by Bill McBride on 4/21/2015 04:09:00 PM
Tuesday, April 21, 2015
Here is a relatively new indicator that I'm following that appears to be a leading indicator for industrial production.
From the American Chemistry Council: Leading Economic Indicator Rises for Fourth Consecutive Month; Reaches Seven Year High
TThe Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), was up 0.1 percent in April, as measured on a three-month moving average (3MMA). Reaching an index of 98.1, last seen in January 2008, the CAB remains up 2.6 percent over a year ago, and suggests gains in business activity will continue into the fourth quarter. ...Click on graph for larger image.
“All of the major production-related indicators are up and we might continue to see a strengthening. Construction-related chemistries have been adversely affected by bad weather so far this year, but we expect an improvement as we get further into spring,” said Kevin Swift, chief economist at the American Chemistry Council. “The data on plastic resins and polymers for packaging suggest that retail sales should continue to be strong as well,” Swift added.
This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production. It does appear that CAB (red) generally leads Industrial Production (blue).
And this suggests continued growth.
by Bill McBride on 4/21/2015 12:59:00 PM
From housing economist Tom Lawler:
NVR, Inc., the nation’s fourth largest home builder with a relatively heavy concentration in the Mid-Atlantic region, reported that net home orders in the quarter ended March 31, 2015 totaled 3,926, up 18.1% from the comparable quarter of 2014. The average net order price last quarter was $375,400, up 2.0% from a year ago. Net orders per active community were up 19.8% YOY. Home deliveries last quarter totaled 2,534, up 14.6% from the comparable quarter of 2014, at an average sales price of $371,000, up 2.7% from a year ago. The company’s order backlog at the end of March was 6,867, up 13.5% from last March, at an average order price of $384,300, up 2.6% from a year ago. The company’s gross homebuilding margin last quarter was 17%, compared to 18% in the comparable quarter of 2014.
NVR gives virtually no “color” on its results or on the housing market in its press release, and does not host a quarterly earnings conference call.
D.R. Horton, the nation’s largest home builder, releases its results for the quarter ended March 31st tomorrow morning before the market opens.
by Bill McBride on 4/21/2015 10:54:00 AM
From the BLS: Regional and State Employment and Unemployment Summary
Regional and state unemployment rates were little changed in March. Twenty-three states and the District of Columbia had unemployment rate decreases from February, 12 states had increases, and 15 states had no change, the U.S. Bureau of Labor Statistics reported today.Click on graph for larger image.
The largest over-the-month decrease in employment occurred in Texas (-25,400), followed by Oklahoma (-12,900) and Pennsylvania (-12,700). The largest over-the-month increases in employment occurred in California (+39,800), Florida (+30,600), and Massachusetts and Washington (+10,500 each).
Nebraska had the lowest jobless rate in March, 2.6 percent. Nevada had the highest rate among the states, 7.1 percent. The District of Columbia had a rate of 7.7 percent.
This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.
The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976.
The states are ranked by the highest current unemployment rate. Nevada, at 7.1%, had the highest state unemployment rate although D.C was higher.
The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate at or above 11% (red).
Currently no state has an unemployment rate at or above 8% (light blue); Only one state and D.C. are still at or above 7% (dark blue).
by Bill McBride on 4/21/2015 09:25:00 AM
A few excerpts from a note by Goldman Sachs economist David Mericle:
How much should we make of the firmer [inflation] recent prints? In our view, not much. The new car and apparel categories are the largest core goods categories, and are also the most sensitive to import prices. Auto import prices have begun to fall over the last few months, and we expect a decline in consumer prices to follow. Apparel import prices, in contrast, only flattened recently and remain up roughly 1% over the past year. This is not so surprising: the dollar's recent appreciation has not been primarily against the currencies of countries from which the US imports clothing, such as China. But the roughly one-third decline in cotton prices since mid-2014 is likely to result in a larger decline in apparel prices, and we expect that the full impact has yet to be felt. Our equity analysts expect apparel prices to fall for the remainder of 2015, and the 12% drop in raw cotton prices in the March PPI suggests further declines could come soon. ...This is an argument for the Fed raising rates in September (as opposed to June) or even later.
What about services, which account for three-quarters of the core? Soft health care inflation has been a key contributor to lower core inflation. Slower growth of public payments for health care services and likely spillovers to private insurers suggest that health care inflation is unlikely to exceed core inflation going forward. While health care inflation should normalize from the current sub-1% rate eventually, soft wage growth in the health care industry suggests little immediate upward pressure. Shelter inflation has been among the firmest components of the core, and the low rental vacancy rate suggests this trend is likely to continue in the near term. But we see limited further upside: the National Multi Housing Council's Market Tightness Index is less elevated, and data from REIS indicate that new construction should raise the vacancy rate.
More broadly, we do not view the recent data as a sign that pass-through is now behind us. Pass-through is a two-stage process. Dollar appreciation should result first in lower import prices, and then in gradually lower consumer prices. Similarly, while commodity prices are reflected in consumer energy goods and services prices fairly quickly, core prices then respond to energy costs with a lag. ... [W]hile the first stage of oil price pass-through appears largely complete, import prices likely have further to fall. ...
Overall, we expect that further pass-through will cause year-on-year core PCE inflation to fall by another 0.1-0.2 percentage points by the September FOMC meeting (at which point the July data will be available).
Does pass-through disinflation matter for liftoff? ... It appears that Fed officials increasingly view pass-through disinflation as something to be waited out, rather than as something to be ignored.
Monday, April 20, 2015
by Bill McBride on 4/20/2015 08:19:00 PM
CoreLogic released the Southern California report today for March (CoreLogic acquired DataQuick).
The data shows 18,156 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March.
That was up 35.6% from 13,650 sales in February, and up 5.0% from 17,638 sales in March last year.
Note: Currently CoreLogic hasn't released the short sales and foreclosure data that DataQuick used to release.