Tuesday, February 28, 2017

Fourth Quarter GDP Grew at 1.9%

Real GDP for the fourth quarter of 2016 grew at a seasonally adjusted annual rate of 1.9%, according to the Bureau of Economic Analysis’s revised estimate, unchanged from the advance estimate. The general picture of economic growth remained the same.
The change in GDP reflected an upward revision to personal consumption expenditures that was offset by downward revisions to nonresidential fixed investment and state and local government spending.
The upward revision to consumer spending reflected upward revisions to both goods and services. The nonresidential fixed investment downward revision was due to downward revisions to equipment and to intellectual property products.

Real GDP grew at 1.6% in 2016, a slower pace than the 2.6% rate in 2015. The yearly increase was due to positive contributions from PCE, residential fixed investment, state and local government spending, and exports that were partly offset by negative contributions from private inventory investment and nonresidential fixed investment.

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Monday, February 27, 2017

Durable Goods Orders Increased in January

New orders for manufactured durable goods increased 1.8% in January to $230.4 billion, following a 0.8% December decrease, according to the U.S. Census Bureau.
New orders excluding defense rose 1.5% on the month, as orders of nondefense capital goods increased 3.6% to $69.0 billion.

Shipments of manufactured durable goods decreased 0.1% to $238.3 billion.

Inventories of manufactured durable goods were virtually unchanged at $383.8 billion, following 0.1% December decrease.

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Friday, February 24, 2017

New Home Sales Increased in January

New single-family home sales rose to a seasonally adjusted annual rate of 555,000 in January, according to the U.S. Census Bureau and the Department of Housing and Urban Development. The January level was 3.7% above the revised December rate of 535,000 and 5.5% above the January 2016 level.
Sales rose in most regions, increasing 15.8% in the Northeast, 14.8% in the Midwest, and 4.3% in the South. In contrast, sales in the West fell 4.4%.

The median price of a new home was $312,900, down 3.0% from December. The average price was $360,900.

At the end of January there was an estimated supply of 5.7 months at the current sales rate, unchanged from December.

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Consumer Sentiment Fell in February

Consumer Sentiment declined 2.2 points in February to 96.3, according to the University of Michigan Consumer Sentiment Index.
The Current Economic Conditions Index rose 0.2 points to 111.5, while the Consumer Expectations Index fell 3.8 points to 86.5.
“While consumer confidence edged upward in late February, it remained slightly below the decade peak recorded in January. Overall, the Sentiment Index has been higher during the past three months than anytime since March 2004,” said Richard Curtin, chief economist of UM Surveys of Consumers. “Normally, the implication would be that consumers expected Trump's election to have a positive economic impact. That is not the case since the gain represents the result of an unprecedented partisan divergence, with Democrats expecting recession and Republicans expecting robust growth.”

Read the University of Michigan Surveys of Consumers release.
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Wednesday, February 22, 2017

FOMC Minutes: Hike May be Appropriate ‘Fairly Soon’

Fed officials expressed that they could raise interest rates “fairly soon” as an improving economy and the possibility of faster than anticipated inflation could put the economy at risk of overheating, according to the minutes of the meeting released today.

“Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations,” the minutes said.

The minutes showed that Fed officials grappled with uncertainty on numerous issues, including the Trump administration’s fiscal plans and the potential effects of a rising dollar.

The Fed has left the door open for the possibility of raising rates at its next policy meeting on March 14-15, as some Federal Open Market Committee members noted that it might be appropriate to move “potentially at an upcoming meeting.” The FOMC voted unanimously to leave rates at 0.50-0.75 basis points at its last meeting.

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Existing-Home Sales Increased in January

Existing-home sales rose 3.3% to a seasonally adjusted annual rate of 5.69 million in January, according to the National Association of Realtors (NAR). The fast start to 2017 saw existing-home sales reach their strongest level since February 2007 (5.79 million).
"Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home," said Lawrence Yun, NAR chief economist. "Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions."

The total housing inventory rose 2.4% to 1.69 million homes available for sale, while the median existing home price stood at $228,900, a 7.1% increase from January 2016.

Distressed sales remained at 7% of the total in January, which are down from 9% a year ago. Five percent of sales were foreclosures and 2% were short sales. On average, foreclosures and short sales sold for discounts of 14% and 10%, respectively.

