In February, the monthly average value of the U.S. dollar (USD) appreciated against all three currencies we track: Canada’s “loonie” (+0.6%), the euro (+1.0%), and the Japanese yen (+2.3%). On the broad trade-weighted index basis (goods and services) the USD strengthened by 0.7% against a basket of 26 currencies.
The foregoing comments represent the
general economic views and analysis of
Construction spending during January 2024 was estimated at a seasonally
adjusted annual rate (SAAR) of $2,102.4 billion, 0.2% (±0.8%)* below the
revised December estimate of $2,105.8 billion (originally $2,096.0 billion); expectations
were for +0.2%. The January figure is 11.7% (±1.5%) above the January 2023 SAAR
of $1,882.2 billion; the not-seasonally adjusted YoY comparison (shown in the
table below) is +12.2%.
* 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 $1,623.4 billion, 0.1% (±0.7%)* above
the revised December estimate of $1,622.3 billion (originally $1,619.7
billion):
- Residential. $900.8 billion, +0.2% (±1.3%)* of which
- Home improvement. $336.2 billion, -0.1% (-3.6% YoY);
- Nonresidential. $722.6 billion, -0.1% (±0.7%)*.
Public Construction
Public
construction spending was $479.0 billion, 0.9% (±1.5%)* below the revised
December estimate of $483.5 billion (originally $476.3 billion):
- Educational. $101.5 billion, -0.7% (±3.1%)*;
- Highway. $150.1 billion, -2.1% (±3.6%)*.
Click
here for a
discussion of January’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 second estimate of 4Q2023 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) revised the growth of the U.S. economy to a
seasonally adjusted and annualized rate (SAAR) of +3.21% (+3.3% expected), down
0.06 percentage point (PP) from the “advance” estimate (“4Qv1”) and -1.65PP from
3Q2023.
As with 4Qv1, all four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), Net exports (NetX), and government consumption expenditures (GCE) -- contributed positively to the 4Q percent-change headline. “Compared to 3Q2023, the deceleration in real GDP in 4Q primarily reflected a downturn in private inventory investment and slowdowns in federal government spending, residential fixed investment, and consumer spending,” the BEA wrote, adding, “Imports decelerated.”
As
for details (billions of chained 2017 dollars; all relative to 4Qv1) --
PCE (+$5.1B):
*
Goods (-$7.6B). Spending on durable goods retreated ($7.2B), led by recreational
goods and vehicles (-$6.8B). A decline in nondurable goods (-$0.9B) was led by
clothing and footwear (-$2.9B).
*
Services (+$12.1B). Health care (+$16.5B) dominated the jump in household
consumption expenditures (+$16.7B).
PDI (-$12.3B):
*
Fixed investment (+$7.3B). Gains were balanced between nonresidential (+$3.4B) --
led by structures (+$6.6B) and intellectual property products (+$4.1B) but
partially offset by equipment (-$8.4B) -- and residential investment (+$3.4B).
*
Inventories (-$16.4B). Nonfarm inventories (-$14.2B) led the drop in this
category.
NetX (-$6.7B):
*
Exports (+$0.6B). Goods (+$0.4B) led the upward revision in this category.
*
Imports (-$7.3B). Goods (-$4.0B) held a narrow lead over services (-$3.1B).
Because imports are a subtraction in the calculation of GDP, the downward
revision nudged NetX up relative to 4Qv1.
GCE (+$8.9B):
*
Federal (-$0.9B). Nondefense consumption expenditures (+$-1.8B) led this
category.
*
State and local (+$9.6B). Gross investment (+$9.5B) dominated.
The BEA’s change in real final sales of domestic product -- which ignores inventories -- was revised to +3.49% (+0.28PP from 4Qv1), a level 0.11PP below the 3Q2023 estimate.
“This
all points to more domestic demand growth than previously thought and a hotter
economy in general,” said James
Knightley, chief international economist at ING.
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 January 2024 were at a seasonally adjusted annual rate (SAAR)
of 661,000 units (685,000 expected).
