The FOMC looks very likely to raise rates at next week’s meeting, the first with Chairman Powell at the helm ... we expect a slightly hawkish tone to next week’s meeting.
[We] expect the post-meeting statement to retain January’s upbeat tone ... but we expect the Committee’s optimism to come across more clearly in the SEP and the dots ... we do think the statement will acknowledge recent housing weakness.
The SEP is likely to show higher GDP growth projections for 2018, 2019, and longer-run, as well as a lower unemployment path and a modest inflation overshoot in 2020.
Public remarks by Fed officials suggest a broad shift in the committee’s outlook towards a potentially faster pace of tightening, and we expect the median dot to show four hikes in 2018, up from three at the December meeting.
The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 4-10 March 2018, according to data from STR.The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.
In comparison with the week of 5-11 March 2017, the industry recorded the following:
• Occupancy: +1.1 at 68.1%
• Average daily rate (ADR): +2.0% to US$131.46
• Revenue per available room (RevPAR): +3.1% to US$89.53
February closed with 1,131 sales, up just .2% from January’s 1,129 sales. Compared with one year ago (1,028), the current figure is a 10% increase. Of the 1,131 sales this month, 171 (15.1%) cash financing, 651 (57.6%) used conventional, 203 (17.9%) used FHA, 59 (5.2%) used VA and 47 (4.2%) used Other types of financing.CR Note: Inventory is still low, but now increasing year-over-year in Sacramento.
Active Listing Inventory increased 2.8% from 1,677 to 1,724. The Months of Inventory, however, remained at 1.5 Months. A year ago the Months of inventory was 1.4 and Active Listing Inventory stood at 1,469 listings (17.4% below the current figure).
The Average DOM (days on market) remained at 31 from month to month. The Median DOM dropped from 17 to 13.
“Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.” 66.9% of all homes sold this month (757) were on the market for 30 days or less and 81.8% (925) of all homes sold in 60 days or less. Compare this to February 2016 where 78.8% of all homes sold (1,082) sold in 60 days or less.
This paper details CBO’s methodology for estimating and projecting labor force participation rates. CBO constructs a birth-year cohort model of the labor force participation rate that estimates labor force participation rates by age-sex-education-race subgroups. Using the estimated model to project rates over the next decade, CBO expects the overall rate to decline by 2.7 percentage points, reaching 60.1 percent by 2028.
Most (2.5 percentage points, or about 80 percent) of the 3.2 percentage-point decline since the 2007–2009 recession in the labor force participation rate for the population at least 16 years old is the result of aging. That decline continued a trend that began in the late 1990s and early 2000s as the early baby-boom cohorts began to turn 50 years old, the age at which individuals tend to start reducing their participation in the labor force. CBO projects that the continued aging of the population will further reduce the overall participation rate over the next 11 years by an additional 2.8 percentage points, as most baby boomers age into retirement.
Although aging is the primary driver of the falling labor force participation rate, it is not the only driver, as other structural factors are...
The number of job openings increased to 6.3 million on the last business day of January, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were little changed at 5.6 million and 5.4 million, respectively. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.2 percent and 1.2 percent, respectively. ...The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.
The number of quits was little changed at 3.3 million in January. The quits rate was little changed at 2.2 percent. Over the month, the number of quits was little changed for total private and for government.
Industrial production rose 1.1 percent in February following a decline of 0.3 percent in January. Manufacturing production increased 1.2 percent in February, its largest gain since October. Mining output jumped 4.3 percent, mostly reflecting strong gains in oil and gas extraction. The index for utilities fell 4.7 percent, as warmer-than-normal temperatures last month reduced the demand for heating. At 108.2 percent of its 2012 average, total industrial production in February was 4.4 percent higher than it was a year earlier. Capacity utilization for the industrial sector climbed 0.7 percentage point in February to 78.1 percent, its highest reading since January 2015 but still 1.7 percentage points below its long-run (1972–2017) average.Click on graph for larger image.
Housing Starts:Click on graph for larger image.
Privately-owned housing starts in February were at a seasonally adjusted annual rate of 1,236,000. This is 7.0 percent below the revised January estimate of 1,329,000 and is 4.0 percent below the February 2017 rate of 1,288,000. Single-family housing starts in February were at a rate of 902,000; this is 2.9 percent above the revised January figure of 877,000. The February rate for units in buildings with five units or more was 317,000.
Privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,298,000. This is 5.7 percent below the revised January rate of 1,377,000, but is 6.5 percent above the February 2017 rate of 1,219,000. Single-family authorizations in February were at a rate of 872,000; this is 0.6 percent below the revised January figure of 877,000. Authorizations of units in buildings with five units or more were at a rate of 385,000 in February.
CoreLogic analysis shows U.S. homeowners with mortgages (roughly 63 percent of all properties) have seen their equity increase by a total of $908.4 billion since the fourth quarter 2016, an increase of 12.2 percent, year over year.CR Note: A year ago, in Q4 2016, there were 3.2 million properties with negative equity - now there are 2.5 million. A significant change.
In the fourth quarter 2017, the total number of mortgaged residential properties with negative equity decreased 1 percent from the third quarter 2017 to 2.5 million homes, or 4.9 percent of all mortgaged properties. Compared to the fourth quarter 2016, negative equity decreased 21percent from 3.2 million homes, or 6.3 percent of all mortgaged properties.
Negative equity peaked at 26 percent of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009.
Business activity grew robustly in New York State, according to firms responding to the March 2018 Empire State Manufacturing Survey. The headline general business conditions index climbed nine points to 22.5. The new orders index rose to 16.8 and the shipments index advanced to 27.0—readings that pointed to strong growth in orders and shipments. Unfilled orders increased, delivery times lengthened, and inventories edged higher. Labor market indicators showed an increase in employment and hours worked. After reaching a multiyear high last month, the prices paid index moved up further, reflecting ongoing and widespread increases in input prices. The prices received index held steady and suggested moderate selling price increases. Firms remained optimistic about future business conditions, though less so than last month, and capital spending plans remained strong.And from the Philly Fed: March 2018 Manufacturing Business Outlook Survey
Results from the March Manufacturing Business Outlook Survey suggest continued growth for the region’s manufacturing sector. ... The diffusion index for current general activity remained positive but declined, from 25.8 in February to 22.3 this month ... The firms continued to report increases in employment. Nearly 35 percent of the responding firms reported increases in employment, while 9 percent reported decreases this month. The current employment index edged slightly higher to 25.6, its highest reading in five months.Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:
Builder confidence in the market for newly-built single-family homes edged down one point to a level of 70 in March from a downwardly revised February reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) but remains in strong territory.
“Builders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand.”
“A strong labor market, rising incomes and a growing economy are boosting demand for homeownership even as interest rates rise,” said NAHB Chief Economist Robert Dietz. “With these economic fundamentals in place, the single-family sector should continue to make gains at a gradual pace in the months ahead.”
The HMI component gauging current sales conditions held steady at 77, the chart measuring sales expectations in the next six months dropped two points to 78, and the index gauging buyer traffic fell three points to 51.
Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 57, the...
In the week ending March 10, the advance figure for seasonally adjusted initial claims was 226,000, a decrease of 4,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 231,000 to 230,000. The 4-week moving average was 221,500, a decrease of 750 from the previous week's revised average. The previous week's average was revised down by 250 from 222,500 to 222,250.The previous week was revised down.
Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal.
Mortgage rates fell again today as several economic updates painted a slightly gloomier picture. In general, weaker economic data coincides with lower rates. First up were Retail Sales numbers, which moved into negative territory in February. Analysts expected a modest improvement. Later in the morning, several widely-followed sources of GDP tracking adjusted Q1 estimates significantly lower. For instance, the Federal Reserve Bank of Atlanta keeps a running tally of where GDP would come out today given the incoming data. Today's reading fell to 1.9% from 2.5% last week.Here is a table from Mortgage News Daily:
The average borrower is likely to see the same interest rate at the top of the page (i.e. same NOTE rate) but with slightly lower upfront costs today (i.e. lower EFFECTIVE rate). With these gains, the average lender has inched down to the same rates seen on March 1st. [30YR FIXED - 4.5-4.625%]
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 1.9 percent on March 14, down from 2.5 percent on March 9. After yesterday's Consumer Price Index release from the U.S. Bureau of Labor Statistics and this morning's retail sales report from the U.S. Census Bureau, the nowcast of first-quarter real personal consumption expenditures growth fell from 2.2 percent to 1.4 percent.
Advance estimates of U.S. retail and food services sales for February 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $492.0 billion, a decrease of 0.1 percent from the previous month, but 4.0 percent above February 2017. ... The December 2017 to January 2018 percent change was revised from down 0.3 percent to down 0.1 percent.Click on graph for larger image.