November 2013 ISM Reports

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For a second month in November, more manufacturing businesses surveyed by the Institute for Supply Management (ISM) indicated that their activity expanded than any time since April 2011. The PMI rose to 57.3 percent, an increase of 0.9 percentage point from October's reading of 56.4 percent (50 percent is the breakpoint between contraction and expansion). “With 15 of 18 manufacturing industries reporting growth in November relative to October,” said Bradley Holcomb, chair of ISM’s Manufacturing Business Survey Committee, “the positive growth trend characterizing the second half of 2013 is continuing.”

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Most general manufacturing sub-indices were positive in November: Orders, production and employment were up; inventories were either essentially unchanged or decreasing; and input prices rose more slowly. Performance of the two manufacturing industries we track diverged, however, with Wood Products contracting but Paper Products expanding. Wood Products orders and production fell, and input prices rose. For Paper Products, orders and production rose while input prices fell.

Growth in the service sector slowed again in November. The non-manufacturing index (now known simply as the “NMI”) registered 53.9 percent, 1.5 percentage points lower than October’s 55.4 percent. New order, business activity and employment sub-indices all declined relative to October (the employment index to its lowest point since May). Nonetheless, “respondents' comments for the most part indicate the non-manufacturing sector is maintaining a steady course of incremental growth and a positive outlook for the upcoming months.” said Anthony Nieves, chair of ISM’s Non-Manufacturing Business Survey Committee. 

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Among the individual service industries we track, only Ag & Forestry expanded (thanks to new orders, higher inventories and imports). The drop in Construction employment was enough to offset increases in inventories and backlogged and new export orders. Real Estate was unchanged.

Commodities up in price included corrugated boxes. Caustic soda, gasoline, diesel and natural gas were down in price.

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 2013 U.S. Home Sales, Inventories and Prices

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Sales of new single-family homes rose by 90,000 units (25.4 percent) to 444,000 (SAAR) in October. Meanwhile, the median price of new homes sold dropped by $11,600 (4.5 percent) to $245,800; prices are $33,500 (12.0 percent) below their April peak. Because of Census Bureau reporting delays, the graph above contains data through August. The revised data show the three-month average starts-to-sales ratio increased to 1.52 in August -- near the top end of the historical range. 

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Data for single-unit completions is also delayed until mid-December, so the graph above shows results through August. Because sales rocketed higher in October, new-home inventory retreated by 1.5 months-of-sales (to 4.9 months) despite the absolute number of homes shrinking by only 7,000 units.

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Existing home sales decreased at a faster pace (-170,000 units or 3.2 percent) to 5.12 million units (SAAR) in October; as a result, the share of total sales comprised of new homes jumped up to 8.0 percent. The median price of previously owned homes sold in October edged higher (by $1,000 or 0.5 percent), to $199,500.

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Although the median price of existing homes for sale continued to retreat in September (by $10,400 or 5.0 percent), housing affordability has not experienced a commensurate rebound. Concurrently, Standard & Poor’s reported that both the 10- and 20-City Composites in the S&P/Case-Shiller Home Price indices posted not-seasonally adjusted monthly gains of 0.7 percent in September (13.3 percent relative to a year earlier). This small month-over-month gain (the smallest since February) suggests that price momentum is starting to fade.

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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 2013 International Trade (Softwood Lumber)

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Softwood lumber exports rose by 23 MMBF (14.6 percent) in October while imports increased by 34 MMBF (3.7 percent). Exports were 39 MMBF (27.7 percent) above year-earlier levels; imports were 21 MMBF (2.3 percent) higher. 

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Asia (especially China and Japan) retained the “top spot” for U.S. softwood lumber exports in September. China was also the largest single-country destination by a wide margin; year to date (YTD), exports to China were up 67.2 percent relative to the same period in 2012. Meanwhile, Canada was far-and-away the largest source of softwood lumber imports into the United States. Imports from Romania, Austria, Estonia, Sweden, Malaysia and Honduras have increased markedly on both year-over-year and YTD change bases. 

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Just over half of U.S. softwood lumber exports left the country through West Coast (primarily Seattle, WA) customs districts in October. At the same time, Great Lakes customs districts (especially Duluth, MN) handled over two-thirds of the softwood lumber imports coming into the United States.

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Douglas-fir made up one-quarter of all softwood lumber exports in October, followed by southern yellow pine. Hem-fir exports have jumped on a YTD basis, causing that species’ ranking to rise from 10^th to 6^th.

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 2013 International Trade (General)

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Total October exports of $192.7 billion and imports of $233.3 billion resulted in a goods and services deficit of $40.6 billion, down from $43.0 billion in September. October exports were $3.4 billion more than September exports of $189.3 billion. October imports were $1.0 billion more than September imports of $232.3 billion.

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On a global scale, data compiled by the Netherlands Bureau for Economic Policy Analysis showed that world trade volume increased by 0.8 percent in September while prices were essentially unchanged.

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 2013 U.S. Construction Spending

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Overall construction spending in the United States increased by 0.8 percent during October, to a seasonally adjusted and annualized rate (SAAR) of $908.4 billion. The increase derived solely from a 3.9 percent advance in public construction spending. Private construction spending, by contrast, retreated for a third time in the last four months -- by 0.5 percent (the most since April). Both residential (-0.6 percent, the most since July) and non-residential (-0.5 percent) spending declined.

Click here for a discussion of October’s new residential permits. We hope to present a full complement of construction-related reports in January, when the Census Bureau has returned to a more normal report schedule in the wake of the partial Federal government shutdown.

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 2013 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil fell for a third month in November, by $6.46 (6.4 percent) to $94.07 per barrel. That price drop occurred despite the lagged impacts of a modest increase in consumption of 25,000 barrels per day (BPD) to 19.1 million BPD in September, but coincided with a strengthening of the dollar and a noticeable increase in crude stocks. The weaker euro and reduced non-U.S. supply widened the monthly average price spread between Brent crude (the predominant grade used in Europe) and WTI by $4.53 in November, to $13.07 per barrel.

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Futures prices retreated -- especially the near-term contracts -- largely because of the lifting of sanctions against Iran.

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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 2013 Currency Exchange Rates

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In November the monthly average value of the U.S. dollar appreciated against the three major currencies we track: 2.4 percent against the yen, 1.2 percent against Canada’s loonie, and 1.1 percent relative to the euro. On a trade-weighted index basis, the dollar strengthened by 0.9 percent 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.