In September, the monthly average value of the U.S. dollar (USD) appreciated versus Canada’s “loonie” (+3.3%), euro (+2.3%), and the Japanese yen (+5.9%). On the broad trade-weighted index basis (goods and services) the USD strengthened by 2.7% against a basket of 26 currencies.
The foregoing comments represent the
general economic views and analysis of
Construction spending during August 2022 was estimated at a seasonally
adjusted annual rate (SAAR) of $1,781.3 billion, 0.7% (±1.0%)* below the
revised July estimate of $1,793.5 billion (originally $1,777.3 billion); expectations
were for -0.1%. The August figure is 8.5% (±1.6%) above the August 2021
estimate of $1,641.6 billion; the not-seasonally adjusted YoY comparison (shown
in the table below) is +8.8%.
During
the first eight months of this year, construction spending amounted to $1,183.8
billion, 10.9% (±1.0%) above the $1,067.4 billion for the same period in 2021.
* 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.
Private Construction
Spending
on private construction was at a SAAR of $1,426.0 billion, 0.6% (±0.7%)* below
the revised July estimate of $1,435.2 billion (originally $1,424.2 billion):
- Residential. $912.9 billion, -0.9% (±1.3%)* of which
- Home improvement. $375.4 billion, +1.0% (+35.8% YoY);
- Nonresidential. $513.1 billion, -0.1% (±0.7%)*.
Public Construction
Public
construction spending was $355.3 billion, 0.8% (±1.8%)* below the revised July
estimate of $358.3 billion (originally $353.1 billion):
- Educational. $77.6 billion, -0.4% (±1.8%)*
- Highway. $102.0 billion, -1.4% (±4.8%)*.
Click
here for a
discussion of August’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
Along
with revisions to data extending back through 1Q2017, in its third estimate of 2Q2022
gross domestic product (GDP) the Bureau of Economic Analysis (BEA) fine-tuned the growth rate of the U.S. economy
to a seasonally adjusted and annualized rate (SAAR) of -0.58% (-0.6% expected), essentially
unchanged from the second estimate (“2Qv2”) and +1.06 percentage points (PP) from
the revised 1Q2022.
As with prior 2Q reports, two groupings of GDP components -- private domestic investment (PDI) and government consumption expenditures (GCE) -- pulled the headline estimate “into the red;” those negative contributions were partially offset by personal consumption expenditures (PCE) and net exports (NetX). The update primarily reflected an upward revision to consumer spending that was countered by further deterioration in PDI and a moderation in NetX.
As
for details (all relative to 2Qv2):
PCE. The upward revision to consumer spending (+$168.0 billion, real) was led
by services (+$126.3B). Other services (+$65.7B), health care (+$29.3B), and
recreation services (+$27.8B) dominated the services category. Spending on
goods also increased (+$33.0B); recreational goods and vehicles (+$55.3B),
furnishings and durable household equipment (+$28.5B), and gasoline and other
energy goods (+$17.9B) were the top three movers in this category.
PDI. Equipment fixed investment (-$92.8B) dominated the downward revision
to PDI. This was partially offset by upward revisions to residential investment
(+$2.4B) and inventories (+$26.3B).
NetX. Exports were boosted by $58.0B while imports were revised up by $14.0B.
GCE. Upward revisions to nondefense federal consumption expenditures (+$42.7B) and state and local consumption expenditures (+$5.0B) made this category’s contribution to headline GDP change less negative relative to both 2Qv2 and 1Q.
Consumer
Metrics Institute’s Rick Davis
summarized the key points of this report as follows:
--
The headline number probably benefits substantially from under reporting of
inflation. For this estimate the BEA assumed an effective annualized deflator
of 9.10%. During the same quarter the inflation recorded by the Bureau of Labor
Statistics (BLS) in its CPI-U index (quarter average over quarter average) was
significantly higher at 10.5%. Underestimating inflation results in optimistic
growth rates, and if the BEA’s nominal data was deflated using CPI-U inflation
information the headline growth number would have been -1.86%.
