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Friday, October 17, 2014

Housing Starts Rebound Above 1 Million Unit Pace in September

Housing starts rebounded in September, to an annualized rate of 1.017 million units. September’s pace grew 6.3% from a slight downwardly revised August rate. September’s growth was due to both single family and multi-family construction improvements. The pace of new construction is now 17.8% higher than a year ago.



Of the four regions, only the South did not contribute to the overall gain. Multifamily starts jumped 16.7% in September, bringing the annual pace to 371,000 units. It is important to note that multifamily starts declined 28.7% in August, so September’s gain has yet to fully offset the decline from the month prior. Single family starts also improved by 1.1% to an annual rate of 646,000 units.



Permit issuance was also stronger in September. Overall housing permits increased 1.5%, driven by a 4.8% monthly growth in multi-family permits. Single-family permit issuance declined.

Despite the positive September report, housing starts remain well below the long-run average of 1.5 million units.

Read the Census release.

Thursday, October 16, 2014

Industrial Production Rebounded in September

Industrial production grew 1.0% in September. The largest gain this year more than offset a decline the month prior. All three major components increased, with the largest gain in utilities. The six-month annualized growth rate increased to 3.9%. Year-over-year growth was 4.3%, an increase from August and the fifth consecutive month of improvement.



Manufacturing growth improved 0.5% in September, led by a 0.8% increase in high-tech. Manufacturing is the core component of industrial production and does not fluctuate like mining and utilities. As such, growth in manufacturing demonstrates that the core of industrial production is improving.

Mining production increased 1.8%, a massive uptick from the month prior. Utilities production jumped 3.9%, driven by a 4.5% growth in electric. The capacity utilization ratio improved in September, rising 0.6% to 79.3%.

Read the Federal Reserve release.

U.S. Treasury: Budget Results for Fiscal Year 2014

U.S. Treasury Secretary Jacob Lew and Office of Management and Budget (OMB) Director Shaun Donovan yesterday released details of the fiscal year (FY) 2014 final budget results. The deficit in FY 2014 fell to $483 billion, $197 billion less than the FY 2013 deficit and $165 billion less than forecast in President Obama's FY 2015 Budget. As a percentage of Gross Domestic Product (GDP), the deficit fell to 2.8 percent, the lowest level since 2007 and less than the average of the last 40 years. In dollar terms, the FY 2014 deficit is the lowest since 2008.

Read the full release.

Beige Book: U.S. Economy Grew at “Modest to Moderate Pace”

The Federal Reserve’s Beige Book, released yesterday indicated that economic expansion is continuing at a “modest to moderate" pace, a slowdown from the previous report. Reports from Cleveland, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco Districts all indicated moderate growth. The New York, Philadelphia, Richmond, Atlanta, and Kansas City Districts saw the pace of growth improve modestly. Growth in the Boston District was mixed. Several districts were generally optimistic about future growth.

The growth in consumer spending ranged from slight to moderate, with a pace similar to the previous report. Notably, the New York District reported that general merchandise sales slowed. While auto sales varied across districts, most reported a positive outlook and growth. Tourism activity was reported to have increased across much of the nation, with many Districts reporting higher hotel occupancy rates and optimism about the remainder of 2014 and 2015.

Manufacturing growth generally increased since the last report, with many districts reporting a positive outlook. The two weak spots were that, “New York noted that manufacturing growth had stalled, and Boston indicated that their contacts cited weaker results than in the past few reports.”

Loan volumes generally increased since the last reporting period. Credit standards generally remained unchanged since the previous Beige Book. The bright spots were that, “New York reported... delinquency rates continued to decline, particularly for commercial loans and mortgages. Philadelphia banking contacts described steady improvement in credit quality, and San Francisco noted that asset quality has improved since the previous report.”

The report noted that the pace of employment growth remained the same since the last reporting period. Continuing a recent trend, many districts report difficulty filling qualified workers for high-skilled positions. Notably, the districts reported increased upward pressure for wage growth, particularly for skilled labor. The report stated that, “Cleveland, Richmond, and Kansas City noted upward wage pressures for transportation workers; Richmond also reported upward wage pressures for skilled engineers, managers, information technology professionals, and bankers. San Francisco noted that software developers were receiving above-average wage increases. New York reported that workers were more frequently leaving jobs for higher pay, while a contact in the St. Louis District noted increased turnover of skilled employees who were switching to higher-paying jobs.”

Read the Federal Reserve release.

Wednesday, October 15, 2014

Producer Prices Declined in September

Producer prices declined by 0.1% in September, the first monthly decline since August 2013. Year-over-year growth slowed to 1.6%, below the 2.0% target of the Federal Reserve.



Prices for finished services decreased 0.1% in September, driven largely by a 0.7% drop in energy prices. Gasoline prices continue to drop rapidly. Final demand also dropped 0.1%.

Prices at earlier stages of production increased. Processed and unprocessed intermediate goods improved 0.1% and 0.6% respectively. The increase was driven by growing food prices in the earlier stages of production.

Read the BLS report.

Retail Sales Declined in September

Retail sales declined 0.3% in September, the first monthly decline since January, when sales were depressed due to the cold weather. Clothing sales led the decline. September’s year-over-year growth was 4.3%, a slowing of the annual pace from August, but above July’s annual pace.



Despite the overall decline, some categories of retail sales showed improvement. Electronics and appliances had the strongest monthly growth at 3.4%. The largest monthly drop occurred for clothing and accessories, which shrank 1.2%. The drop more than offset the gain from the month prior.

Despite weaker report in September, future outlook is strong. The steady improvements in the labor market should drive spending higher.

Read the Census report.

Tuesday, October 14, 2014

Small Business Optimism Dropped Below Pre-Recession Average in September

Small business optimism declined 0.8 points in September to 95.3, settling 5 points below the pre-recession average. September’s drop was driven by job openings and planned capital outlays.



Financing continues to be the least cited concern holding back small business conditions, with 2% of respondents citing it as the single most important problem. Government requirement and red tape overtook the top spot at 22%, with taxes dropping to the number two spot at 21%.

Four of the ten index components improved and the remaining six declined. Of the six, two declined by a combined 10 points total and account for the overall index decline. Job openings and planned capital outlays took the biggest hits, declining 5 points each, and those two components correlate directly with GDP and job growth, potentially weighing down on third quarter GDP.

Read the NFIB report.