Daddy, is this a cyclical high?
The diffusion index of current general activity increased from a reading of 17.8 in June to 23.9 this month. The index has remained positive for five consecutive
months and is at its highest reading since March 2011. The current new orders and shipments indexes increased notably this month, increasing 17 points and 19 points, respectively. Both unfilled orders and delivery times indexes were positive for the second consecutive month, suggesting continued strengthening
The current indicators for labor market conditions also suggest improved conditions this month. The employment index remained positive, and, although it increased
less than 1 point, it has improved for four consecutive months. The percentage of firms reporting increases in employment (24 percent) exceeded the percentage
reporting decreases (12 percent). The workweek index was positive for the fifth consecutive month and increased 5 points.
About 36 percent of the firms reported higher input prices this month, near the level reported last month. The prices paid index changed little from its reading in June, although it had increased 24 points over the previous two months. The prices received index, which reflects firms’ own final goods prices, increased slightly, from 14.1 to 16.8. The percent of firms reporting higher prices (21 percent) exceeded the percentage reporting lower prices (4 percent), although 72 percent of the firms
reported steady prices. (Chart from Bespoke Investment)
That comes on the heels of the Empire State Survey which stands at 25.6, right within the high range of the past 14 years.
U.S. home construction tumbled in June due to a stretch of wet weather in the South, a decline that analysts said was likely a temporary departure from a trend of recovery in the housing market.
Housing starts sank 9.3% last month to a seasonally adjusted annual pace of 893,000. It was the weakest showing since September 2013 and the second-straight monthly drop, the Commerce Department said Thursday.
The June decline was driven by a nearly 30% drop in the South, the largest monthly decrease on record for that part of the country. Other parts of the U.S., however, posted increases. Construction in the Midwest was up 28%, while the Northeast was up 14%.
The problem in the South, home builders say, is that the region’s unusually wet winter and spring limited the number of home lots ready for construction. By June, a shortage of such build-ready lots left several builders unable to start constructing enough homes to meet demand.
Still, the pace of construction for May was revised lower, showing a 7.3% decline, compared with an initially reported 6.5% decrease, the Commerce Department said.
And new applications for building permits, a bellwether of future construction, declined 4.2% in June from the prior month to a pace of 963,000, the lowest figure since January. (…)
White House Economists See Few Labor Force Dropouts Returning The American labor force, as a share of the overall population, has been shrinking for more than a decade. A detailed new report from the White House Council of Economic Advisers estimates the majority of that decline has been driven by the retirement of the Baby Boom generation and that only one-sixth of the decline is clearly attributable to the weak economy.
(…) The decline has sparked a divide among economists, some of whom have attributed most of the gains to the simple fact that the Baby Boomers, who were born after World War II, are now reaching retirement age. Other economists, however, have argued the Baby Boomers explain a small part of the decline and the reason the labor force has fallen so much is that the economy has been historically weak and unprecedented numbers of Americans have lost their jobs and given up hunting for another one. (Research from different arms of the Federal Reserve, such as this paper from a Boston Fed conference and this paper from the Philadelphia Fed, have reached contradicting conclusions.)
The CEA’s paper lands in the middle of this debate, saying that of the 3.1 percentage point drop in labor force participation since 2007, 1.6 percentage points can be explained by demographics. About 0.5 percentage point can be explained by the historical pattern that some people in a weak economy are more likely to give up on the labor force. The CEA says the remaining 1 percentage point drop results from “other factors, which may include trends that pre-date the Great Recession and consequences of the unique severity of the Great Recession.”
The number of workers who left because of the weak economy but may return has been shrinking, the report concludes. By many measures the economy has been improving, albeit slowly, and around 1 million workers who were sitting things out may have already returned to the labor force, leaving fewer left sitting on the sidelines. (…)
The CEA’s conclusion is that 1.6% of workers are probably gone to retirement, 0.5% may return as they only left because the economy was weak, and that the divide among the remaining 1% is unclear. (…)
The CEA analyzes several scenarios for what could happen in coming years. In a best-case scenario, the labor force participation rate would rise from its current level of 62.8% to a little above 63%.
In most scenarios, however, the rate would hold steady for a few years and then resume its decline as more and more of the Baby Boomers born in the 1950s hit retirement age.
(…) “Probably the most significant policy response to falling labor force participation rates is immigration reform,” the report says. “On average, immigrants are younger and participate in the labor force at higher rates than native-born Americans.”
Then, how do you explain that? (Chart from BMO Capital)
Chinese Home Prices Decline In Record Number Of Cities, Average Sale Price Has Biggest Drop Since Lehman
(…) As summarized by Bloomberg, China’s new-home prices fell in a record number of cities tracked by the government as developers cut prices to boost sales volume. Prices fell in a record 55 of the 70 cities last month from May, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the statistics.
What’s worse, and as can be seen on the chart below, prices in Shanghai and the southern city of Guangzhou fell 0.6 percent each from May, the biggest drop since January 2011, while they declined 0.4 percent in Shenzhen. Prices fell 1.7 percent in the eastern city of Hangzhou, the largest monthly decline among all the cities.
At the national level, China recorded a 0.48% sequential decline in home prices: the largest since at least 2010. And slamming the nail in the Chinese housing market, at least for now, is that the Average Sale Price dropping by 1.5% Y/Y, the biggest drop since Lehman!