--
Although the BEA’s “bottom line” number (real final sales, which excludes
inventories) is positive, there is weakness in consumer spending on goods and
commercial fixed investments.
--
Household real disposable income continues to get hammered. The most telling
number is household savings, which is plunging as household budgets continue to
get squeezed.
“The
next report, covering the third quarter, will be released just prior to the
mid-term elections,” Davis observed. “It should be interesting.”
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 August 2022 were at a seasonally adjusted annual rate
(SAAR) of 685,000 units (498,000 expected).
This is 28.8% (±18.3%) above the revised July rate of 532,000 (originally 511,000
units), but 0.1% (±16.5%)* below the August 2021 SAAR of 686,000 units; the
not-seasonally adjusted (NSA) year-over-year comparison (shown in the table
above) was 0.0%. For longer-term perspectives, NSA sales were 50.7% below the
“housing bubble” peak and 5.2% above the long-term, pre-2000 average.
The
median sales price of new houses sold in August 2022 was $436,800 (-6.3%, or $29,500). The average sales price was $521,800 (-6.3%
or $34,900). Homes priced at/above $750,000 were 12.7% of sales, up from the
year-earlier 9.1%.
* 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 August, single-unit completions ticked up by 4,000 units (+0.4%). Sales jumped (153,000 units), resulting in inventory for sale expanding on an absolute basis (+2,000 units) but shrinking in months-of-inventory terms (-2.3 months).
Existing home sales retreated for a seventh month in August (-0.4% or 20,000 units) to a SAAR of 4.80 million units (4.70 million expected). Inventory of existing homes for sale contracted in absolute terms (-20,000 units) but was unchanged on a months-of-inventory basis. Because resales retreated while new-home sales rose, the share of total sales comprised of new homes jumped to 12.5%. The median price of previously owned homes sold in August fell to $389,500 (-2.4% or $9,700).
Housing affordability nudged higher (+3.1 index points) as the median price
of existing homes for sale in July fell by $10,300 (-2.4% MoM; +10.6 YoY) to a
new record of $410,600. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller
CoreLogic Home Price indices declined at a not-seasonally adjusted monthly change
of -0.3% (+15.8% YoY) -- the first MoM drop since January 2019.
“Although
U.S. housing prices remain substantially above their year-ago levels, July’s
report reflects a forceful deceleration,” said Craig
Lazzara, Managing Director at S&P DJI. “For example, while the National
Composite Index rose by 15.8% in the 12 months ended July 2022, its
year-over-year price rise in June was 18.1%. The -2.3% difference between those
two monthly rates of gain is the largest deceleration in the history of the
index. We saw similar patterns in our 10-City Composite (up 14.9% in July vs.
17.4% in June) and our 20-City Composite (up 16.1% in July vs. 18.7% in June).
On a month-over-month basis, all three composites declined in July.
“The
theme of strong but decelerating prices was reflected across all 20 cities.
July’s year-over-year price change was positive for each one of the 20 cities,
with a median gain of 15.0%, but in every case July’s gain was less than
June’s. Prices declined in 12 cities on a month-to-month basis. Tampa (+31.8%)
narrowly edged Miami (+31.7%) to remain at the top of the league table for the
fifth consecutive month, with Dallas (+24.7%) holding on to third place. As has
been the case for the last several months, price growth was strongest in the
Southeast (+27.5%) and South (+26.9%).
“As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day. Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate.”
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 August at a seasonally adjusted annual rate (SAAR) of 1,575,000 units (1.440
million expected). This is 12.2% (±14.9%)* above the revised
July estimate of 1,404,000 (originally 1.446 million units, but 0.1% (±9.6%)*
below the August 2021 SAAR of 1,576,000 units; the not-seasonally adjusted YoY
change (shown in the table above) was +0.4%..
Single-family
housing starts in August were at a SAAR of 935,000; this is 3.4% (±10.1%)*
above the revised July figure of 904,000 units (-15.2% YoY). Multi-family:
640,000 units (+28.0% MoM; +36.7% 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 1,342,000.
