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Economic Watch: Leading Indicators, E-Commerce Sales Post Impressive Gains

Three new economic reports add to increasing evidence the U.S. economy will have a better overall first quarter of the year than the final three months of 2016.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
February 17, 2017
Economic Watch: Leading Indicators, E-Commerce Sales Post Impressive Gains

 

3 min to read


Three new economic reports add to increasing evidence the U.S. economy will have a better overall first quarter of the year than the final three months of 2016.

The Conference Board's Leading Economic Index (LEI) for the U.S. increased 0.6% in January to 125.5, following a 0.5% increase in December and a 0.2% increase in November.

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"If this trend continues, the U.S. economy may even accelerate in the near term.”

“The U.S. Leading Economic Index increased sharply again in January, pointing to a positive economic outlook in the first half of this year,” said Ataman Ozyildirim, director of business cycles and growth research at the private research group. “The January gain was broad-based among the leading indicators. If this trend continues, the U.S. economy may even accelerate in the near term.”

The LEI is made of 10 components, including data from manufacturing, housing and consumer expectations. The January improvement was described by Well Fargo Securities as “’broad-based with only a single component subtracting from the headline figure, non-defense capital goods minus aircraft."

E-Commerce Sales Jump

A separate report from the Commerce Department showed e-commerce sales increased in both the fourth quarter of 2016 and for all of last year.

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They rose 1.9% in the final three months of 2016 from the third quarter. The fourth quarter 2016 e-commerce estimate was up 14.3% from the same time in 2015, far outpacing the 4.1% hike in total retail sales during the same period.

Total e-commerce for 2016 was at $394.9 billion, an increase of 15.1% from 2015, while total retail sales in 2016 increased 2.9%. E-commerce sales in 2016 accounted for 8.1% of total sales, up from 7.3% in 2015.

According to some analysts and recent reports, the increasing rise of e-commerce has already led to changes in how the trucking industry does business and is expected to bring even more in the years to come.

Housing Starts Ease But Remain Strong

These reports follow one from the Commerce Department showing housing starts in January dropped 2.6% to a seasonally adjusted annual rate of 1.246 million units. But that's still slightly better than analysts’ expectations.

Multifamily production fell 10.2% to 423,000 units after an unusually high December 2016 reading, whereas single-family starts ticked up 1.9% to 823,000 units.

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“A settling of housing production is in line with what we are hearing from builders, that they are largely optimistic about current market conditions but still face supply-side headwinds and regulatory hurdles,” said Granger MacDonald, chairman of the National Association of Home Builders.

Overall permit issuance, an indicator of future building levels, rose 4.6% in January to 1.285 million units, its highest level in more than a year. Single-family permits fell 2.7% to 808,000 units, while multifamily permits increased 19.8% to 477,000 units.

“Increasingly volatile as of late, construction activity remains in positive territory on an annual basis, despite a back and forth month-to-month,” said Lindsey Piegza, chief economist at Stifel Fixed Income.

She noted that the recent rise in mortgage rates, plus a warning from Federal Reserve Chair Janet Yellen of the Fed potentially raising rates, may restrain the housing market and other sectors sensitive to interest rates.

“After all, consumers continue to face moderate labor market conditions with slowing wage growth, making it increasingly more difficult for the average American, particularly first-time homebuyers, to afford a home purchase,” Piegza said.

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Late last month the Commerce Department released numbers that showed the widest measure of U.S. economic growth, GDP, slowed in the final quarter of last year and for all of 2016 -- though much of it wasn’t due to domestic weakness but rather a surge of imports.

The gross domestic product (GDP) increased at an annual rate of 1.9% in October through December, down from the 3.5% pace in the third quarter of 2016.

However, since that time there have been reports showing so far this that employment remains strong while manufacturing is increasing and retail sales are surging, causing many analysts to forecast the first quarter of 2017 will see an overall improvement in the GDP.

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