In July, the monthly average value of the U.S. dollar (USD) appreciated versus Canada’s “loonie” (+1.0%), the euro (+3.9%), and the Japanese yen (+2.1%). On the broad trade-weighted index basis (goods and services) the USD strengthened by 2.2% against a basket of 26 currencies.
The foregoing comments represent the
general economic views and analysis of
Construction spending during June 2022 was estimated at a seasonally
adjusted annual rate (SAAR) of $1,762.3 billion, 1.1% (±1.0%) below the revised
May estimate of $1,781.9 billion (originally $1,779.8 billion); expectations
were for an 0.2% increase. The June figure is 8.3% (±1.5%) above the June 2021
SAAR of $1,628.0 billion; the not-seasonally adjusted YoY comparison (shown
in the table below) is +8.7%.
During
the first six months of this year, construction spending amounted to $848.2
billion, 10.7% (±1.0%) above the $766.0 billion for the same period in 2021.
Private Construction
Spending
on private construction was at a SAAR of $1,416.4 billion, 1.3% (±0.5%) below
the revised May estimate of $1,434.4 billion (originally $1,394.7 billion):
- Residential. $923.7 billion, -1.6% (±1.3%) of which
- Home improvement. $355.6 billion, -0.3% (+33.4% YoY);
- Nonresidential. $492.7 billion, -0.5% (±0.5%)*.
Public Construction
Public
construction spending was $345.9 billion, 0.5% (±1.8%)* below the revised May
estimate of $347.5 billion (originally $343.8 billion):
- Educational. $77.5 billion, -0.7% (±3.0%)*
- Highway. $97.4 billion, -2.7% (±5.1%)*.
* 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.
Click
here for a
discussion of June’s new residential permits, starts and completions. Click here for a
discussion of new and existing home sales, inventories and prices.
The foregoing comments represent the
general economic views and analysis of
The
Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 2Q2022
U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate
(SAAR) of -0.93% (+0.5% expected), up
0.64 percentage point (PP) from 1Q2022’s -1.57%.
On
a year-over-year (YoY) basis, which should eliminate any residual seasonality
distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 2Q2022 was
1.6% higher than in 2Q2021; that growth rate was slower (-1.9PP) than 1Q2022’s +3.5%
relative to 1Q2021.
Two groupings of GDP components -- personal consumption expenditures (PCE) and net exports (NetX) -- contributed positively to the 2Q headline. However, that combination was more than offset by private domestic investment (PDI) and government consumption expenditures (GCE).
As
for details (all comparisons to 1Q2022) --
PCE (Contributed 0.70PP to the headline, down 0.54PP from 1Q):
*
Goods. Spending on non-durable goods rose (+$81.7 billion, nominal), led by
gasoline and other energy goods (+$56.0B). Spending on durable goods fell (-$6.6B),
dominated by recreational goods and vehicles (-$10.4B).
*
Services. Gains (+$255.3B) were broad-based, led by housing and utilities (+$62.6B)
and food services and accommodations (+$59.1B).
PDI (Subtracted 2.73PP, down 3.66PP from 1Q):
*
Fixed investment. Gains in this category (+$57.9B) were led by intellectual
property products (+$43.2B); residential investment fell (-$6.4B).
*
Inventories. Nonfarm inventories shrank by $118.5B; farm: -$0.7B.
NetX (Added 1.43PP, up 4.66PP from 1Q):
*
Exports. Goods exports rose by $191.7B; services: +$55.4B.
*
Imports. Goods imports rose $98.5B; services: +$48.9B.
GCE (Subtracted 0.33PP, up 0.18PP from 1Q). Although GCE fell on a QoQ
percentage basis, the category saw gains in absolute terms -- primarily in
state and local consumption expenditures (+$85.0B)
Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories, was +1.08% (up 2.30PP from 1Q).
Consumer
Metric Institute’s Rick Davis
summarized the key points of this report as follows:
--
Consumer spending on goods moved deeper into contraction, with the growth rate
for all consumer spending declining by about a half percent.
--
Commercial spending on fixed investment also began to contract, primary due to
weakening residential construction.
--
Real household income and savings rates continued to shrink. The consumer is in
no position to quickly reverse the course of the headline number.
