In September, the monthly average value of the U.S. dollar (USD) appreciated against Canada’s “loonie” (+0.4%), the euro (+2.2%), and the Japanese yen (+2.1%). On the broad trade-weighted index basis (goods and services) the USD strengthened by 1.5% against a basket of 26 currencies.
The foregoing comments represent the
general economic views and analysis of
Construction spending during August 2023 was estimated at a seasonally
adjusted annual rate (SAAR) of $1,983.5 billion, 0.5% (±1.2%)* above the
revised July estimate of $1,973.7 billion (originally $1,972.6 billion); expectations
were for +0.5%. The August figure is 7.4% (±1.8%) above the August 2022 SAAR of
$1,847.3 billion; the not-seasonally adjusted YoY comparison (shown in the
table below) is +6.8%.
During
the first eight months of this year, construction spending amounted to $1,284.7
billion, 4.2% (±1.2%) above the $1,233.4 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.
Private Construction
Spending
on private construction was at a SAAR of $1,551.8 billion, 0.5% (±0.7%)* above
the revised July estimate of $1,544.6 billion (originally $1,548.9 billion):
- Residential. $879.9 billion, +0.6% (±1.3%)* of which
- Home improvement. $348.9 billion, -0.7% (-3.5% YoY);
- Nonresidential. $671.9 billion, +0.3% (±0.7%)*.
Public Construction
Public
construction spending was $431.6 billion, 0.6% (±2.1%)* above the revised July
estimate of $429.1 billion (originally $423.7 billion):
- Educational. $90.6 billion, +0.2% (±3.5%)*;
- Highway. $130.4 billion, +0.4% (±5.1%)*.
Click
here for a
discussion of August’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
In
its third estimate of 2Q2023 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) left the headline growth rate of the U.S.
economy essentially unchanged at a seasonally adjusted and annualized rate
(SAAR) of +2.06% (+2.3% expected), down
0.01 percentage point (PP) from the second estimate (“2Qv2”) and -0.19PP from 1Q2023.
Although
the 2Qv3 headline number was practically identical to 2Qv2, the underlying
components shifted around quite noticeably. In 2Qv1 and 2Qv2, three groupings
of GDP components -- personal consumption expenditures (PCE), net exports
(NetX), and government consumption expenditures (GCE) -- had contributed
positively to the headline while private domestic investment (PDI) detracted
from it. In 2Qv3, by contrast, all four components contributed positively to
the headline -- although the contribution of PCE was cut in half, PDI was increased
by over 50%, NetX was revised marginally positive, and GCE was left nearly unchanged.
There
were several reasons for these outsized revisions:
After accounting for all the revisions, “the updated estimates show that real GDP increased at an average annual rate of 2.2% from 2017 to 2022, 0.1PP higher than the previously published estimate,” the BEA reported.
Given the degree of changes to the historical data, comparing this 2Qv3 report to either prior same-quarter estimates or prior quarters seems a “fool’s errand.” Nonetheless, it appears the main takeaway is that the consumer was far weaker in 2Q than previously portrayed.
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 2023 were at a seasonally adjusted annual rate
(SAAR) of 675,000 units (699,000 expected).
This is 8.7% (±15.6%)* below the revised July rate of 739,000 (originally 714,000
units), but 5.8% (±21.1%)* above the August 2022 SAAR of 638,000 units; the
not-seasonally adjusted (NSA) year-over-year comparison (shown in the table
above) was +5.9%. For longer-term perspectives, NSA sales were 51.4% below the “housing
bubble” peak but 3.3% above the long-term, pre-2000 average.
The
median sales price of new houses sold in August 2023 was $430,300 (-1.4%, or $6,300).
The average sales price was $514,000 (+1.2%, or $6,100). Homes priced at/above
$750,000 comprised 14.8% of sales, down from the year-earlier 15.7%.
* 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 retreated by 68,000 units (-6.6%). Sales also fell (64,000 units, or -8.7%), resulting in inventory for sale expanding in both absolute (+5,000 units) and months-of-inventory (+0.8 month) terms.
Existing home sales slipped (-0.7% or 30,000 units) in August to a SAAR of 4.04 million units (4.10 million expected). The inventory of existing homes for sale contracted in absolute terms (-10,000 units) but was unchanged in months-of-inventory terms. Because resales retreated more slowly than new-home sales, the share of total sales comprised of new homes decreased to 14.3%. The median price of previously owned homes sold in August rose to $407,100 (+0.3% or $1,400).
Housing affordability was unchanged as the median price of existing homes for
sale in July fell by $3,400 (-0.8% MoM; +1.6% YoY) to $412,300. Concurrently,
Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller
CoreLogic Home Price indices decelerated to a not-seasonally adjusted monthly change
of +0.6% (+1.0% YoY).
“U.S.
home prices continued to rally in July 2023,” said Craig
Lazzara, Managing Director at S&P DJI. “Our National Composite rose by
0.6% in July, and now stands 1.0% above its year-ago level. Our 10- and 20-City
Composites each also rose in July 2023, and likewise stand slightly above their
July 2022 levels.
“We
have previously noted that home prices peaked in June 2022 and fell through
January of 2023, declining by 5.0% in those seven months. The increase in
prices that began in January has now erased the earlier decline, so that July
represents a new all-time high for the National Composite. Moreover, this
recovery in home prices is broadly based. As was the case last month, 10 of the
20 cities in our sample have reached all-time high levels. In July, prices rose
in all 20 cities after seasonal adjustment (and in 19 of them before
adjustment).
“That
said, regional differences continue to be striking. On a year-over-year basis,
the Revenge of the Rust Belt continues. The three best-performing metropolitan
areas in July were Chicago (+4.4%), Cleveland (+4.0%), and New York (+3.8%),
repeating the ranking we saw in May and June. The bottom of the leader board
reshuffled somewhat, with Las Vegas (-7.2%) and Phoenix (-6.6%) this month’s
worst performers.
“All
of the cities at all-time highs are in the Eastern or Central time zones, and
with two exceptions (Dallas and Tampa), all of the cities not at all-time highs
are in the Pacific or Mountain time zones. The Midwest (+3.2%) continues as the
nation’s strongest region, followed by the Northeast (+2.3%). The West (-3.8%)
and Southwest (-3.6%) remain the weakest regions.
“On a year-to-date basis, the National Composite has risen 5.3%, which is well above the median full calendar year increase in more than 35 years of data. Although the market’s gains could be truncated by increases in mortgage rates or by general economic weakness, the breadth and strength of this month’s report are consistent with an optimistic view of future results.”
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 1,283,000 units (1.435
million expected).
This is 11.3% (±8.3%) below the revised July estimate of 1,447,000 (originally
1.452 million units) and 14.8% (±9.0%) below the August 2022 SAAR of 1,505,000
units; the not-seasonally adjusted YoY change (shown in the table above) was -15.1%.
Single-family
housing starts in August were at a rate of 941,000; this is 4.3% (±8.8%)* below
the revised July figure of 983,000 units (+2.1% YoY). Multi-family: 342,000
units (-26.3% MoM; -42.2% 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 1,406,000 units. This is 5.3% (±15.1%)* above the
revised July estimate of 1,335,000 (originally 1.321 million units) and 3.8%
(±13.2%)* above the August 2022 SAAR of 1,355,000 units; the NSA comparison: +3.1%
YoY.
Single-family housing completions were at a SAAR of 961,000 units; this is 6.6% (±11.1%)* below the revised July rate of 1,029,000 units (-7.7% YoY). Multi-family: 445,000 units (+45.4% MoM; +33.2% YoY).
Total
permits were at a SAAR of 1,543,000 units (1.440 million expected). This is 6.9%
above the revised July rate of 1,443,000 (originally 1.442 million units) but 2.7%
below the August 2022 rate of 1,586,000 units; the NSA comparison: -0.6% YoY.
Single-family permits were at a SAAR of 949,000; this is 2.0% above the revised July figure of 930,000 units (+7.4% YoY). Multi-family: 594,000 units (+15.8% MoM; -11.4% YoY).
Press
release from NAHB’s Robert Dietz:
“Persistently
high mortgage rates above 7% continue to erode builder confidence, as sentiment
levels have dropped below the key break-even measure of 50 for the first time
in five months.
“Builder
confidence in the market for newly built single-family homes in September fell
five points to 45, according to the National Association of Home Builders
(NAHB)/Wells Fargo Housing Market Index (HMI). This follows a six-point drop in
August.
“The
two-month decline in builder sentiment coincides with when mortgage rates
jumped above 7% and significantly eroded buyer purchasing power. And on the
supply-side front, builders continue to grapple with shortages of construction
workers, buildable lots and distribution transformers, which is further adding
to housing affordability woes. Insurance cost and availability is also a
growing concern for the housing sector.
“Putting
into place policies that will allow builders to increase the housing supply is
the best remedy to ease the nation’s housing affordability crisis and curb
shelter inflation. Shelter inflation posted a 7.3% year-over-year gain in
August, compared to an overall 3.7% consumer inflation reading.
“As
mortgage rates stayed above 7% over the last month, more builders are reducing
home prices again to bolster sales. In September, 32% of builders reported
cutting home prices, compared to 25% in August. That’s the largest share of
builders cutting prices since December 2022 (35%). The average price discount
remains at 6%. Meanwhile, 59% of builders provided sales incentives of all
forms in September, more than any month since April 2023.
“While
more pricing-out is now occurring, the lack of resale inventory at the start of
2023 has shifted the new construction buyer mix. A special question in the
September HMI survey revealed that 42% of new single-family home buyers were
first-time buyers on a year-to-date basis in 2023. This is significantly higher
than the 27% reading from a more normalized market in 2018.”