This is 5.4% (±12.1%)* below the revised July estimate of 1,419,000 (originally
1.424 million units), but 3.1% (±10.5%)* above the August 2021 SAAR of
1,302,000 units; the NSA comparison: +2.7% YoY.
Single-family completions were at a SAAR of 1,017,000; this is 0.4% (±12.8%)* above the revised July rate of 1,013,000 units (+7.1% YoY). Multi-family: 325,000 units (-20.0% MoM; -7.8% YoY).
Total
permits were at a SAAR of 1,517,000 units (1.621 million expected). This is 10.0% below the revised July rate of
1,685,000 (originally 1.674 million units) and 14.4% below the August 2021 SAAR
of 1,772,000 units; the NSA comparison: -13.0% YoY.
Single-family permits were at a SAAR of 899,000; this is 3.5% below the revised July figure of 932,000 units (-14.1% YoY). Multi-family: 618,000 units (-17.9% MoM; -11.3% YoY).
In
another sign that the slowdown in the housing market continues, builder
sentiment fell for the ninth straight month in September as the combination of
elevated interest rates, persistent building material supply chain disruptions
and high home prices continue to take a toll on affordability.
Builder
confidence in the market for newly built single-family homes fell three points
in September to 46, the lowest level since May 2014 with the exception of the
spring of 2020, according to the National Association of Home Builders
(NAHB)/Wells Fargo Housing Market Index (HMI).
“Buyer
traffic is weak in many markets as more consumers remain on the sidelines due
to high mortgage rates and home prices that are putting a new home purchase out
of financial reach for many households,” said NAHB Chairman Jerry
Konter. “In another indicator of a weakening market, 24% of builders
reported reducing home prices, up from 19% last month.”
“Builder
sentiment has declined every month in 2022, and the housing recession shows no
signs of abating as builders continue to grapple with elevated construction
costs and an aggressive monetary policy from the Federal Reserve that helped
pushed mortgage rates above 6% last week, the highest level since 2008,” said
NAHB Chief Economist Robert Dietz. “In this soft market, more than half of the
builders in our survey reported using incentives to bolster sales, including
mortgage rate buydowns, free amenities and price reductions.”
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.
Total industrial production (IP) decreased 0.2% in August (+0.2% expected). Manufacturing output edged up 0.1% after increasing 0.6% in July. The index for mining was unchanged, and the index for utilities decreased 2.3%. At 104.5% of its 2017 average, total IP in August was 3.7% above its year-earlier level.
Market Groups
The indexes for the major market groups were mixed
in August. Modest losses were registered by consumer goods, construction
supplies, and materials, while gains were posted by business equipment, defense
and space equipment, and business supplies. The cutback for consumer goods was
concentrated in consumer energy products, whereas the decline for materials was
fairly widespread. The largest decrease among materials groups, 2.0%, was in
consumer parts. Within business equipment, the largest increase came in
information processing and related equipment.
Industry Groups
Manufacturing
output moved up 0.1% in August and was 3.3% above its year-earlier level. The
index for durable manufacturing was unchanged, the index for nondurable
manufacturing rose 0.2%, and the index for other manufacturing (publishing and
logging) edged down 0.1%.
Within
durables, gains of at least 1.0% were recorded by machinery, by computer and
electronic products, by aerospace and miscellaneous transportation equipment,
and by miscellaneous manufacturing. Losses of more than 1% were registered by wood
products (-1.7%), by motor vehicles and parts, and by furniture and
related products. Within nondurables, increases for petroleum and coal
products, paper (+0.9%), and chemicals offset decreases for most
other industries.
Mining output was unchanged in August after posting five consecutive monthly gains. The decrease of 2.3% for utilities reflected a decline for electric utilities moderated by a small increase for natural gas utilities.
Capacity
utilization (CU) declined 0.2 percentage point (PP) in August to 80.0%, a rate
that is 0.4PP above its long-run (1972–2021) average.
