by Calculated Risk on 9/04/2014 10:00:00 AM

The August ISM Non-manufacturing index was at 59.6%, up from 58.7% in July. The employment index increased in August to 57.1%, up from 56.0% in July. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: August 2014 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in August for the 55th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 59.6 percent in August, 0.9 percentage point higher than the July reading of 58.7 percent. This represents continued growth in the Non-Manufacturing sector. The August reading of 59.6 percent is the highest for the composite index since its inception in January 2008. The Non-Manufacturing Business Activity Index increased to 65 percent, which is 2.6 percentage points higher than the July reading of 62.4 percent, reflecting growth for the 61st consecutive month at a faster rate. This is the highest reading for the index since December of 2004 when the index also registered 65 percent. The New Orders Index registered 63.8 percent, 1.1 percentage points lower than the reading of 64.9 percent registered in July. The Employment Index increased 1.1 percentage points to 57.1 percent from the July reading of 56 percent and indicates growth for the sixth consecutive month. The Prices Index decreased 3.2 percentage points from the July reading of 60.9 percent to 57.7 percent, indicating prices increased at a slower rate in August when compared to July. According to the NMI®, 15 non-manufacturing industries reported growth in August. Respondents' comments vary by business and industry. The majority of the comments reflect continued optimism in regards to business conditions. Some respondents indicate that there may be some tapering off in the recent strong rate of growth in the non-manufacturing sector."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was solidly above the consensus forecast of 57.1% and suggests faster expansion in August than in July.

The NMI was at the highest level since its inception.  New orders was strong - and employment was up solidly.

by Calculated Risk on 9/04/2014 08:33:00 AM

The DOL reports:

In the week ending August 30, the advance figure for seasonally adjusted initial claims was 302,000, an increase of 4,000 from the previous week's unrevised level of 298,000. The 4-week moving average was 302,750, an increase of 3,000 from the previous week's unrevised average of 299,750.

There were no special factors impacting this week's initial claims.

The previous week was unrevised at 298,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 302,750.

This was close to the consensus forecast of 305,000.

by Calculated Risk on 9/04/2014 08:15:00 AM

From ADP:

Private sector employment increased by 204,000 jobs from July to August according to the August ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
Mark Zandi, chief economist of Moody’s Analytics, said, "Steady as she goes in the job market. Businesses continue to hire at a solid pace. Job gains are broad based across industries and company sizes. At the current pace of job growth the economy will return to full employment by the end of 2016.”

This was below the consensus forecast for 213,000 private sector jobs added in the ADP report. 

The BLS report for August will be released on Friday.

by Calculated Risk on 9/03/2014 08:31:00 PM

From the WSJ: Small Firms Poised to Spend More on Plants, Equipment

Among 798 small private firms with less than $20 million in revenue, for instance, 51% said in August that they planned to increase their capital outlays in the next 12 months.

That is ... up from 42% a year ago, according to the survey by The Wall Street Journal and Vistage International, a San Diego executive-advisory group.

August marked the first month since June 2012, when the monthly survey began, that owners of small firms who planned to spend more on fixed investments outnumbered those who planned to hold steady or cut back.

This survey has only been conducted for a couple of years, but this is a positive sign. On credit, the Federal Reserve's July Senior Loan Officer survey indicated some pickup in small firm demand for loans, and slightly easier lending standards.

Thursday:
• At 7:45 AM ET, Press conference following the Governing Council meeting of the ECB in Frankfurt with Mario Draghi. Here is the ECB website and press conference page.

• At 8:15 AM, the ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for 213,000 payroll jobs added in August, down from 218,000 in July.

• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 305 thousand from 298 thousand.

• Also at 8:30 AM, the Trade Balance report for July from the Census Bureau. The consensus is for the U.S. trade deficit to be at $42.7 billion in July from $41.5 billion in June.

• At 10:00 AM, the ISM non-Manufacturing Index for August. The consensus is for a reading of 57.1, down from 58.7 in July. Note: Above 50 indicates expansion.

by Calculated Risk on 9/03/2014 06:01:00 PM

From housing economist Tom Lawler: Toll Brothers: Net Home Orders Down, Price Gains on Orders Slows; Some “Lessening” in Pricing Power but No “Need” to Increase Incentives Much -- Yet

Toll Brothers, the self-described “nation’s leading builder of luxury homes,” reported that net home orders in the quarter ended July 31, 2014 totaled 1,324, down 5.8% from the comparable quarter of 2013. Net orders per community last quarter were down 15.9% from the comparable quarter of 2013. The company average net order price last quarter was $717,000, up 1.4% from a year ago. Toll’s sales cancellation rate, expressed as a % of gross orders, was 6.6% last quarter, up from 4.6% in the comparable quarter of 2013. Home deliveries last quarter totaled 1,364, up 36.8% from the comparable quarter of 2013, at an average sales price of $732,000, up 12.4% from a year ago. The company’s order backlog at the end of July was 4,204, up 5.1% from last July, at an average order price of $737,300, up 4.1% from a year ago. The company controlled 49,037 home sites at the end of July, up 3.9% from last July and up 25.1% from two years ago.

For its “traditional” home building business (i.e., ex city living), net home orders totaled 1,281 last quarter, down 5.0% from the comparable quarter of 2014, at an average net order price of $700,500, up 3.4% from a year ago.

Here are a few excerpts from the company’s press release.

Douglas C. Yearley, Toll Brothers' chief executive officer:

"Although we have seen some lessening of pricing power in the past year, we have not felt the need to incentivize to spur home sales. Because we generally do not build 'spec' homes, we are not under pressure to move standing inventory. We are driven by bottom-line growth and are pleased with our continued margin expansion through what we still believe is a recovering, albeit bumpy, housing cycle. We have been particularly pleased with our performance in a number of the markets we have targeted for growth, especially Coastal California, Texas, and the urban New York City area.

"With pent-up demand still yet to be unleashed, we are growing community count in attractive locations.”

Robert I. Toll, executive chairman

"The national housing data has been somewhat volatile in recent months. Without real urgency pushing buyers to make a decision, general industry demand continues to be impacted by uncertainty about the economy and world events, improving but fragile consumer confidence and reduced affordability due to rising prices and limited personal income growth. One data point we do have confidence in is the low level of production compared to historic norms. Population grew during the recession and has continued to increase since then. Based on trends over more than forty years, the industry should be building 50% more homes this year than its current pace to meet the increased population demographics.”

As with many other builders, last year Toll raised prices aggressively based on stronger-than-expected demand as well as longer-than-expected development timelines that limited supply. Toll and many other builders are now increasing active communities at a double-digit pace, but are having trouble generating double-digit sales growth because prices were increased at too rapid a pace last year.

Toll’s net orders were significantly below consensus.