Kansas City Fed: Manufacturing Activity Expanded in February at Fastest Rate since June 2011

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The Kansas City Federal Reserve Bank said that manufacturing activity expanded in February at its fastest rate since June 2011. The composite index of general business conditions rose from 9 in January to 14 in February, expanding for the third straight month. As such, manufacturing conditions have continued to improve after notable challenges over the past two years from global headwinds and reduced commodity prices, especially for crude oil. Outside of the headline number, the underlying indices also suggested relatively healthy gains in new orders (up from 20 to 26), production (down from 20 to 11), shipments (down from 20 to 16), employment (up from 6 to 17) and the average workweek (up from 9 to 15), even with some easing in a couple of these measures. Exports (up from -5 to 9) were also stronger in the month, with positive growth for the first time in 15 months.

At the same time, manufacturers continue to be quite upbeat about the next six months, mirroring sentiment seen in other recent regional reports. The forward-looking composite index edged up from 27 to 29, its highest reading in the survey’s 16-year history. To illustrate the figure, 59 percent of respondents expect production to be higher moving forward, with 18 percent seeing declines in output. More than half also anticipate increased sales and shipments, with one-third predicting more hiring and 39 percent planning more capital spending. The exports data were also encouraging, particularly given that they have been a major drag for the Kansas City Fed region over the past couple years, with that index up from 4 to 13, a level not seen since June 2013.

Existing Home Sales Jump to their Fastest Rate in Nearly 10 Years

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The National Association of Realtors (NAR) reported that existing home sales increased 3.3 percent in January, rising to its highest annual level since February 2007. There were 5.69 million existing homes sold in January, up from 5.51 million in December. NAR Chief Economist Lawrence Yun attributed the strong growth in 2016 to “strong hiring and improved consumer confidence at the end of last year,” but noted ongoing challenges from “inventory levels that are far from adequate and deteriorating affordability conditions.” On a year-over-year basis, sales of existing homes have increased 3.8 percent, led by strength in every region of the country except for the Midwest.

In January, both single-family (up from 4.91 million to 5.04 million) and condo/co-op (up from 600,000 to 650,000) sales were higher. Inventories remain low, as noted above, with 3.6 months of supply on the market, the same as in the previous report. That is down from an average of 4.4 months of supply for 2016 as a whole. Reduced supply has led to higher prices, not surprisingly. The median price for an existing home sold in January was $228,900, up 7.1 percent over the past 12 months.

Markit: Eurozone Manufacturing Activity Rose at Fastest Rate since April 2011

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The Markit Flash Eurozone Manufacturing PMI rose from 55.2 in January to 55.5 in February, its fastest rate since April 2011. As such, the continent’s economy continues to move in the right direction, with activity accelerating at a modest rate. The headline PMI has trended higher since bottoming out at 51.2 one year ago. The underlying data were mostly higher in February. New orders (up from 56.0 to 56.1), output (up from 56.1 to 57.2) and exports (up from 55.2 to 55.5) each accelerated somewhat in the latest survey. Hiring growth also continued to be promising despite pulling back a little from its quickest pace in nearly six years (down from 55.0 to 54.6). Likewise, respondents remained upbeat about future output (down from 66.9 to 66.3) even though that measure eased from its highest point since January 2014 in this release. Read More

Philly Fed: Manufacturing Activity Accelerated in February at Strongest Rate Since November 1983

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The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded in February at its strongest rate since November 1983. The composite index of general business activity rose from 23.6 in January to 43.3 in February, with 48.2 percent of survey respondents suggesting that conditions had improved this month. Just 4.8 percent said that conditions had worsened. Other measures were also uplifting, including new orders (up from 26.0 to 38.0), shipments (up from 20.5 to 28.6) and the average employee workweek (up from 6.8 to 13.6). Growth in hiring (down from 12.8 to 11.1) continued to expand modestly despite some easing in the current release. Read More


Housing Starts Ease a Bit in January but Remain Mostly Encouraging

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The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts declined 2.6 percent in January, pulling back a bit after rebounding by 11.3 percent in December. New residential construction activity dropped from an annualized 1,279,000 in December to 1,246,000 in January. Another positive sign was the fact that housing starts have now exceeded 1.2 million in three of the past four months – a psychological threshold that we have struggled to maintain each time. Despite the easing in this report, housing market data remains mostly encouraging, up 10.5 percent over the past 12 months from 1,128,000 in January 2016. Indeed, much of the recent volatility has come from the multifamily segment, ranging from 271,000 units in September to 471,000 in December. In this release, multifamily starts decreased to 423,000 units, up 19.8 percent year-over-year from 353,000 units one year ago.