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Thursday, February 16, 2017

Housing Starts Fell in January

Housing starts fell to a seasonally adjusted annual rate of 1.246 million in January, 2.6% below the revised December rate of 1.279 million, but 10.5% above the January 2016 rate.
Housing activity increased in two out of the four regions. The Northeast and the South saw housing starts jump 55.4% and 20.0%, respectively. The West and the Midwest, however, experienced declines of 41.3% and 17.9%, respectively.
New building permits increased during the month, rising 4.6% to 1.285 million. Permits were up 8.2% from the January 2016 rate.

Housing completions were at a seasonally adjusted annual rate of 1.047 million, down 5.6% from the revised December estimate and 0.9% below the January 2016 rate.

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Wednesday, February 15, 2017

Builder Confidence Declined in February

The National Association of Home Builders/Wells Fargo Housing Market Index fell to 65 in February, a 2 point decrease from January’s reading of 67.

“While builders remain optimistic, we are seeing the numbers settling back into a normal range,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “Regulatory burdens remain a major challenge to our industry, and NAHB looks forward to working with the new Congress and administration to help alleviate some of the pressures that are holding small businesses back and making homes less affordable.”

All three HMI components declined in February. The component measuring current sales conditions fell 1 point to 71, the component measuring sales expectations declined 3 points to 73, and the component measuring buyer traffic fell 5 points to 46.

The regional three-month moving averages for HMI scores were mixed. The Northeast fell 2 points to 50 and the Midwest rose 1 point to 65. The South declined 1 point to 67 and the West held at 79 for the third straight month.

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Industrial Production Decreased in January

Industrial production fell 0.3% in January after increasing 0.6% in December. Over the last year, industrial production was unchanged.
Manufacturing output increased 0.2% in January, the same increase as December. Production of durable goods fell, while nondurables rose 0.6% during the month. Capacity utilization for manufacturing increased by 0.1 percentage point to 75.1%, a rate that is 3.3 percentage points below its long-run average.

The mining index increased 2.8% in January as most mining industries posted increases.

The utilities index fell 5.7% in January, largely because unseasonably warm weather reduced the demand for heating.

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Retail Sales Rose in January

There were $472.1 billion in retail and food service sales in January, up 0.4% from the previous month and 5.6% from January 2016, according to the U.S. Census Bureau.
Core retail sales – excluding automobiles and parts – increased 0.8% after rising by 0.4% in December. Year-over-year core sales increased 5.3%.

Retail trade sales increased 0.2% from December and are up 5.6% from last year. Sales at nonstore were unchanged from December, while increasing 12.0% year-over-year.

Sales at gasoline stations continued to climb, rising 2.3% during the month and 14.2% from a year ago.

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CPI Increased 0.6% in January

The Consumer Price Index increased 0.6% in January on a seasonally adjusted basis. Over the last 12 months, the all-items index rose 2.5%.
Prices for all items less food and energy, the “core CPI,” increased 0.3% in January, a slight uptick from December. The index rose 2.3% for the 12 months ending in January.

The food index increased 0.1% after being unchanged for six months. Prices for food at home was unchanged, while prices for food away from home increased 0.4%. Over the past 12 months, food prices have fallen 0.2%.

The energy index increased 4.0% in January. The gasoline index posted a strong gain, rising 7.8% following a 2.4% December increase.

Read the BLS release.
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Tuesday, February 14, 2017

Yellen: Fed to Consider Raising Rates at Upcoming Meetings

In her semiannual report on monetary policy to the Senate Banking Committee, Federal Reserve Chairwoman Janet Yellen did not rule out the central bank raising short-term interest rates at its March policy meeting. She presented a positive report of the economy, noting job gains and stronger wage growth. This led her to remark that an increase in the federal-funds rate would likely be appropriate at the Federal Open Market Committee’s upcoming meetings, as long as job gains and inflation continue as the Fed expects.

Ms. Yellen took numerous questions on the Fed’s strategy for dealing with the balance sheet, which currently stands at about $4.5 trillion. She noted that the Fed does not want to use the balance sheet as an active policy tool and that policy makers want to shrink it in an orderly and predictable way.

When asked about the impact changes in fiscal policy could have on the economy, Ms. Yellen held to her previous remarks that it is too early to tell. She noted that most Fed officials would like greater clarity on fiscal policy before trying to incorporate it into their forecasts.