--
The BEA continues to under-recognize inflation. The headline number would have
been contracting at a far more dramatic -3.18% rate if the BEA had used
inflation data from the Bureau of Labor Statistics (BLS). [Ed note: CMI uses end-of-quarter
CPI values in its estimation of GDP change; substituting quarterly average CPI
values (which we believe more completely encompasses conditions during the
respective quarters) yields a less-dire -2.43%.]
“At
face value this is the second consecutive quarter that the headline number
indicated economic contraction,” Davis wrote. “However, the National Bureau of
Economic Research (NBER) is the official arbiter of recessions in the US, and
they are not especially timely in making their calls. Meanwhile, politicians
(and even the FED) will be busy spinning other (currently more favorable)
definitions of recessions, including unemployment rates.
“Our
own go-to source of wisdom, Douglas Adams, once wrote: ‘If it looks like a
duck, and quacks like a duck, we have at least to consider the possibility that
we have a small aquatic bird of the family Anatidae on our hands.’ We couldn't
agree more,” Davis concluded.
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
Sales of new
single-family houses in June 2022 were at a seasonally adjusted annual rate (SAAR)
of 590,000 units (664,000 expected). This
is 8.1% (±15.0%)* below the revised May rate of 642,000 (originally 696,000
units) and 17.4% (±11.6%) below the June 2021 SAAR of 714,000 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 57.5% below the “housing
bubble” peak and 6.3% below the long-term, pre-2000 average.
The
median sales price of new houses sold in June slumped (-9.5% or $42,100) to $402,400.
The average sales price also tumbled (-11.1% or $57,200) to $456,800. Homes
priced at/above $750,000 were 4.1% of sales, down from the year-earlier 6.6%.
* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.
As mentioned in our post about housing permits, starts and completions in June, single-unit completions fell by 43,000 units (-4.1%). Sales also retreated (52,000 units; -8.1%), resulting in inventory for sale expanding in absolute (+11,000 units) and months-of-inventory (+0.9 month) terms.
Existing home sales retreated for a fifth month in June (290,000 units or -5.4%) to a SAAR of 5.12 million units (5.395 million expected). Inventory of existing homes for sale expanded in both absolute (+111,000 units) and months-of-inventory (+0.4 month) terms. Because resales retreated at a slower rate than new-home sales, the share of total sales comprised of new homes slipped to 10.3%. The median price of previously owned homes sold in June advanced to a record $416,000 ($7,600 or +1.9% MoM).
Housing affordability dropped (5.6 index points) as the median price of
existing homes for sale in May rose by $12,500 (+3.1% MoM; +14.6 YoY) to $414,200.
Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller
CoreLogic Home Price indices rose at a not-seasonally adjusted monthly change
of +1.9% (+19.7% YoY).
“Housing
data for May 2022 continued strong, as price gains decelerated slightly from
very high levels,” said Craig
Lazzara, Managing Director at S&P DJI. “The National Composite Index
rose by 19.7% for the 12 months ended May, down from April’s 20.6%
year-over-year gain. We see a similar pattern in the 10-City Composite (up
19.0% in May vs. 19.6% in April) and in the 20-City Composite (+20.5% vs.
+21.2%). Despite this deceleration, growth rates are still extremely robust,
with all three composites at or above the 98th percentile historically.
“The
market’s strength continues to be broadly based, as all 20 cities recorded
double-digit price increases for the 12 months ended in May. May’s gains ranked
in the top quintile of historical experience for 19 cities, and in the top
decile for 17 of them. However, at the city level we also see evidence of
deceleration. Price gains for May exceeded those for April in only four cities.
As recently as February of this year, all 20 cities were accelerating.
“Tampa
(+36.1%) was the fastest growing city for the third consecutive month, with
Miami (+34.0%) in second place. In May, Dallas fought its way into the top
three with a gain of 30.8%. Prices continued strongest in the South and
Southeast, both of which recorded 30.7% gains year-over-year.
“We’ve noted previously that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that was ongoing as our May data were gathered. Accordingly, a more-challenging macroeconomic environment may not support extraordinary home price growth for much longer.”
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.
Builders
started construction of privately-owned housing units
in June at a seasonally adjusted annual rate (SAAR) of 1,559,000 units (1.588
million expected).