On the other hand, single-family housing starts have more consistently drifted higher, even with a slight lull in both November and December. Single-family starts rose from 808,000 in December to 823,000 in January. While this was lower than the 868,000 units started in October, its fastest pace since October 2007, the current data represent progress from 775,000 units in January 2016, a year-over-year gain of 6.2 percent. Read More

Consumer Prices Increased 2.5 Percent Year-Over-Year in January, the Highest Since March 2012

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The Bureau of Labor Statistics said that consumer prices rose 0.6 percent in January, its fastest month pace in more than four years. It was also the sixth straight monthly increase, with the larger figure in January due largely to higher energy costs, up 4.0 percent in this report. For its part, gasoline costs were up 7.6 percent in January, with a 20.3 percent gain over the past 12 months. At the same time, food prices edged up 0.1 percent in January, with a decline of 0.2 percent since January 2016. Overall, the consumer price index increased 2.5 percent year-over-year in January, up from 0.9 percent in July and the highest level since March 2012.

Core consumer prices were up 0.3 percent in January, its fastest rate in five months. There were higher prices for apparel, household furnishings, medical care new vehicles, transportation services and shelter, but used cars and trucks had slightly reduced prices in this release. Excluding food and energy costs, consumer prices have increased 2.3 percent over the past 12 months, up from 2.2 percent in the prior report. Even though core consumer price inflation has exceeded the Federal Reserve’s stated goal of 2 percent for 15 consecutive months, overall prices pressures remain modest and under control for now.


Retail Sales Have Grown Sharply Over the Past Year

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The Census Bureau said that retail sales rose 0.4 percent in January, extending the 1.0 percent gain seen in December. It was the fifth consecutive monthly increase in retail spending, illustrating once again that Americans have been willing to open their pocketbooks after being more cautious with their purchases at this time last year. Indeed, over the past 12 months, retail sales have jumped 5.6 percent, a healthy rebound from a year-over-year pace of just 2.2 percent in August. Motor vehicles and parts sales have been a relative bright spot of late, but the January data were held back somewhat by a 1.4 percent decline in auto sales. To be fair, this drop was likely a response to a larger-than-normal jump in December in motor vehicle purchases, up 3.2 percent. Excluding automobiles, retail sales rose 0.8 percent in January, with year-over-year growth of 5.3 percent. Read More

mfg production

Manufacturing Production Expanded for the Fourth Consecutive Month

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The Federal Reserve said that manufacturing production expanded for the fourth consecutive month. (To be fair, November’s increase was essentially stagnant, up 0.03 percent.) Output in the sector was up 0.2 percent in January, extending the 0.2 percent gain seen in December. The recent improvements suggest that manufacturers are beginning to recover from notable weaknesses over the past two years, with a strong dollar and global headwinds dampening overall activity. In that regard, manufacturing production grew just 0.3 percent year-over-year in January, highlighting the significant challenges seen over the past 12 months in growing production. Similarly, manufacturing capacity utilization edged up from 75.0 percent to 75.1 percent, which, despite some progress, continued to be below the 75.5 percent utilization rate observed one year ago. Read More

New York Fed: Manufacturing Activity Expanded at Fastest Pace Since September 2014

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The Empire State Manufacturing Survey said that manufacturing activity expanded at the fastest pace since September 2014, rising for the fourth straight month in February. The composite index of general business conditions jumped from 6.5 in January to 18.7 in February, with nearly one-third reporting a better environment today than last month. There were also notable improvements in new orders (up from 3.1 to 13.5) and shipments (up from 7.3 to 18.2). Indeed, the percentage of respondents saying that their sales were higher rose from 29.1 percent to 36.3 percent in this survey.

While other measures had made progress in recent months, employment had lagged behind. In this release, however, that started to change. Indices for the number of employees (up from -1.7 to 2.0) and the average workweek (up from -4.2 to 4.1) each shifted into positive territory, with hiring expanding for the first time since May 2016. Hopefully, we will continue seeing stronger labor market data in the coming months, particularly if demand remains strong. Read More

NFIB: Small Business Owners Remained Very Upbeat in January

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The National Federation of Independent Business (NFIB) said that sentiment among small business owners remained at a 12-year high in January. The Small Business Optimism Index edged up from 105.8 in December to 105.9 in January, with both at levels not seen since December 2004. Respondents have responded quite positively in the aftermath of the election, hoping that the new Administration will bring about needed changes on the tax and regulatory front. Along those lines, the percentage of respondents suggesting that the next three months would be a “good time to expand” has risen from 11 percent in November to 23 percent in December to 25 percent in January, its fastest pace since the Great Recession. In addition, the percentage expecting sales to increase over the next three months remained elevated, but eased in this report from 31 percent in December, its largest level since October 2005, to 29 percent in January. Read More