Manufacturing CU was unchanged in August at 79.6%, a rate that is 1.4PP above its long-run average (wood products: -1.8%; paper: +0.9%). The operating rate for mining fell 0.3PP to 88.1%, while the operating rate for utilities fell 1.9PP to 72.8%. Capacity utilization for mining was nearly 2PP above its long-run average, but the rate for utilities remained substantially below its long-run average.
Capacity
at the all-industries level increased by 0.1% MoM (+1.4% YoY) to 130.7% of 2017
output. Manufacturing edged up by 0.1% (+1.0% YoY) to 129.0%. Wood products: 0.0% (+1.3% YoY) at 126.3%;
paper: -0.1% (-0.3% YoY) to 110.1%.
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) rose 0.1% in August (-0.1%
expected)
after being unchanged in July. Over the last 12 months, the all-items index
increased 8.3% before seasonal adjustment.
Increases
in the shelter, food, and medical care indexes were the largest of many
contributors to the broad-based monthly all-items increase. These increases
were mostly offset by a 10.6% decline in the gasoline index. The food index
continued to rise, increasing 0.8% over the month as the food at home index
rose 0.7%. The energy index fell 5.0% over the month as the gasoline index
declined, but the electricity and natural gas indexes increased.
The
index for all items less food and energy rose 0.6% in August, a larger increase
than in July. The indexes for shelter, medical care, household furnishings and
operations, new vehicles, motor vehicle insurance, and education were among
those that increased over the month. There were some indexes that declined in
August, including those for airline fares, communication, and used cars and
trucks.
The
all-items index increased 8.3% for the 12 months ending August, a smaller
figure than the 8.5% increase for the period ending July. The all-items index less
food and energy rose 6.3% over the last 12 months. The energy index increased
23.8% for the 12 months ending August, a smaller increase than the 32.9%
increase for the period ending July. The food index increased 11.4% over the
last year, the largest 12-month increase since the period ending May 1979.
The
Producer Price Index for final demand (PPI-FD) fell 0.1% in August (-0.1% expected). Final
demand prices decreased 0.4% in July and advanced 1.0% in June. On an
unadjusted basis, the index for final demand moved up 8.7% for the 12 months
ended in August.
In
August, the decrease in the index for final demand is attributable to a 1.2%
decline in prices for final demand goods. In contrast, the index for final
demand services advanced 0.4%.
Prices
for final demand less foods, energy, and trade services moved up 0.2% in August
following a 0.1% rise in July. For the 12 months ended in August, the index for
final demand less foods, energy, and trade services increased 5.6%.
Final Demand
Final
demand goods: The index for final demand goods fell 1.2% in August after
declining 1.7% in July. The August decrease can be traced to a 6.0% drop in
prices for final demand energy. Conversely, the index for final demand goods
less foods and energy rose 0.2%, while prices for final demand foods were
unchanged.
Product
detail: In August, over three-quarters of the decrease in prices for final
demand goods is attributable to the index for gasoline, which fell 12.7%.
Prices for diesel fuel, jet fuel, chicken eggs, primary basic organic
chemicals, and home heating oil also declined. In contrast, the index for
construction machinery and equipment increased 2.6%. Prices for beverages and
beverage materials and for electric power also rose.
Final
demand services: The index for final demand services moved up 0.4% in August,
the fourth consecutive rise. Sixty percent of the August advance 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 also moved
higher, rising 0.3%. Conversely, the index for final demand transportation and
warehousing services decreased 0.2%.
Product detail: Forty percent of the increase in prices for final demand services can be attributed to margins for fuels and lubricants retailing, which rose 14.2%. The indexes for securities brokerage, dealing, investment advice, and related services; loan services (partial); transportation of passengers (partial); portfolio management; and chemicals and allied products wholesaling also moved higher. In contrast, prices for truck transportation of freight decreased 1.9%. The indexes for guestroom rental and for food and alcohol retailing also fell.
Most of the not-seasonally adjusted price indexes we track retreated MoM, but all advanced YoY.
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.
