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ABC Bullion

Overnight US economic data wrap - in detail

25 July 2014

The below data was from part of Westpacs overnight report - its an excellent read

US new home sales fell 8.1% in June, and the previously reported 18.6% jump in May was revised to less than half that, an 8.3% rise. A month ago, reporting the May numbers, I wrote: “Looked at on a chart of new home sales since 2000, the May rise is just a hiccough. What’s more, even with the May spike, the annualised sales pace so far this year of 446k compares to 447k in the first half of 2013, so on that basis the new build market has really just been treading water. A downward revision next month to say 12% and a 4% fall in June would leave sales on 443k annualised for the year; that’s not a forecast, just a reality check from someone who has watched these figures each month since 1990!” Well the revision was deeper and the fall was steeper, so the numbers now give an annualised sales pace so far this year of 425k which compares to 431k new homes sold in 2013, so on this basis the new build market has sinking. That contrasts with the recently improved sentiment of homebuilders according to the NAHB. To put this into historic perspective, in the last 50 years America has produced houses at less than a 400k annualised pace just four times: 2008-13, early 1980s, and for shorter periods (a handful of months) in the early 1970s, and mid 1960s. In those three earlier episodes, sales recovered by at least 200k over the next year. This time around, they have slipped further. Impaired credit, higher mortgage rates, supply issues, affordability, demographics... all are factors at play. This is still not a normal economic recovery, so any talk of policy normalisation must include a full understanding of what’s going on in housing, as the Fed chair has acknowledged. The other burning question is why did American bosses hire nearly 1.5mn extra workers so far this year to produce no extra output? We get data updates next week on jobs and growth, of course.

US factory PMI (Markit) fell from its all time high of 57.3 in June to 56.3 in July, its lowest since April, but still higher than at any point in 2013 or years prior to that. In contrast, the latest reading for the ISM factory was 55.3 in June. In the last 6 months of 2013 the ISM factory headline averaged 56.2 and ranged from 54.9 to 57.0; since then it has averaged just 54.0 in a range from 51.3 to 55.4. Well after the winter disruption, the ISM has only managed to rise above the lowest of the six readings in H2 2013, indicative of an ongoing slower pace of economic growth in 2014 compared to the temporary burst of growth in summer-fall last year. So: two different survey pictures of the same sector of the US economy. ISM has the credibility that comes with longevity, the Markit new boy on the block has more survey participants. Let’s reserve judgement on which one is the better guide to the broader economy until after we have seen the July ISM and Q2 GDP plus revisions, all out next week.

In other US news, initial jobless claims fell 19k to 284k in the week ended 19/7, but this may have been to do with shorter than usual summer shutdowns of auto plants for new model retooling, which plays havoc with seasonally adjusted weekly data. Still, at least claims didn’t skyrocket (ducks, awaiting next week’s data)! Also, the Kansas City Fed factory index rose from 6 to 9 in July, not quite reversing its fall from 10 in May.