ECONOMIC NUGGETS – April 2, 2014

Apr 02, 2014
  1. Janet Yellen, the new chairperson of the Board of Governors of the Federal Reserve System, survived her first press conference. She learned the hard way the weight her words carry when asked when the Fed was likely to raise interest rates. She was more explicit than she likely intended, sending stock and bond prices into a tailspin. Some in the market may have latched onto her “about six months” comment without noting the clock was not to start ticking until the Fed ends its asset purchase program, probably in October. Her attempts to backtrack on that implied date and add nuance to her remark were lost on the market, which is not into subtleties—at least not in the short run. The financial markets did recover the next day when investors took the time to read and analyze what she said. She is not the first, nor likely the last, chairperson to discover that a minor, even offhand, comment can have serious, unintended consequences
  2. The Federal Reserve announced it will reduce its purchases of long-term assets from $65 billion per month to $55 billion per month starting in April. The Fed appears to be staying on course to reduce the size of its monthly long-term asset purchases in $10 billion increments with the statement issued after each Federal Open Market Committee meeting (roughly every six weeks). Once the Fed is no longer purchasing assets, it will begin a program of reducing its holdings of long-term assets, no doubt in the same measured way—a slow, but deliberate increase in the pace of the reduction
  3. February total commercial construction spending was $945.7 billion at a seasonally adjusted annualized rate (SAAR), up 0.1% from January and up 8.9% on a year-to-date not seasonally adjusted (NSA) basis
    • Nonresidential building construction spending was $308.1 billion, down 0.3% from January. However, January spending was revised up by $4.8 billion, 1.6% of the previously reported number, revising January’s change from a 1.0% drop to a 0.1% increase. On a year-to-date NSA basis, spending was up 5.7% compared to the same period a year ago
      • Lodging construction spending jumped 2.9% in February after falling 1.1% in January. On a year-to-date NSA basis, spending was up 40.7%
      • Health care construction spending rose 0.4% in February, but was down 4.2% on a year-to-date NSA basis
      • Education construction spending decreased 1.1% in February and was down 5.4% on a year-to-date NSA basis
      • Manufacturing construction spending slipped 0.1% in February after surging 8.9% in January. On a year-to-date NSA basis, spending was up 16.3%
    • Heavy engineering (non-building) construction spending was $272.4 billion, up 1.7% in February after dropping 2.4% in January. On a year-to-date NSA basis, spending was up 6.1%. Spending for January was revised down by $6.7 billion, 2.5% of the previously reported number
      • Communication construction spending increased 7.2% in February after shooting up 14.0% in January, its fourth consecutive monthly increase. On a year-to-date NSA basis, spending was up 47.2%
      • Power construction spending rose a strong 4.7% in February after plunging 9.8% in January. Nonetheless, on a year-to-date NSA basis, spending was up 3.2%
      • Highway construction spending increased 1.3% in February after rising 0.8% in January.  January’s increase was in spite of a $3.8 billion downward revision, 4.3% of the previously reported number. On a year-to-date NSA basis, spending was up 9.6%
    • New residential construction spending in was $225.1 billion in February, down 0.4% from January, its first monthly decline since September 2011. On a year-to-date NSA basis, spending was up 18.9%
  1. The February AIA Architecture Billings Index (ABI) inched up 0.3 points to 50.7. This was the second month in a row the index was above 50 and 16 months out of the past 19 months it was above 50. An index number above 50 indicates rising billings, a positive for the outlook for commercial construction
  2. The third estimate of fourth quarter 2013 real (inflation-adjusted) gross domestic product (GDP) growth was revised up slightly to +2.6% (SAAR) from the second estimate of +2.4%
    • Investment in nonresidential structures was revised from +0.2% to -1.8%
    • Growth in real consumer spending was revised up from +2.6 to +3.3% (the consumer is still spending)

  1. The March NAHB/Wells Fargo Housing Market Index (HMI) rose 1 point to 47 after February’s record 10 point plunge, marking two months in a row with a below 50 reading―a negative for single-family residential construction
  2. February new home sales dropped 3.3% to 440,000 (SAAR) wiping out January’s 3.2% gain. On a year-over-year NSA basis, sales were down 2.8%, but were flat on a year-to-date basis compared to the same period a year ago
  3. Both the 10-city and 20-city S&P/Case-Shiller® Home Price seasonally adjusted (SA) indexes increased 0.8% in January, marking 23 months in a row that both indexes increased. On a year-over-year NSA basis, the indexes were up 13.5% and 13.2%, respectively
  4. For all 20 cities, home prices on a year-over-year NSA basis have increased for 13 consecutive months
  5. The January SA Federal Housing Finance Agency’s (FHFA) Purchase-Only Home Price Index advanced 0.5% after rising 0.7% in December. On a year-over-year NSA basis, the index was 7.4% higher
  6. The SA Producer Price Index (PPI) for finished goods was up 0.4% in February after increasing 0.6% in January. On a year-over-year NSA basis, the February PPI was up 1.3%
  7. A price index for inputs used in nonresidential construction, excluding capital equipment, was up 0.7% (NSA) in February after a 0.5% increase in January. The index was up 0.4% (NSA) from February 2013, while the PPI for inputs for residential construction was up 1.1% over the same period
  8. The February Consumer Price Index (CPI) increased 0.1% (SA) for the second month in a row. The CPI was 1.1% (NSA) higher than in February 2013. Core CPI, which excludes food and energy prices, increased 0.1% (SA) for the third month in a row. The index was 1.6% higher than in February 2013

 



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