Wednesday, November 25, 2015

New Home Sales Rose 10.7 Percent in October

Sales of new single-family homes rose in October to a seasonally adjusted annual rate of 495,000 according to the U.S. Census Bureau and Department of Housing and Urban Development. The October rate is 10.7 percent above the revised September rate of 447,000, and 4.9 above the year ago rate of 472,000.

New home sales increased in three of the four regions. Sales increased by 135.3 percent in the Northeast, 8.9 percent in the South, and 5.3 percent in the Midwest. New home sales contracted by 0.9 percent in the West.

The median sales prices of new houses sold in October was $281,500, down from $307,800 in September. The average price was $366,000, down $3,600 from last month.

At the end of October there was an estimated supply of 5.5 months at the current sales rate, down from 6.0 in September.

In contrast to October’s strong gains in new home sales, sales of existing homes fell 3.4 percent according to the National Association of Realtors.

Read the Census/HUD release.

Visit the new Banks and the Economy.

Consumer Sentiment Increased in November

Consumer sentiment rose to 91.3 in November, up 1.3 points from the previous month according to the University of Michigan Consumer Sentiment Index. The headline index is lower than the average level for the past six months (91.6).

“The data indicate that consumers have become increasingly aware of economic cross currents in the domestic as well as the global economy. Nearly all of the recent advance was focused on current conditions rather than future economic prospects, and the entire November gain was due to lower income households. Households with incomes in the top third of the distribution, who account for more than half of all spending, expressed a more cautious optimism,” says Richard Curtin, Chief Economist for UM Surveys of Consumers.

The Current Economic Conditions Index rose 2.0 points to 104.3, and was 1.6 points higher than the previous year. The Index of Consumer Expectations rose 0.8 points to 82.9, and grew 3.0 points year over year.

House Prices Rose 0.8 Percent in September

House prices in the U.S. rose 0.8 percent in September on a seasonally adjusted basis, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI). On a quarterly basis, house prices increased by 1.3 percent from the second quarter, and 5.7 percent from the third quarter of 2014.

“The long-anticipated slowdown in home price appreciation did not occur in the third quarter,” says FHFA Principal Economist Andrew Leventis. “The factors that have contributed to extraordinary price growth over the last few years – low interest rates, tight inventories, strong buyer confidence, and improving income growth – continued to drive prices upward in much of the country. However, as prices continue to rise, reduced affordability will be a stronger market headwind.”

Prices rose in all nine census divisions in September, with increases ranging from 0.1 percent in the West North Central and East South Central Regions, to 1.4 percent in New England. On a yearly basis, the Mountain and Pacific regions posted the strongest gains, with house prices increasing by 9.3 and 8.3 percent respectively. The Middle Atlantic region posted the softest gains, with prices rising only 3.6 percent over the year.

Read the FHFA release.

Visit the new Banks and the Economy.

Personal Income Rises, Consumption Flat

Personal income increased $68.1 billion, or 0.4 percent, in October, according to the Bureau of Economic Analysis, up from a 0.2 percent increase in September. Personal consumption expenditures (PCE) increased $15.2 billion, or 0.1 percent, consistent with the previous month.

Disposable personal income – personal income less taxes – increased 0.4 percent, up from 0.3 percent in Septmeber.

The personal savings rate – personal savings as a percentage of disposable income – was 5.6 percent, up from 4.3 percent last month.

Wages and salaries increased $45.0 billion, after increasing just $2.5 billion in September. October’s increase was primarily driven by a $36.8 billion wage increase in service-producing industries.

The price index for PCE decreased 0.1 percent, after decreasing 0.1 percent in September. The index excluding food and energy increased less than 0.1 percent from September and 1.3 percent from a year ago, still below the Federal Reserve’s target of 2.0 percent.

Read the BEA release.

Visit the new Banks and the Economy page.

Durable Goods Orders Grew 3.0 Percent in October

New orders for manufactured durable goods increased 3.0 percent to $239.0 billion in October, according to the U.S. Census Bureau. The October increase followed a 0.8 percent decrease in September. The majority of the increase was attributable to an 8.0 percent increase in new orders for transportation equipment. Excluding transportation, new orders increased 0.5 percent.

New orders excluding defense grew 3.2 percent on the month, as orders of non-defense capital goods increased by 13.2 percent to $83.2 billion. Despite an increase in new orders, shipments of non-defense capital goods fell 1.4 percent in October.

Shipments of manufactured durable goods, down two of the last three months, decreased 1.0 percent to $240.1 billion, following a 0.2 percent increase last month.

Inventories of manufactured durable goods, down five of the last six months, decreased 0.2 percent to $397.4 billion, following a 0.6 percent decrease in September.

Read the Census release.

Visit the new Banks and the Economy.

Tuesday, November 24, 2015

ABA Statement on FDIC’s Third Quarter Bank Earnings Report

By James Chessen, ABA chief economist

“Robust loan growth was the driving factor behind another strong quarter for America’s banking industry.  Lending served as the primary driver of the growth in bank assets as the bread and butter of banking moves to center stage.  Banks are well prepared to manage what is expected to be a slow and gradual increase in interest rates by the Fed.  This gives institutions ample time to adjust while low interest rates will continue to attract business borrowers.  With solid profitability, continually improving asset quality and strong capital levels, U.S. banks remain well positioned to make the loans that help drive economic growth.”
Lending Remains at the Forefront
“Loans increased more than $480 billion year over year as banks continue to make the loans that support job growth. The across-the-board increase in lending continued as businesses and consumers take advantage of historically low interest rates.  There has never been a better time to borrow for businesses eyeing expansion in an improving economy.  As commercial lending grows, it drives new economic activity and creates more employment opportunities.  The increase in lending goes beyond businesses, with consumer lending also expanding. Consumer credit growth reflects the hard work people have done to regain their financial footing after the great recession, which gives them the necessary leeway to responsibly take on a bit more credit.”   
Banks Remain Highly Capitalized as Loans Increase
“Banks remain highly capitalized at levels far exceeding the most stringent regulatory standards. The U.S. financial system is strong and well-positioned to withstand a gradual increase in rates by the Fed as well as any economic circumstance that could arise.  With solid levels of capital, banks have refocused their efforts on deploying it in support of loan growth that helps strengthen our economy.  Total industry capital is now $1.8 trillion, and with reserves banks have set aside for possible loan losses, there is a total buffer of $1.9 trillion protecting the industry from any economic circumstance that could arise.”
Asset Quality Continues to Improve
“Asset quality sustained its five-year trend of improvement as cautious behavior on the part of both banks and borrowers continued to pay off.  Loan losses have now returned to pre-crisis lows.  Underwriting standards will naturally adjust to reflect an improving economy and lower risk of lending.  Bank portfolios continue to improve, but sector-specific concerns remain, particularly with the oil and gas sector due to persistently low prices.  Bankers understand that an increase in energy-sector defaults could pose some downside risk and have taken precautionary measures to ensure they’re prepared for any local economic downturn.”

Conference Board Sees Declining Consumer Confidence

The Conference Board’s Consumer Confidence Index declined for a second straight month in November to a reading of 90.4, down from 99.1 in October and 102.6 in September.

The Present Situation Index also decreased for a second month to 108.1, down from 114.6 in October and 120.3 in September.

The Expectations Index saw a third monthly decline, to 78.6 in November, down from 91.6 in August.

According to Lynn Franco, Director of Economic Indicators at The Conference Board, “The decline was mainly due to a less favorable view of the job market… Heading into 2016, consumers are cautious about the labor market and expect little change in business conditions.”

Read The Conference Board report.
Visit the new Banks and the Economy.