Volume 24, Number 6
Reginald J. Smith, Community Development Manager – Bank of Kansas City
Economic Highlights for the Week Ending February 16, 2018
MONDAY, February 12th
Tight inventory of homes for sale the final quarter of last year kept house price appreciation strong. The median price for an existing home, nationwide, was up 5.3% in the fourth quarter to $247,800, from $235,400 in the fourth quarter of 2016. Median prices increased in 162 out of the 177 metro areas tracked by this index, or in 92% of measured markets. Lawrence Yun, NAR chief economist noted “Remarkably, home prices have risen a cumulative 48 percent since 2011, yet during this same timeframe, incomes are up only 15 percent. The outlook is for house prices to continue to rise this year but with some moderation as mortgage rates tick higher.
TUESDAY, February 13th
The National Federation of Independent Business’ small business optimism index increased from 104.9 in December from 106.9 in January. The index is near its cyclical high of 107.5 indicating strong optimism among small business owners. Six of the ten components of the index posted increases. More firms believed that now was a good time to expand, expected the economy would improve, planned to increase inventories, and make capital outlays. Current job openings increased and more firms reported having job openings that were tough to fill. Current inventories were reportedly drawn down and fewer firms had expectations of higher real sales.
WEDNESDAY, February 14th
Retail sales came in much weaker than expected in January, but a sharp downward revision to December looks certain to pull down what had been outstanding strength for consumer spending in fourth-quarter GDP. Despite the weakness, prospects are bright with tax cuts beginning to impact paychecks. Sales fell 0.3% in January but were essentially unchanged excluding autos. This follows no growth in December and growth of 0.8% in November. Sales declined most at building supply stores, vehicle dealers and drug stores. Growth leaders included gasoline stations, apparel stores and department stores. In January sales were 3.6% above their year-ago level, down from more than 5% growth the prior two months.
The consumer price index shot 0.5% higher in January, led by a 3.0% jump in energy costs. Food prices remained subdued. Excluding the volatile categories of both food and energy, the core CPI rose a stronger-than-expected 0.3% on the month. Despite these strong monthly gains, the yearly gains for headline and core consumer prices at 2.1% and 1.8% respectively remain well with the Fed’s target for inflation. All told, the monetary policy implications are straightforward as the Federal Reserve will likely raise rates in March, the first of four 25-basis point rate hikes expected this year.
THURSDAY, February 15th
Jobless claims rose 7k to 230k for the week ending February 10. The four-week moving average rose 3,500 from the previous week’s revised average to 228,500. Claims remain near historic lows consistent with minimal layoffs and strong demand for labor.
The NAHB housing market index was unchanged at a level of 72 in February, indicating continued optimism among the nations’ homebuilders. Assessments of current and future sales remained strong, though current sales conditions inched down in February. Foot traffic through model homes held steady suggesting solid demand for new homes. Homebuilders are upbeat as they address capacity challenges in the new home market as the supply of homes continues to lag solid demand.
FRIDAY, February 16th
New housing construction starts surged 9.7% in January to an annual rate of 1.326 million. This follows an upwardly revised pace of 1.209 million in December. January’s strength was centered on multifamily housing starts which surged 19.7% to 431k. Single family starts also gained 3.7% to 877k from a rate of 846k in December. Total housing starts are now 7.3% above their January 2017 pace. Housing permits issuance, often used as a proxy for future building activity, jumped 7.4% in January to an annual rate of 1.396 million led by a sizable increase for multifamily permits. Single family permit issuance slipped 1.7% last month. Permit data suggests multifamily starts to continue at a faster clip in the next couple of months.
Stock Market Close for the Week
A Week Ago
WEEK IN ADVANCE
After a week of mostly housing market related data, reports in the coming week wrap up the sector for the month. Watch for new home sales and pending home sales, both on next week’s calendar. Key Interest Rates Latest 6 Mos Ago 1 Yr Ago Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Key Interest Rates
6 Mos Ago
1 Yr Ago
Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco