NAM: Monday Economic Report

  • New single-family home sales pulled back somewhat, down 0.7% from 706,000 units in August to 701,000 units in September. Nonetheless, the trendline remains very encouraging, with new single-family home sales jumping 15.5% over the past 12 months. Similarly, existing home sales also pulled back in September from the best pace since March 2018 in August, but with 3.9% growth year-over-year. Workforce challenges and low inventory levels were cited as challenges in that release.
  • Reduced mortgage rates have helped to buoy recent housing market strength. The average 30-year fixed-rate mortgage ticked higher last week, up to 3.75%. It was near a three-year low as recently as Sept. 5, at 3.49%, but mortgage rates remain well below the 4.94% average reading on Nov. 15, 2018.
  • Manufacturing activity remained weak, with global economic headwinds and trade uncertainties continuing to challenge growth in the sector. Along those lines, new durable goods orders fell 1.1% in September, with a decrease of 0.3% if excluding transportation equipment sales. Over the past 12 months, new durable goods orders have fallen sharply, down 5.4%, and core capital goods orders—a proxy for capital spending—have declined 0.8% year-over-year.
  • The IHS Markit Flash Eurozone Manufacturing PMI was unchanged at 45.7 in October, the ninth straight monthly contraction in activity and remaining the weakest reading since October 2012. This was led by severe challenges in Germany, which has contracted in every month so far in 2019, but French manufacturers reported a slight improvement in growth, led by recoveries in exports and output and with stronger hiring.
  • Manufacturers in the Kansas City Federal Reserve Bank’s district said that activity contracted for the fourth consecutive month in October, with declining paces for new orders, employment and exports. Respondents felt marginally positive about growth over the next six months, but that forward-looking measure dropped to the lowest level since March 2016.
  • Meanwhile, the IHS Markit Flash U.S. Manufacturing PMI made progress in October for the second consecutive month following August’s reading, which was the slowest since September 2009. The IHS Markit survey suggests that manufacturing activity might have stabilized recently, with some of the regional Federal Reserve Bank surveys making similar conclusions (including the Richmond Fed release described in this report, but not the Kansas City one).
  • Manufacturers will see if the same is true in the Institute for Supply Management® survey out this week, as it has showed contracting activity in the U.S. manufacturing sector, with September’s PMI® at the lowest reading since June 2009. 
  • Other highlights this week include the first look at third quarter real GDP and the latest jobs numbers. In addition, the Federal Reserve is expected to cut short-term rates for the third time this year.