This is 1.5% (±19.9%)* above the revised December rate of 651,000 (originally
664,000 units) and 1.8% (±19.4%)* above the January 2023 SAAR of 649,000 units;
the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table
above) was +3.6%. For longer-term perspectives, NSA sales were 52.4% below the
“housing bubble” peak and 9.0% above the long-term, pre-2000 average.
The
median sales price of new houses sold in January 2024 was $420,700 (+1.8% MoM,
or $7,600). The average sales price was $534,300 (+8.3%, or $40,900). Homes
priced at/above $750,000 comprised 14.0% of sales, up from the year-earlier 12.7%.
* 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 January, single-unit completions fell by 167,000 units (-16.3%). Sales advanced (10,000 units, or +1.5%), but inventory for sale expanded in absolute terms (+4,000 units) but remained constant in months-of-inventory terms.
Existing home sales rose (120,000 units or +3.1%) in January to a SAAR of 4.00 million units (3.97 million expected). The inventory of existing homes for sale expanded in absolute terms (+20,000 units) but shrank in months-of-inventory terms (-0.1 month). Because new sales advanced at a slower pace than resales, the share of total sales comprised of new homes decreased to 14.2%. The median price of previously owned homes sold in January dipped to $379,100 (-0.6% or $2,300).
Housing affordability jumped 7.7 percentage points as the median price of
existing homes for sale in December retreated by $5,200 (-1.3% MoM; +4.0% YoY)
to $387,000. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller
CoreLogic Home Price indices fell to a not-seasonally adjusted monthly change
of -0.4% (but +5.5% YoY).
“U.S.
home prices faced significant headwinds in the fourth quarter of 2023,” said Brian
Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones
Indices. “However, on a seasonally adjusted basis, the S&P Case-Shiller
Home Price Indices continued its streak of seven consecutive record highs in
2023. Ten of 20 markets beat prior records, with San Diego registering an 8.9%
gain and Las Vegas the fastest rising market in December, after accounting for
seasonal impacts.”
“2023
U.S. housing gains haven’t followed such a synchronous pattern since the COVID
housing boom. The term ‘a rising tide lifts all boats’ seems appropriate given
broad-based performance in the U.S. housing sector. All 20 markets reported
yearly gains for the first time this year, with four markets rising over 8%.
Portland eked out a positive annual gain after 11 months of declines.
Regionally, the Midwest and Northeast both experienced the greatest annual
appreciation with 6.7%.”
“Looking back at the year, 2023 appears to have exceeded average annual home price gains over the past 35 years. With trend growth at the national level of 4.7%, a 5.5% return demonstrates solid, steady growth. While we are not experiencing the double-digit gains seen in the previous two years, above-trend growth should be well received considering the rising costs of financing home mortgages. We previously suggested that the surge in home prices during the COVID pandemic could have accelerated home ownership temporarily. The past two years reflect consistent growth slightly above trend, suggesting a more secular shift in home ownership post pandemic. In the short term, meanwhile, we should be able to measure the impact of higher mortgage rates on home prices. Increased financing costs appeared to precipitate home price declines in the fourth quarter, as 15 markets saw lower values compared to September.”
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
January at a seasonally adjusted annual rate (SAAR) of 1,331,000 units (1.470
million expected).
This is 14.8% (±10.2%) below the revised December estimate of 1,562,000
(originally 1.460 million units) and 0.7% (±11.7%)* below the January 2023 SAAR
of 1,340,000 units; the not-seasonally adjusted YoY change (shown in the table
above) was -4.1%.
Single-family
housing starts in January were at a SAAR of 1,004,000; this is 4.7% (±11.6%)*
below the revised December figure of 1,054,000 units (+18.7% YoY).
Multi-family: 327,000 units (-35.6% MoM; -37.2% 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 1,416,000 units. This is 8.1% (±10.0%)* below the
revised December estimate of 1,541,000 (originally 1.574 million units), but 2.8%
(±14.6%)* above the January 2023 SAAR of 1,377,000 units; the NSA comparison: +1.6%
YoY.