Ms. Yellen also fielded questions on regulation, specifically the effect it has had on community banks. She stated that the Fed has been working to reduce the regulatory burden on community banks and that Congress should consider easing some of the more burdensome requirements levied on small banks by Dodd-Frank.

Producer Prices Increased 0.6% in January

Producer prices rose 0.6% in January, seasonally adjusted, after climbing 0.2% in December, according to the U.S. Bureau of Labor Statistics. Producer prices rose 1.6% for the twelve months ended January 2017.
The index for final demand goods rose 1.0% in January, the largest jump since May 2015. The increase was led by a 4.7% rise in the index for final demand energy. There was a smaller 0.4% increase in the index for final demand goods less food and energy.

Prices for final demand services ticked up 0.3% in January, after rising 0.1% in December. Much of the advance was due to the index for final demand trade services, which increased by 0.9%.

Read the BLS release.
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Small Business Optimism Rose in January

The NFIB Small Business Optimism Index increased 0.1 points in January to 105.9, the highest reading since December 2004. Five of the ten index components rose, while five declined. All of the index components have held near record highs since the remarkable increases after the election.
Reported job creation has started to pick up, as 53% of businesses reported hiring or trying to hire. However, 47% reported few or no qualified applicants for the positions they were trying to fill. Fifteen percent of employers surveyed cited the difficulty of finding qualified workers as their top business problem. A seasonally adjusted net 18% of owners plan to create new jobs, which is the strongest reading since November 2006.

Seasonally adjusted, the net percent of owners expecting better business conditions fell two points to a net 48%. The percent of owners reporting higher sales in the past three months rose five points to a net negative 2%. Seasonally adjusted, the net percent of owners expecting higher real sales volumes fell two points to a net 29% of owners. Capital spending decreased as 59% of owners reported capital outlays, down four points from December. The percent of owners planning capital outlays in the next 3 to 6 months fell two points to 27%.

Credit conditions held steady, as 4% of owners reported that all their borrowing needs were not met. Only 2% of business owners surveyed reported that financing was their top business problem, unchanged from the past two months.

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Tuesday, February 7, 2017

Fed Survey: CRE Tightening Trend Continues

Bankers continued tightening credit for commercial real estate loans and consumer loans in the last three months while holding steady on other business loans and easing credit standards very slightly in their home mortgage portfolios, according to the Federal Reserve’s latest senior loan officer survey released today. A net 33.3 percent said they tightened on CRE multifamily loans; 25 percent tightened on construction or land development loans. Demand for CRE loans was moderately weaker or about the same, respondents said.

The tightening trend, consistent over recent quarters, is expected to continue through 2017; a net 29.8 percent said they expected to tighten standards on construction loans, while 44.1 percent said the same for multifamily CRE loans. Lenders generally expected to ease standards on commercial or industrial loans, particularly for smaller businesses. Nearly all bankers expected credit quality to improve or stay the same in 2017 for most categories, although a few bankers expected to see deterioration in their CRE portfolios.

However, in the previous quarter, on net bankers generally reported that they had left standards on commercial and industrial loans unchanged for large, midsize and small firms. Terms were slightly eased for larger firms; for example, a net 11.6 percent said they had increased the maximum size of credit lines, and 8.7 percent reported easing on loan covenants. Demand for C&I loans was largely unchanged. A less-favorable economic outlook was fingered as the main reason for those who tightened. For those who eased loan terms, 72 percent said more aggressive competition was at least a somewhat important factor.

Meanwhile, a slight 4.8 percent reported easing standards on GSE-eligible mortgages. Demand remained on net unchanged for GSE-eligible mortgages, while slightly less than 10 percent on net reported the weaker demand for government mortgages, Qualified Mortgage non-jumbo, non-GSE eligible loans and jumbo loans regardless of QM status. A net 8.3 percent tightened standards on credit card applications, up from the previous quarter, and 11.6 percent on net said they tightened on auto loans, with a focus on trimming maximum maturities, widening spreads, requiring higher down payments and tightening up credit score thresholds.