This is 2.0% (±9.0%)* below the revised May estimate of 1,591,000 (originally
1.549 million units) and 6.3% (±10.2%)* below the June 2021 SAAR of 1,664,000
units; the not-seasonally adjusted YoY change (shown in the table above) was -7.5%.
Single-family
housing starts in June were at a SAAR of 982,000; this is 8.1% (±12.2%)* below
the revised May figure of 1,068,000 units (-16.3% YoY). Multi-family: 577,000
units (+10.3% MoM; +15.7% YoY).
* 90% confidence interval (CI) is not statistically different from zero. The Census Bureau does not publish CIs for the entire multi-unit category.
Total
completions were at a SAAR of 1,365,000 units.
This is 4.6% (±11.7%)* below the revised May estimate of 1,431,000 (originally
1.465 million units), but 4.6% (±13.4%)* above the June 2021 SAAR of 1,305,000
units; the NSA comparison: +2.9% YoY.
Single-family housing completions were at a SAAR of 996,000; this is 4.1% (±11.1%)* below the revised May rate of 1,039,000 units (+6.4% YoY). Multi-family: 369,000 units (-5.9% MoM; -5.1% YoY).
Total
permits were at a SAAR of 1,685,000 units (1.666 million expected). This is 0.6% below the revised May rate of
1,695,000 (originally 1.695 million units) but 1.4% above the June 2021 SAAR of
1,661,000 units; the NSA comparison: -0.6% YoY.
Single-family permits were at a SAAR of 967,000 units; this is 8.0% below the revised May figure of 1,051,000 units (-13.9% YoY). Multi-family: 718,000 units (+11.5% MoM; +26.9% YoY).
Builder
confidence plunged in July as high inflation and increased interest rates
stalled the housing market by dramatically slowing sales and buyer traffic. In
a further sign of a weakening housing market, builder confidence in the market
for newly built single-family homes posted its seventh straight monthly decline
in July, falling 12 points to 55, according to the National Association of Home
Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This marks the lowest
HMI reading since May 2020 and the largest single-month drop in the history of
the HMI, except for the 42-point drop in April 2020.
“Production
bottlenecks, rising home building costs and high inflation are causing many
builders to halt construction because the cost of land, construction and
financing exceeds the market value of the home,” said NAHB Chairman Jerry
Konter. “In another sign of a softening market, 13% of builders in the HMI
survey reported reducing home prices in the past month to bolster sales and/or
limit cancellations.”
"Affordability
is the greatest challenge facing the housing market,” said NAHB Chief Economist
Robert Dietz. “Significant segments of the home buying population are priced
out of the market. Policymakers must address supply-side issues to help
builders produce more affordable housing.”
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.
In the wake of annual revisions, total industrial production (IP) was shown to have moved down 0.2% in June (+0.1% expected) but advanced at an annual rate of 6.1% for 2Q as a whole. Manufacturing output declined 0.5% for a second consecutive month in June; even so, it rose at an annual rate of 4.2% in 2Q. In June, the index for mining advanced 1.7%, while the index for utilities fell 1.4%. At 104.4% of its 2017 average, total industrial production in June was 4.2% above its year-earlier level.
Industry Groups
Manufacturing
output fell 0.5% in June, with decreases for durable and nondurable
manufacturing of 0.3% and 0.8%, respectively. Within durable manufacturing,
declines of more than 1% in primary metals, machinery, and motor vehicles and
parts outweighed gains of more than 1% in miscellaneous manufacturing and in
electrical equipment, appliances, and components (wood products: +0.7%).
Within nondurable manufacturing, every group except for two posted a decline of
at least 0.8%; apparel and leather recorded a gain of 2.5%, while chemicals
registered a dip of 0.1% (paper: -0.8%). The index for other
manufacturing (publishing and logging) moved down 0.2%.
The output of mining gained 1.7% in June and rose at an annual rate of 14.5% in 2Q; strength in the oil and gas sector has been the primary impetus for the recent gains in mining. The index for utilities fell 1.4% in June but grew at an annual rate of 5.1% in 2Q.
Capacity
utilization (CU) decreased 0.3 percentage point (PP) in June to 80.0%, a rate
that is 0.4PP above its long-run (1972–2021) average.