Single-family completions were at a SAAR of 857,000; this is 16.3% (±7.9%) below the revised December rate of 1,024,000 units (-17.0% YoY). Multi-family: 559,000 units (+8.1% MoM; +57.1% YoY).
Total
permits were at a SAAR of 1,470,000 units (1.510 million expected). This is 1.5%
below the revised December rate of 1,493,000 (originally 1.495 million units)
but 8.6% above the January 2023 SAAR of 1,354,000 units; the NSA comparison: +11.6
YoY.
Single-family permits were at a rate of 1,015,000; this is 1.6% above the revised December figure of 999,000 units (+42.0% YoY). Multi-family: 455,000 units (-7.9% MoM; -22.1% YoY).
Press
release from NAHB’s Robert Dietz:
“Expectations
that mortgage rates will continue to moderate in the coming months, the
prospect of future rate cuts by the Federal Reserve later this year, and a
protracted lack of existing inventory helped provide a boost to builder
sentiment for the third straight month.
“Builder
confidence in the market for newly built single-family homes climbed four
points to 48 in February, according to the National Association of Home
Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the highest
level since August 2023.
“Buyer
traffic improved at the start of 2024, as even small declines in interest rates
produce a disproportionate positive response among likely home purchasers. And
while mortgage rates still remain too high for many prospective buyers, we
anticipate that due to pent-up demand, many more buyers will enter the
marketplace if mortgage rates continue to decline this year.
“With
expectations of Fed rate cuts in the latter half of 2024, NAHB is forecasting
that single-family starts will rise about 5% this year. But as builders break
ground on more homes, lot availability is expected to be a growing concern,
along with persistent labor shortages. And as a further reminder that the
recovery will be bumpy as buyers remain sensitive to interest rate and
construction cost changes, the 10-year Treasury rate is up more than 40 basis
points since the beginning of the year.
“With
mortgage rates now below 7% since mid-December, more builders are cutting back
on reducing home prices to boost sales. In February, 25% of builders reported
cutting home prices, down from 31% in January and 36% in the last two months of
2023. However, the average price reduction in February held steady at 6% for
the eighth straight month. Meanwhile, the use of sales incentives is also
diminishing. The share of builders offering some form of incentive dropped to
58% in February, down from 62% in January and the lowest share since last
August.”
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 0.3% in January
(+0.2% expected),
after rising 0.2% in December. Over the last 12 months, the all-items index
increased 3.1% before seasonal adjustment.
The
index for shelter continued to rise in January, increasing 0.6% and
contributing over two thirds of the monthly all-items increase. The food index
increased 0.4% in January, as the food at home index increased 0.4% and the
food away from home index rose 0.5% over the month. In contrast, the energy
index fell 0.9% over the month due in large part to the decline in the gasoline
index.
The
index for all items less food and energy rose 0.4% in January. Indexes which
increased in January include shelter, motor vehicle insurance, and medical
care. The index for used cars and trucks and the index for apparel were among
those that decreased over the month.
The
all-items index rose 3.1% for the 12 months ending January, a smaller increase
than the 3.4% increase for the 12 months ending December. The index for all
items less food and energy rose 3.9% over the last 12 months, the same increase
as for the 12 months ending December. The energy index decreased 4.6% for the
12 months ending January, while the food index increased 2.6% over the last
year.
The
Producer Price Index for final demand increased 0.3% in January (+0.1% expected). Final-demand
prices declined 0.1% in December 2023 and advanced 0.1% in November. On an
unadjusted basis, the index for final demand rose 0.9% for the 12 months ended
January 2024.
In
January, the advance in the index for final demand can be traced to a 0.6% rise
in prices for final-demand services. In contrast, the index for final-demand
goods decreased 0.2%.
The
index for final demand less foods, energy, and trade services rose 0.6% in
January 2024, the largest advance since moving up 0.6% in January 2023. For the
12 months ended January 2024, prices for final demand less foods, energy, and
trade services increased 2.6%.
Final Demand
Final-demand
services: The index for final-demand services moved up 0.6% in January, the
largest increase since rising 0.8% in July 2023. In January, most of the
advance is attributable to prices for final-demand services less trade,
transportation, and warehousing, which climbed 0.8%. The index for final-demand
trade services moved up 0.2%. (Trade indexes measure changes in margins
received by wholesalers and retailers.) Conversely, prices for final-demand
transportation and warehousing services fell 0.4%.
