Economic Watch: Economy Continues to Show Improvement, New Homes Sales Solid

A barometer of where the U.S. economy is headed over the next several months showed it continued to increase, according to a report released on Thursday, while a separate one revealed sales of new homes in the U.S. tumbled in the final month of last year but improved for all of 2017.

The Conference Board’s Leading Economic Index (LEI), for the U.S., made up of ten economic components, increased 0.6% in December to a reading of 107, following a upwardly revised 0.5% increase in November, and a 1.3% jump in October.

The December gain was slightly better than a 0.5% jump expected from a poll of analysts.

“The U.S. LEI continued rising rapidly in December, pointing to a continuation of strong economic growth in the first half of 2018. The passing of the tax plan is likely to provide even more tailwind to the current expansion,” said Ataman Ozyildirim, director of business cycles and growth research at The Conference Board, a private research group.

He said the gains among the leading indicators have been widespread, with most of the strength concentrated in new orders in manufacturing, consumers’ outlook on the economy, improving stock markets and financial conditions.

The Conference Board’s Coincident Economic Index for the U.S., which measures current economic conditions increased 0.3% in December to 102.8 following a 0.1% upturn in November, and a 0.4% hike in October. 

The Lagging Economic Index for the U.S., which measures past conditions, increased 0.7% in December to 104, following a 0.1 percent improvement in November and a 0.3 percent rise in October.

2017 New Home Sales Up Over 2016 Despite December Drop

Meantime, a Commerce Department report showed sales of new single-family homes in December fell 9.3% to an adjusted annual rate of 625,000 from the downwardly revised rate the month before.

While the December decline is the biggest monthly drop since August 2016, the November level remained the best month on record since 2007

Despite the December month-over-month decline, sales were 14.1% higher than they were the same time a year ago.

Total new single-family home sales for the year amounted to 608,000 homes, an 8.3% improvement over 2016.

According to analysts at Econoday, the decline in new home sales for December masks what is actually a solid new home sales report.

“The bottom line is upward sales momentum, incoming supply and room for prices to move higher,” Econoday said. “Residential investment has been dragging down the gross domestic product in recent quarters, but today's report points to a solid contribution for [Friday's] fourth-quarter report.”

The report on new home sales followed one the day before from the National Association of Realtors on existing home sales, which also showed a December drop despite better numbers in 2017 than the year before.