Housing Starts Rise to 10-Year High U.S. single-family housing starts in February hit their highest level since the recession thanks to warm weather, a strengthening economy and increased demand from buyers looking to get ahead of rising mortgage rates.
- Housing starts rose 3% in February from the previous month to a seasonally adjusted annual rate of 1.288 million, above the revised January rate of 1.251 million.
- Permits fell 6.2% to 1.213 million from the revised January total of 1.293 million. Permits to build single-family homes increased 3.1% (13.5% y/y) to 832,000, nearly a ten-year high. Permits to build multi-family units fell 21.6% (-11.2% y/y) to 381,000.
- Single-family construction rose 6.5% in February from the previous month, while multifamily construction fell 3.7%.
- Total housing starts declined by a revised 1.9% in January, driven by a 7.3% drop in multifamily construction. Total starts in February were up 6.2% compared with a year earlier.
- Last month was one of the warmest Februarys on record, boosting construction activity.
U.S. JOLTS: U.S. Labor Market Activity Remains Firm
The total job openings rate of 3.7% during January held steady with the prior three months. Nevertheless, the rate was below July’s peak of 4.0%. The private-sector job openings rate remained at 4.0%, where it was during all of last year. In the government sector, the job openings rate fell to 2.0%, the lowest level since June 2015. (…)
The actual number of job openings rebounded 1.6% (-1.5% y/y) to 5.626 million, down from the July high of 5.973 million. Private-sector openings improved 2.1% to 5.173 million and eased 0.8% y/y. Construction job openings increased 5.0% (-7.0% y/y) following sharp declines during the prior six months, while the number of openings in education & health services declined 2.9% y/y. Factory sector job openings jumped 6.4% (4.6% y/y). Professional & business services openings rebounded 13.8% m/m following sharp declines since July, while leisure & hospitality openings were off 3.5% y/y. Government-sector job openings declined 9.4% y/y.
Philadelphia Fed Factory Index Declines; Prices Surge
(…) The ISM-Adjusted General Business Conditions Index constructed by Haver Analytics surged to 60.2 this month, the highest level since July 2004. The ISM-Adjusted headline index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each). This figure is comparable to the ISM Composite Index. During the last ten years, there has been a 71% correlation between the adjusted Philadelphia Fed Index and real GDP growth.
Despite the decline in the overall business conditions index, shipments, unfilled orders and inventories increased. New orders and delivery times improved just modestly, the latter indicating fairly stable delivery speeds.
The employment series rose to the highest level since November 2014. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing sector payrolls. The average workweek reading strengthened significantly to an expansion high.
Prices paid strengthened to the highest level since May 2011. Forty-one percent of respondents (NSA) reported paying higher prices, while none paid less.
The future business activity index increased to the highest level since August 2014. Most component series increased m/m, notably prices paid to its 2011 high.
But
Despite the apparent strength, manufacturers have not been able to raise prices as frequently as their input prices have risen. (Mishtalk)
Empire State Business Conditions Survey Eases
The Empire State Manufacturing Index of General Business Conditions for March fell to 16.4 from 18.7 in February.
The [ISM] adjusted figure improved to 54.9 from 54.4. It was the highest level since May 2012. During the last ten years, the index posted a 63% correlation with the change in real GDP.
New orders eased, but shipments increased. Unfilled orders and delivery times also rose, but inventories fell. The employment index jumped to 8.8, its highest level since April 2015. During the last ten years, there has been a 69% correlation between the employment index and the m/m change in factory sector payrolls. The average workweek reading also surged to the highest point since March 2012.
The prices paid series eased to 31.0, but remained up sharply versus the readings of 2016 and 2015. A lessened 33.6% of respondents reported paying higher prices, while a reduced 2.7% reported them lower. The prices received index similarly declined to 8.8, its lowest point in three months.
Expectations of business conditions six months ahead fell sharply to 37.4, its lowest point since November. The index was pulled lower by weakened readings for orders, shipments and employment. An earlier decline in expected prices stabilized.
Richard Yamarone, Bloomberg Intelligence Economists:
Total industrial production has been flat over the past year, while manufacturing activity hasn’t been much better, mustering a lowly 0.3 percent gain from year-ago levels. A sustained uptick in production may be several months away as businesses remain sidelined until some definitive trade, tax and regulatory policy is formalized.
Consensus expects a slight 0.2 percent increase in the headline industrial production index and a more robust gain of 0.5 percent in manufacturing output during February — the difference being the softer pace of utility and mining production. Given the considerably warmer-than-normal temperatures experienced last month — the deviation in the number of heating degree days from normal was minus 183 in February versus minus 151 in January — the risk is that the headline is lower than consensus. (…)
While there’s reason to believe that greater optimism will ultimately lead to a pickup in output, businesses will likely refrain from actually putting capital to work until there’s some degree of clarity with respect to the policies regarding taxes, trade, and regulation.
Trump’s Budget Likely to See Major Rewrite in Congress Republicans were quick to lodge objections to President Trump’s budget plans, many of which trim away smaller programs that help the sort of local communities he vowed to rejuvenate during the campaign.
Insurers See Health-Care Premiums Increasing Significantly
According to a nonpartisan report released by the Congressional Budget Office on Monday, the House Republicans’ bill, known as the American Health Care Act, could raise premiums by 15% to 20% for individual plans in 2018, compared with rates without the bill. These increases would largely be due to the end of penalties for people who lack insurance; the CBO suggested that fewer healthy people would enroll without the mandate, helping to raise average costs.
(…) with a number of Republican lawmakers balking at the House bill, insurers are increasingly nervous that the time frame will slip, leaving them with no clear path forward for 2018. That could push up rates or lead some to simply withdraw from the marketplaces, as Humana Inc. has already said it would do next year.
“The more uncertainty, the higher the price,” said Martin Hickey, chief executive of New Mexico Health Connections. His nonprofit has seen a potential 40% premium increase on ACA marketplace plans.
Even if a version of the House bill does pass, insurers say it fails to answer one of their most important questions: funding for the cost-sharing subsidies, which pay most of the costs of deductibles and other out-of-pocket charges for low-income consumers. Those subsidies would be repealed in 2020 under the House bill, but it doesn’t set aside money to pay them in the meantime.
The cost-sharing subsidies are paid to insurers, which—under the current law—are on the hook to cover the consumers’ out-of-pocket costs even if they aren’t being repaid by the federal government as expected. If the insurers aren’t sure that the federal money will flow, they would build that extra expense into future premium rates. Some insurers may also simply decide to withdraw, experts said, given the high financial stakes involved. (…)
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Congressional Estimate Confirms Major Implications for States from AHCA A Congressional Budget Office estimate indicates that state governments could face significant reductions in federal funding under the proposed American Health Care Act (AHCA).