Product
detail: A 2.2% increase in the index for hospital outpatient care was a major
factor in the January rise in prices for final-demand services. The indexes for
chemicals and allied products wholesaling, machinery and equipment wholesaling,
portfolio management, traveler accommodation services, and legal services also
moved higher. In contrast, prices for long-distance motor carrying decreased
1.0%. The indexes for computer hardware, software, and supplies retailing and
for engineering services also moved lower.
Final-demand
goods: The index for final-demand goods moved down 0.2% in January, the fourth
consecutive decline. Most of the January decrease is attributable to a 1.7%
drop in prices for final-demand energy. The index for final-demand foods fell
0.3%. Conversely, prices for final-demand goods less foods and energy increased
0.3%.
Product detail: Leading the January decline in the index for final-demand goods, prices for gasoline fell 3.6%. The indexes for electric power; hay, hayseeds, and oilseeds; beef and veal; ethanol; and iron and steel scrap also moved lower. In contrast, prices for communication and related equipment increased 2.4%. The indexes for soft drinks and for liquified petroleum gas also moved higher.
The not-seasonally adjusted price indexes we track were all higher on a MoM basis and all lower 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.
Total industrial production (IP) edged down 0.1% in January (+0.2% expected) after recording no change in December. In January, manufacturing output declined 0.5% and mining output fell 2.3%; winter weather contributed to the declines in both sectors. The index for utilities jumped 6.0%, as demand for heating surged following a move from unusually mild temperatures in December to unusually cold temperatures in January. At 102.6% of its 2017 average, total IP in January was identical to its year-earlier level.
Market Groups
The major market groups posted mixed results in January. The index for consumer goods rose 0.6% with modest gains in its durable and nondurable components. The indexes for business equipment, construction supplies, and business supplies all declined less than 1%; the index for construction supplies was 4.1% below its year-earlier level. Meanwhile, the output of defense and space equipment continued to post solid growth in January and was over 13% above its year-earlier level. Materials output decreased 0.4% in January, as the non-energy component decreased 0.7%, while the energy component edged up 0.1%.
Industry Groups
Manufacturing
output fell 0.5% in January; the index for durable manufacturing edged up 0.1%,
while the index for nondurable manufacturing fell 1.1%. The index for other
manufacturing (publishing and logging) moved down 0.2%. Among durables, the
largest gains were recorded in electrical equipment, appliances, and components
as well as in aerospace and miscellaneous transportation equipment. Computer
and electronic products also moved up in January, in part based on the continued
strength in semiconductor production. Nonmetallic mineral products and primary
metals recorded declines of around 1%; wood products: -0.7%.
Declines were widespread among nondurables, with notable weather-related
decreases in the indexes of petroleum and coal products, chemicals, and
plastics and rubber products; paper: -1.9%.
In January, mining output fell 2.3% amid a weather-related pullback in oil and gas extraction and a drop in coal production. The output of utilities jumped 6.0% as electric and natural gas utilities output increased 4.7 and 13.9%, respectively.
Capacity
utilization (CU) for the industrial sector moved down 0.2 percentage point (PP)
in January to 78.5%, a rate that is 1.1PP below its long-run (1972–2023)
average.
Manufacturing CU decreased to 76.6% in January, a rate that is 1.6PP below its long-run average (wood products: -0.8%; paper: -1.9%). The operating rate for mining decreased 2.3PP to 92.2%, a rate that is 5.7PP above its long-run average. The operating rate for utilities moved up 4.0PP to 74.2%, well below its long-run average of 84.4%.
Capacity
at the all-industries level edged up by 0.1% MoM (+1.4% YoY) to 130.6% of 2017
output. Manufacturing also increased by 0.2% (+1.5% YoY) to 129.6%. Wood products: +0.1% (+0.4% YoY) at 120.2%;
paper products: unchanged (-1.0%
YoY) at 105.3%.
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.