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.
With July exports of goods and services at $251.7 billion (+1.6% MoM; -3.5% YoY) and imports at $316.7 billion (+1.7% MoM; -4.7% YoY), the net trade deficit was $65.0 billion (+2.0% MoM; -9.3% YoY).
Softwood lumber exports edged down (3 MMBF or -2.8%) in July, along with imports (54 MMBF or -4.4%). Exports were 9 MMBF (-8.0%) below year-earlier levels; imports: 150 MMBF (-11.4%) lower. As a result, the year-over-year (YoY) net export deficit was 141 MMBF (-11.8%) smaller. Also, the average net export deficit for the 12 months ending July 2023 was 3.3% below the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the lumber-trade graph above).
North America (53.4% of total softwood lumber exports; of which Mexico: 36.1%; Canada: 17.3%), Asia (13.0%; especially China: 4.1%), and the Caribbean (26.6%; especially the Dominican Republic: 14.1%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were 78.0% higher than the same month of the prior year. Meanwhile, Canada was the source of most (85.9%) softwood lumber imports into the United States. Imports from Canada were 8.2% lower YTD/YTD. Overall, YTD exports were down 2.9% compared to the prior year; imports: -7.1%.
U.S. softwood lumber export activity through the Gulf customs region represented 41.7% of the U.S. total; West Coast: 32.2%, and Eastern: 18.7%. Mobile (22.2% of the U.S. total), San Diego (16.7%) Laredo (13.3%), and Seattle (12.7%) were the most active districts. At the same time, the Great Lakes customs region handled 55.7% of softwood lumber imports -- most notably the Duluth, MN district (18.5%) -- coming into the United States.
Southern
yellow pine comprised 29.2% of all softwood lumber exports; Douglas-fir (12.8%),
treated lumber (16.1%), other pine (11.2%) and finger-jointed (7.5%) were also
significant.
The foregoing comments represent the
general economic views and analysis of
Total industrial production (IP) increased 0.4% in August (+0.1% expected), and manufacturing output inched up 0.1%. The August reading for manufacturing was held back by a drop of 5% in the output of motor vehicles and parts; factory output elsewhere rose 0.6%. The index for mining moved up 1.4%, and the index for utilities climbed 0.9%. At 103.5% of its 2017 average, total industrial production in August was 0.2% above its year-earlier level.
Market Groups
In August, the drop in the output of motor vehicles and parts contributed to declines in the indexes for consumer durables and transit equipment. Most of the other major market groups posted increases in August. The index for consumer nondurables moved up 0.4%, and the index for materials advanced 0.7%. Within materials, energy materials rose 1.5%, while non-energy materials edged up 0.1%. The production of defense and space equipment jumped 3.5% in August and was up over 10% from its year-earlier level.
Industry Groups
Manufacturing
output rose 0.1% in August for its second consecutive monthly gain but was 0.6%
below its year-earlier level (NAICS manufacturing: +0.1% MoM; -0.7% YoY).
The index for durable manufacturing edged up 0.1% in August, and the index for
nondurable manufacturing increased 0.2%. Other manufacturing (publishing and
logging) moved down 0.2%.
Within
durable manufacturing, gains of more than 1% were recorded by primary metals
(1.6%); machinery (2.0%); aerospace and miscellaneous transportation equipment
(3.3%); furniture and related products (1.3%); and miscellaneous (1.5%). Apart
from the large drop in the index for motor vehicles and parts, small
declines—all less than 1%—were registered by wood products (-0.4%);
nonmetallic mineral products; fabricated metal products; and electrical
equipment, appliances, and components. Despite the August drop in the output of
motor vehicles and parts, the index was 5.9% above its year-earlier level.
Within nondurable manufacturing, gains of 1% or more in August in the indexes
for printing and support and for chemicals were partially offset by declines
elsewhere (e.g., paper products: -0.3%).
In August, mining output rose 1.4% and was 3.9% above its year-earlier level. The August gain in mining resulted primarily from an increase of over 3% in the index for oil and gas extraction. The output of utilities rose 0.9%.
Capacity
utilization (CU) moved up to 79.7% in August, in line with its long-run
(1972–2022) average.
Manufacturing CU remained at 77.9% in August, a rate that is 0.3 percentage point (PP) below its long-run (1972–2022) average (wood products: -0.4%; paper: -0.2%). The operating rate for mining jumped 1.4PP to 94.3%, 7.9PP above its long-run average. The operating rate for utilities rose 0.4PP to 73.0%, well below its long-run average.
Capacity
at the all-industries level increased by 0.1% MoM (+1.6% YoY) to 129.9% of 2017
output. Manufacturing also edged up by 0.1% (+1.4% YoY) to 128.8%. Wood products: less than +0.1% (+0.9%
YoY) to 120.1%; paper products: -0.1%
(-0.9% YoY) to 105.6%.
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.
