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.

October 2013 Residential Permits, Starts and Completions

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Because the Census Bureau is delaying the release of September and October’s new housing starts and completions data until December 18 (to be combined with November’s data), we have only permits to report on at this time.

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Builders’ confidence in the future of the residential market held steady in October, with more builders viewing market conditions as good than poor. Total permits broke through the 1.0 million unit threshold (SAAR) for a second time in 2013 during October (+60,000 units, or 6.2 percent relative to September), almost entirely on the strength of multi-family permits (+55,000 units, or 15.3 percent); single-family permits were essentially flat (+5,000 units, or 0.8 percent). Total permits were 16.0 percent higher in October than a year earlier.

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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 Consumer and Producer Price Indices (incl. Forest Products)

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The seasonally adjusted Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in October. Over the last 12 months, the all items index increased 1.0 percent before seasonal adjustment. The all items index increased 1.0 percent over the last 12 months; this was the smallest 12-month increase since October 2009. The energy index has declined 4.8 percent over the last 12 months, its largest 12-month decline since July 2012. The index for all items less food and energy has risen 1.7 percent over the last year, while the food index has risen 1.3 percent.

The seasonally adjusted Producer Price Index for finished goods (PPI) declined 0.2 percent in October. Prices for finished goods fell 0.1 percent in September and rose 0.3 percent in August. At the earlier stages of processing, prices received by producers of intermediate goods declined 0.4 percent, and the crude goods index decreased 0.9 percent. On an unadjusted basis, prices for finished goods advanced 0.3 percent for the 12 months ended October 2013.

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Of the price indices we track, only one (Intermediate Materials) declined in October relative to the previous month and year. Wood Fiber and Pulp, Paper & Allied Products once again achieved new all-time highs.

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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 Macro Pulse -- Cognitive Dissonance

Cognitive dissonance is “the discomfort experienced when simultaneously holding two or more conflicting ideas, beliefs, values or emotional reactions.” That is an apt description of how we felt when reading many of the reports, published during the past month, describing the health of the U.S. economy. In several cases, the headline numbers were quite positive, but the underlying details were much less so. That left us scratching our heads wondering wherein lies the truth. What follows are a couple of examples:

Click here to read the entire November 2013 Macro Pulse recap.

The Macro Pulse blog is a commentary about recent economic developments affecting the forest products industry. The monthly Macro Pulse newsletter summarizes the previous 30 days of commentary available on this website.

October 2013 Industrial Production, Capacity Utilization and Capacity

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Industrial production edged down 0.1 percent in October after having increased 0.7 percent in September. Expectations had been for no change. to Manufacturing production rose 0.3 percent in October for its third consecutive monthly gain. The index for mining fell 1.6 percent after having risen for six consecutive months, and the output of utilities dropped 1.1 percent after having jumped 4.5 percent in September. The level of the index for total industrial production in October was equal to its 2007 average and was 3.2 percent above its year-earlier level. Wood Products and Paper output both rose by 0.5 percent.  

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Capacity utilization for the industrial sector declined 0.2 percentage point in October to 78.1 percent, a rate 1.1 percentage points (1.4 percent) above its level of a year earlier and 2.1 percentage points below its long-run (1972-2012) average. Wood Products capacity utilization rose by 0.5 percent while Paper increased by 0.6 percent. 

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Capacity at the all-industries and manufacturing levels moved, respectively, 0.2 and 0.1 percent higher. By contrast, Wood Products remained unchanged while Paper contracted by 0.1 percent.

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.