U.S. Durable-Goods Orders Fall 1.4%
Orders for durable goods declined a seasonally adjusted 1.4% in February from a month earlier, the Commerce Department said Wednesday. Excluding the volatile transportation sector, orders fell 0.4%, the fifth consecutive monthly decline.
Economists surveyed by The Wall Street Journal had expected overall orders to rise 0.2%.
Most of last month’s decline was due to a drop in transportation orders, particularly defense and civilian aircraft. But demand fell across many other industries.
So far this year, overall orders have decreased 0.5% compared with the same period a year earlier.
Orders for January were weaker than previously thought. Orders rose 2% instead of the initially reported 2.8%, and orders outside of transportation that month fell instead of slightly increasing as initially reported.
Meanwhile, a key measure of business investment continued to fall last month. The measure—orders for nondefense capital goods excluding aircraft—dropped 1.4% from January. That marked the sixth straight monthly decline, indicating businesses are hunkering down.
Weak business investment contributed to the economy’s modest 2.2% annualized growth in the fourth quarter. Nonresidential fixed investment rose at a 4.8% annual rate in October through December, down from the third quarter’s 8.9% pace. (…) (Chart from Doug Short)
U.S. New Home Sales Surprisingly Improve As Prices Weaken Further
New home sales during February increased to 539,000 from 500,000 in January, initially reported as 481,000. The latest figure was the highest since February 2008 and surpassed expectations for 470,000 sales in the Action Economics Forecast Survey.
Lower prices are attracting buyers. The median price for a new home in February declined 4.8% to $275,500 from $289,400, revised from $294,300. The average price of a new home slipped 0.9% to $341,000 (+4.6% y/y) from $344,100, revised from 348,300.
Sales in the Northeast more than doubled (87.0% y/y) to 43,000 while sales in the South increased 10.1% (22.0% y/y). Home sales in the Midwest were off 12.9% (-3.6% y/y) and in the West, sales declined 6.0% (+34.0% y/y).
Rising Rents Are Finally Forcing Millennials to Buy Houses
Millennials made up 32 percent of the U.S. housing market in 2014, up from 28 percent two years earlier, and have pulled ahead of the older Generation X as the largest segment of buyers, according to the National Association of Realtors.
Purchases by younger buyers are likely to grow gradually as millennials work through hurdles such as student debt, lack of down-payment funds and later family formation than previous generations, according to Jed Kolko, chief economist for real estate website Trulia, a unit of Zillow Group Inc. (…)
First-time buyers made up 29 percent of existing-home sales in February, up from 28 percent in January and the first increase since November, the National Association of Realtors reported this week. The share of new buyers fell last year to its lowest level since 1987, according to the group.
About 5.2 million renters say they expect to purchase a house in 2015, up from 4.2 million a year earlier, a reflection of the improving economy, according to the Zillow Housing Confidence Index released this month. (…)
The U.S. rental vacancy rate hit a 21-year low at the end of last year, according to the Census Bureau, giving landlords leverage to charge more.
Effective apartment rents, or what tenants paid after any landlord incentives, jumped 4.6 percent in the fourth quarter from a year earlier, a pace that will be repeated for the first quarter, according to Greg Willett, vice president of MPF Research, a Carrollton, Texas-based apartment-data firm. Leasing costs have climbed from a year earlier in every quarter since 2010, he said. (…)
The unemployment rate for adults ages 25 to 34 fell to 5.4 percent in February from a high of 10.6 percent in October 2009, Labor Department figures show.
The U.S. has about 75 million millennials — people born from 1980 and 1995 — a cohort expected this year to surpass the baby boom generation in absolute numbers as immigrants swell the younger group and boomers die off, according to a January report by the Pew Research Center. (…)
The average mortgage cost 21 percent of average household income in the Dallas area in the fourth quarter, compared with 28.5 percent of income to rent, according to Zillow. The U.S. average was 21.4 percent to own, compared with 30.1 percent to rent. (…)
OIL
Vehicle Miles Traveled: A Structural Change in Our Behavior
The Department of Transportation’s Federal Highway Commission has released the latest report on Traffic Volume Trends, data through January.
“Travel on all roads and streets changed by 4.9% (11.1 billion vehicle miles) for January 2015 as compared with January 2014.” The less volatile 12-month moving average is up 0.36% month-over-month and 2.12% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is little changed, up 0.08% month-over-month and up only 0.97% year-over-year.
Here’s a different way of looking at the recent trend, courtesy of CalculatedRisk:
India has just released its February oil consumption data. And rather remarkably, gasoline sales are up 18.3% on year, on the heels of a 17.7% spike seen in January. For the two months, gasoline consumption averaged about 470,000 b/d, compared with 398,000 b/d a year ago.
Overall oil product sales, including LPG, for the first two months of the year climbed 6% from the corresponding period of 2014 to an average of around 3.7 million b/d.
Right behind gasoline’s strength is LPG, whose consumption over January-February jumped 8% on year. And gasoil, which has the lion’s share of around 48% of the liquid fuels consumed in India, was up a respectable 5%. (…)
China last year consumed nearly six barrels of gasoline for every one sold in India, and demand rose 12.5% on year in 2014 to an average 2.45 million b/d. The January-February data, delayed by the Lunar New Year break, is yet to be released. But given that China’s overall apparent oil demand as calculated by Platts climbed 3% on year in the first two months of this year, it may not be surprising to see a continuing double-digit growth in gasoline sales. (…)
Gasoline consumers in the US, who account for around a tenth of the world’s total oil demand, are enjoying prices more than a dollar per gallon cheaper on average than this time last year. The weekly US Energy Information Administration report released March 18 showed an 8.8% on-year jump in gasoline demand for the week ended March 13 to 9.26 million b/d. Smoothed out on a four-week average basis, however, the rise was a relatively calmer 2.7% compared with the same period of 2014.
Even at a 3% average on-year growth rate, the US alone would add some 260,000 b/d to the global demand for gasoline. Were India and China to continue raising their consumption at 18% and 12% respectively — though I have my doubts — they would together contribute another 370,000 b/d in incremental demand. If, by some miracle, all three remain on this trajectory, we are looking at a surge of around 630,000 b/d in global oil demand in 2015. And that’s looking at just one product and three countries.