Fleet Management

Economic Watch: New Home Sales Hit 10-Year High, Manufacturing Eases a Bit

November 27, 2017

By Evan Lockridge

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Sales of new homes rose last month while two separate reports show the nation’s manufacturing sector is nearly as strong this month as it was during October.

Sales of newly built, single-family homes in October rose 6.2% from the month before to a seasonally adjusted annual rate of 685,000 units from a downwardly revised September reading of 645,000, according to new Commerce Department figures released Monday.

This is the highest sales pace since October 2007 and the third straight monthly increase. Year-to-date, new home sales are 8.9% above their level over the same period last year.

“The October report shows strong sales growth at entry-level price points,” said Granger MacDonald, chairman of the National Association of Home Builders. “In markets where builders are able to provide homes for families with different household budgets, they can fulfill a growing demand for housing.” 

New home sales increased in all four regions. Sales rose 30.2% in the Northeast, 17.9%  in the Midwest, both possibly due to mild weather, while sales increased 6.4% in the West and 1.3% in the South.

“There is solid growth in the number of sales contracts signed before construction has begun, a strong indicator that new single-family home production should continue to grow as we look ahead to 2018,” said NAHB Chief Economist Robert Dietz.

First Look at November Manufacturing Shows Small Decline

This followed a report from Friday that showed the pace of manufacturing in the U.S. remains strong so far this month, but is down just a bit from October’s level, according to financial information services firm IHS Markit.

Its data indicated a positive month with output, new orders and employment all rising at solid rates, however, with a reading of 53.8, the seasonally adjusted Flash U.S. Manufacturing Purchasing Managers’ Index pointed to a slightly slower improvement in business conditions than the nine-month peak seen in October when it registered 54.6.

A reading above 50 indicates manufacturing is expanding while below 50 shows contraction.

Manufacturers anticipate a continued recovery in production volumes over the months ahead, with business optimism picking up to its strongest since the start of 2016, according to the report. Moreover, input buying expanded at the fastest rate since July and backlogs of work were accumulated for the fourth month running.

“An upturn in new order inflows means we can expect a strong end to the year, though prospects for 2018 remain more mixed,” said Chris Williamson, chief business economist at IHS Markit. “Although expectations about the year ahead slipped lower in the service sector, future optimism hit a two-year high in manufacturing, suggesting the goods-producing sector may start to make a stronger contribution to the economy in coming months.”

A final report on November manufacturing is due out the first of December from IHS Markit as well as a similar and more closely watched scorecard from the Institute for Supply Management.

The slight downturn for October is not entirely surprising in the wake of a Commerce Department report out just before Thanksgiving that showed new orders for U.S.-made capital goods declined in October following three straight monthly gains while new orders for all durable goods declined.

The Commerce Department reports that orders for nondefense capital goods excluding aircraft fell 0.5% last month, the biggest drop in just over a year.

The decline came despite a consensus estimate from analysts that production of these goods, which are an proxy of business investment, would increase 0.5%. However, even with the October monthly drop, these orders are 4.4% higher than they were in October 2016.

Overall, new orders for all durable goods fell 1.2% in October from September, due in large part to fewer aircraft orders, noted analysts at Wells Fargo Securities, while the slip in so-called “core capital goods” still showed the best three-month annualized growth rate in four years.

 

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