Manufacturing CU fell 0.5PP in June to 79.3%, 1.1PP above its long-run average (wood products: +0.7%; paper: -0.7%). The operating rate for mining jumped 1.2PP to 88.0%, 5.3PP above its year-earlier level and 1.7PP above its long-run average. Conversely, the operating rate for utilities fell 1.2PP to 75.8%, 8.9PP below its long-run average.
Capacity
at the all-industries level increased by 0.2% MoM (+1.1% YoY) to 130.4% of 2017
output. Manufacturing edged up by 0.1% (+0.8% YoY) to 128.7%. Wood products: +0.1% (+1.6% YoY) to 126.2%;
paper: -0.1% (-0.1% YoY) to 110.3%.
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.
The
Consumer Price Index for All Urban Consumers (CPI-U) increased 1.3% in June (+1.1%
expected)
after rising 1.0% in May. The increase was broad-based, with the indexes for
gasoline, shelter, and food being the largest contributors. The energy index
rose 7.5% over the month and contributed nearly half of the all-items increase,
with the gasoline index rising 11.2% and the other major component indexes also
rising. The food index rose 1.0% in June, as did the food at home index.
The
index for all items less food and energy rose 0.7% in June, after increasing
0.6% in the preceding two months. While almost all major component indexes
increased over the month, the largest contributors were the indexes for
shelter, used cars and trucks, medical care, motor vehicle insurance, and new
vehicles. The indexes for motor vehicle repair, apparel, household furnishings
and operations, and recreation also increased in June. Among the few major component
indexes to decline in June were lodging away from home and airline fares.
The
all-items index increased 9.1% for the 12 months ending June, the largest
12-month increase since the period ending November 1981. The index for all
items less food and energy rose 5.9% over the last 12 months. The energy index
rose 41.6% over the last year, the largest 12-month increase since the period
ending April 1980. The food index increased 10.4% for the 12-months ending
June, the largest 12-month increase since the period ending February 1981.
The
Producer Price Index for final demand (PPI-FD) increased 1.1% in June (+0.8% expected).
This rise followed advances of 0.9% in May and 0.4% in April. Three-fourths of
the advance in the index for final demand was due to a 2.4% rise in prices for
final demand goods. The index for final demand services increased 0.4%.
Final
demand prices moved up 11.3% for the 12 months ended in June, the largest
increase since a record 11.6% jump in March 2022.Prices for final demand less
foods, energy, and trade services moved up 0.3% in June after advancing 0.4% in
both May and April. For the 12 months ended in June, the index for final demand
less foods, energy, and trade services rose 6.4%.
Final Demand
Final
demand goods: The index for final demand goods moved up 2.4% in June, the sixth
consecutive rise. Nearly 90% of the June increase can be traced to a 10.0% jump
in prices for final demand energy. The indexes for final demand goods less
foods and energy and for final demand foods advanced 0.5% and 0.1%,
respectively.
Product
detail: Over half of the June increase in the index for final demand goods is
attributable to gasoline prices, which jumped 18.5%. The indexes for diesel
fuel, electric power, residential natural gas, motor vehicles and equipment,
and processed young chickens also moved higher. In contrast, prices for chicken
eggs dropped 30.2%. The indexes for iron and steel scrap and for jet fuel also
decreased.
Final
demand services: The index for final demand services rose 0.4% in June after
climbing 0.6% in May. Two-thirds of the broad-based advance in June can be
traced to a 0.8% increase in margins for final demand trade services. (Trade
indexes measure changes in margins received by wholesalers and retailers.)
Prices for final demand services less trade, transportation, and warehousing
and for final demand transportation and warehousing services also moved higher,
0.1% and 0.8%, respectively.
Product detail: Over 30% of the June advance in the index for final demand services can be traced to margins for food and alcohol retailing, which rose 3.8%. The indexes for machinery and equipment wholesaling, outpatient care (partial), transportation of passengers (partial), guestroom rental, and hospital inpatient care also increased. Conversely, prices for portfolio management declined 2.7%. The indexes for automobile retailing (partial) and for long-distance motor carrying also moved lower.
The not-seasonally adjusted price indexes we track were mixed both MoM and YoY.
The foregoing comments represent the
general economic views and analysis of
