

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New orders increased $14.9 billion or 2.6% to $592.9 billion. Excluding transportation, new orders rose by $0.7 billion or 0.1% (-0.8% YoY). Durable goods orders increased $15.0 billion or 5.4% to $295.2 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- advanced by $0.6 billion or 0.8% (+1.5% YoY). New orders for nondurable goods decreased $0.1 billion or virtually unchanged to $297.6 billion.

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Unfilled durable-goods orders increased $17.1 billion or 1.3% to $1,374.8 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.95, up from 6.91 in October. 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 seem to be exhibiting a quickening 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.

December 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 $5.79 (-7.5%) to $71.90/barrel in December. That retreat occurred within the context of a weaker U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of October’s increase of 588,000 barrels per day (b/d) in the amount of petroleum products demanded/supplied (to 20.7 million b/d), and accumulated oil stocks that tipped seasonally lower -- staying near the midpoint of the five-year average range (December 2023 average: 439 million barrels). 

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Selected highlights from the 2 January 2024 issue of OilPrice.com‘s Intelligence Report include:

“The first U.S.-Yemen naval clash in the Red Sea, followed by the arrival of an Iranian warship into the Bab-el-Mandeb strait, has prompted an increase in geopolitical risks again, lifting Brent back to the $79 per barrel mark,” editor Tom Kool wrote. “China issuing its crude import quotas for 2024, coupled with product export allowances, will reinvigorate Chinese buying in the markets, so for the first time in several weeks, the immediate outlook seems more bullish than bearish.”

US Oil Output Starts to Decline. According to EIA figures, U.S. crude oil production fell to 13.248 million b/d in October, the first monthly decline since April even as the month-on-month change was a mere 4,000 b/d, with all tight oil plays posting increases except North Dakota. 

Maersk Halts Red Sea Transit, Again. The world's second-largest container line Moller-Maersk halted transit through the Red Sea less than a week after it had decided to resume navigation, with its Maersk Hangzhou tanker coming under attack by Houthi militias. 

China Coal Demand to Peak in 2025. China's state-owned energy company Sinopec expects the country's coal consumption to peak around 2025 at 4.37 billion metric tonnes, with oil hitting a plateau in 2026-2030 at 16 million b/d and natural gas reaching a climax only by 2040.

Russian Pipeline Gas Exports to Europe Collapse. Exports of Russian pipeline gas to Europe plunged by a further 56% year-on-year in 2023, coming in at a mere 28.3 billion cubic meters as Gazprom's options were narrowed down to TurkStream and one remaining pipeline via Ukraine.

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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.

December 2023 Currency Exchange Rates

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In December, the monthly average value of the U.S. dollar (USD) depreciated against all three currencies we track: Canada’s “loonie” (-2.1%), the euro (-0.8%), and the Japanese yen (-3.8%). On the broad trade-weighted index basis (goods and services) the USD weakened by 1.1% 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.

November 2023 Construction Spending

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Construction spending during November 2023 was estimated at a seasonally adjusted annual rate (SAAR) of $2,050.1 billion, 0.4% (±1.0%)* above the revised October estimate of $2,042.5 billion (originally $2,027.1 billion); expectations were for +0.6%. The November figure is 11.3% (±1.5%) above the November 2022 SAAR of $1,842.2 billion; the not-seasonally adjusted YoY comparison (shown in the table below) is +11.6%.

During the first 11 months of this year, construction spending amounted to $1,817.1 billion, 6.2% (±1.0%) above the $1,711.1 billion for the same period in 2022.

* 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 $1,595.0 billion, 0.7% (±0.5%) above the revised October estimate of $1,584.4 billion (originally $1,579.3 billion):
- Residential. $896.8 billion, +1.1% (±1.3%)* of which
- Home improvement. $338.5 billion, -0.8% (-2.8% YoY);
- Nonresidential. $698.2 billion, +0.2% (±0.5%)*.

Public Construction

Public construction spending was $455.1 billion, 0.7% (±1.8%)* below the revised October estimate of $458.1 billion (originally $447.8 billion):
- Educational. $99.2 billion, -0.3% (±2.0%)*;
- Highway. $135.8 billion, +0.1% (±4.4%)*.

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Click here for a discussion of November’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.