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Consumer Credit Growth Slowed in December

Consumer credit increased at a seasonally adjusted annual rate of 4.5% in December, down from an 8.1% rate in November. Total outstanding credit increased $14.2 billion during the month (compared with $25.2 billion in November) to $3.76 trillion.
Revolving credit rose at an annual rate of 2.9% to $995.5 billion, compared to a large 14.4% increase in November. Non-revolving credit rose at a 5.1% annual rate, or $11.8 billion, compared to November’s rate of $13.4 billion. Total non-revolving credit is now $2.77 trillion.
Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 38% of outstanding credit. Depository institutions and finance companies are secondary and tertiary holders, with 25% and 22%, respectively, of outstanding non-revolving credit.

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International Trade Balance Narrowed in December

The U.S. international trade deficit narrowed in December to $44.3 billion, down from $45.7 billion in November, according to the U.S. Census Bureau of Economic Analysis. The contraction reflected a $5.0 billion increase in exports along with a $3.6 billion increase in imports.
The goods deficit decreased $1.2 billion to $65.7 billion, while the services surplus rose $0.3 billion to $21.4 billion.

Exports of goods rose $4.8 billion to $126.9 billion in December, driven by increases in capital goods. Exports of capital goods jumped by $3.3 billion, largely due to a $1.0 billion increase in both civilian aircraft and engines for civilian aircraft exports. Exports of services increased $0.2 billion to $63.8 billion.

Imports of goods increased $3.6 billion to $192.6 billion, mostly due to an increase in automotive vehicles, parts, and engines, which rose by $1.6 billion. Imports of services were virtually unchanged at $42.3 billion in December.

Read the Census/BEA release.
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Friday, February 3, 2017

ISM: Non-Manufacturing Sector Remained Strong in January

The ISM Non-Manufacturing Index registered 56.5 points in January, 0.1 percentage point below December’s figure. This was the 85th consecutive month of growth. Twelve non-manufacturing industries reported growth in January, while five reported contraction.
Growth in the Business Activity Index decreased 0.6 points to 60.3. Thirteen industries reported increased business activity and three reported decreased activity. Respondents noted moderate business expansion and converted prospects to contracts.

Non-manufacturing employment grew for the 35th consecutive month. The index increased 2.0 points to 54.7. Seven industries reported increased employment, while seven reported decreased employment.

The New Orders Index fell 2.1 points to 58.6. Some respondents commented that they saw some new accounts and a resumption of activity that slowed for the holidays.

Supplier deliveries slowed for the 13th consecutive month, as the index registered 52.5 points (readings above 50 for this index indicate slower deliveries). Six industries reported slower deliveries, while five reported faster deliveries.

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Manufactured Goods Orders Rose in December

New orders for manufactured goods increased 1.3% to $464.9 billion in December, according to the U.S. Census Bureau. The December reading followed a 2.3% November decrease.
New orders for manufactured durable goods fell 0.5% to $227.1 billion, after decreasing 4.7% in November. Orders for transportation equipment drove the decrease, falling 2.5% to $73.5 billion.

Shipments of manufactured durable goods increased 1.4% to $238.1 billion. Transportation equipment led the increase, rising 2.4% to $82.2 billion.

Inventories of manufactured durable goods decreased 0.3% to $383.9 billion.

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227,000 Jobs Added in January

Total nonfarm payroll employment rose by 227,000 in January, up from December’s upwardly revised figure of 157,000, according to the Bureau of Labor Statistics. The national unemployment rate moved up slightly to 4.8% as more people entered the labor force. The majority of gains occurred in retail trade, construction, and financial activities.
Private-service providing industries added a net 192,000 jobs, led by gains in retail trade, which added 46,000 jobs during the month, and by financial activities, which added 32,000 jobs this month.

Goods-producing employment rose by 45,000 jobs during the month, as gains in construction led the way.

The civilian labor force participation rate was 62.9%, an increase from December. The number of long-term unemployed, those jobless for 27 weeks or more, was virtually unchanged at 1.9 million and accounted for 24.4% of the unemployed. The number of discouraged workers was 532,000, little changed from a year earlier.

Average hourly earnings increased by 3 cents to $26.00, after a 6-cent increase in December. Over the past year, average hourly earnings have risen by 2.5%.

Read the BLS release.
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Thursday, February 2, 2017

Job Cuts Remained Low in January

Employers announced plans to cut 45,934 jobs in January, according to a report issued by Challenger, Gray & Christmas. January’s announced cuts were 37% higher than December’s. However, the month’s figure was 39% lower than January 2016.

