Economic Watch: Manufacturing, Existing Home Sales Post Strong Upturns
June 23, 2014
New June data points to a robust and accelerated improvement in the performance of the U.S. manufacturing sector.
At 57.5 in June, up from 56.4 the month before, the seasonally adjusted Flash U.S. Manufacturing Purchasing Managers’ Index from the financial information services provider Markit, indicated the strongest upturn in overall business conditions since May 2010. The latest rise in the headline PMI was driven by the fastest output and new orders growth for just over four years.
Manufacturing output growth picked up for the third month running to its strongest since April 2010. Also, the average pace of expansion in the second quarter was the steepest for any quarter since the survey began in early-2007.
Survey respondents generally attributed rising production volumes to improving domestic economic conditions, increased client confidence and a strong pipeline of outstanding work.
In line with the trend for output, total new business volumes increased at a sharp and accelerated pace during June. The latest rise in new work was the most marked since April 2010, despite a weaker contribution from new export order growth. June data signaled that new business from abroad picked up at the slowest pace seen over the current five-month period of expansion, according to Markit.
“U.S. industry is booming again, with the flash manufacturing PMI hitting its highest for just over four years in June. The strong reading also rounds off the best quarter for factories for four years, adding to indications that the U.S. economy rebounded strongly in the second quarter from the weather-related weakness seen at the start of the year," said Chris Williamson, chief economist at Markit. “The survey data suggest that gross domestic product should be set to rise by at least 3% after the 1% decline in the first quarter.
He said if there’s a weak spot it’s the near-stagnation of exports, which raises the possibility that trade will have acted as a drag on the economy in the second quarter.
Meantime, a separate report shows total existing-home sales in the U.S., rose 4.9% to a seasonally adjusted annual rate of 4.89 million in May from an upwardly-revised 4.66 million in April, but remain 5% below the 5.15 million-unit level in May 2013, according to the National Association of Realtors. The month-over-month gain in May was the highest monthly rise since August 2011.
Lawrence Yun, NAR chief economist, said current sales activity is rebounding after the lackluster first quarter. “Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year,” he said. “Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates.”
The median existing-home price for all housing types in May was $213,400, which is 5.1% above May 2013. “Rising inventory bodes well for slower price growth and greater affordability, but the amount of homes for sale is still modestly below a balanced market. Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run,” Yun said.
Earlier this month, NAR reported new home construction activity is currently insufficient in most of the U.S., and some states could face persistent housing shortages and affordability issues unless housing starts increase to match up with local job creation.
NAR President Steve Brown said housing fundamentals are showing slight improvement in markets across the country. “Many potential buyers were left on the sidelines beginning last summer as affordability declined amidst rising home prices and interest rates,” he said. “The temporary pause in rising interest rates and more homes for sale is good news, especially for first-time home buyers, who likely have a better chance in upcoming months to make a competitive offer that’s in return accepted by the seller.”
Single-family home sales rose 5.7% to a seasonally adjusted annual rate of 4.30 million in May from 4.07 million in April, but remain 5.7% below the 4.56 million pace a year ago. The median existing single-family home price was $213,600 in May, up 4.9% from May 2013.
Existing condominium and co-op sales remained unchanged in May from April, as well as May 2013, at an annual rate of 590,000 units.