The steepest job cuts for the year occurred in the retail sector, which announced 22,491 layoffs. These accounted for 49% of all job cuts during the month. Macy’s led the way, reporting plans to close 68 stores and cut 10,000 jobs.

“A January surge in retail hiring has become the standard. Most retailers ramp up hiring in the final three months of the year to handle the holiday rush. However, as consumers increasingly go online to shop, retailers are not only dismissing temporary seasonal workers, but also increasingly closing stores and laying off permanent staff,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

The energy sector, on the other hand, reported only 1,853 job cuts in January. This is compared to 20,103 job cuts in January 2016.

“Oil prices were already starting to rebound in the last half of 2016. Now, with an administration that is expected to be very friendly to the oil, gas, and mining industries, many are forecasting a swift and sustained turnaround for these firms in 2017. The fact that January job cuts in the sector were 91 percent lower than a year ago, certainly appears to support that outlook,” said Challenger.

Read the Challenger Gray & Christmas release.
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Wednesday, February 1, 2017

Fed Holds Rates Steady

The Federal Open Market Committee (FOMC) unanimously voted to hold the current target for the federal funds rate at 50-75 basis points in February. “In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation,” said the FOMC in a statement following their Wednesday meeting.

The Committee noted that information received since their last meeting in December indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace. Federal Reserve officials acknowledged improvement in consumer and business sentiment, as well as a moderate rise in household spending.

The Committee did not provide any clues as to when it might next raise rates. Uncertainty remains regarding the new presidential administration, forcing officials to take more of a wait and see approach. “In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”

Read the FOMC statement.
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Construction Spending Fell in December

Construction spending decreased 0.2% in December to a seasonally adjusted annual level (SAAL) of $1,181.5 billion, according to the Census Bureau. November’s spending estimate was revised to a rate of $1,184.4 billion. Construction spending for the year amounted to $1,162.4 billion, up 4.5% from the 2015 total of $1,112.4 billion.
Total private construction rose to $897.0 billion SAAL, up 0.2% from the revised November estimate of $894.8 billion.

Private residential construction was $466.9 billion SAAL, 0.5% above November’s rate.

Private nonresidential construction was $430.1 billion, virtually the same as November’s estimate.

Public construction decreased 1.7% to $284.5 billion SAAL, largely due to declines in educational and highway construction projects.

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Manufacturing Sector Expanded in January

The ISM Manufacturing Index registered 56.0 points in January, up 1.5 points from the previous month, according to the Institute for Supply Management. January’s reading indicates a fifth consecutive month of expansion in manufacturing, as readings over 50 points denote expansion. Of the eighteen manufacturing industries, twelve reported growth while five reported contraction.
The Employment Index rose 3.3 points to 56.1 in January, indicating expansion for the fourth consecutive month. Ten industries reported expansion, while five reported a decrease in employment.

The New Orders Index ticked up 0.1 points to 60.4 in January, indicating growth for the fifth consecutive month. Twelve industries reported increases in new orders while five reported decreases.

Export orders decreased 1.5 points to 54.5, still indicating growth in exports, but at a slower pace. Eight industries reported growth while four of the eighteen reported a decrease in new export orders.

The inventories index registered 48.5 points, indicating that raw materials inventories contracted for the 19th consecutive month.

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ADP: 246,000 Jobs Added in January

The non-farm private sector added 246,000 jobs in January, according to the ADP National Employment Report. December’s figure was revised downward slightly to 151,000. Service-providing jobs accounted for most of the month’s growth, while goods-producing employment rose as well.
Growth was widespread in December with businesses of all sizes seeing strong increases. Small businesses with fewer than 50 employees added 62,000 jobs, while medium-sized businesses with 50-499 employees added 102,000 jobs. Large businesses added 83,000 jobs.

“The U.S. labor market is hitting on all cylinders and we saw small and midsized businesses perform exceptionally well,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Further analysis shows that services gains have rebounded from their tepid December pace, adding 201,000 jobs. The goods producers added 46,000 jobs, which is the strongest job growth that sector has seen in the last two years.”

Service-providing employment rose by 201,000 jobs, driven by the professional and business services sector which added 71,000 jobs. Health care and social assistance jobs also increased, adding 49,000 jobs. Goods-producing employment increased by 46,000 jobs. The construction industry led the gain, adding 25,000 jobs.

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