The latest economic reports show a further increase in U.S. manufacturing output and a firm footing for the overall economy, but raised some questions about where employment and labor are going, while there were mixed results for existing-home sales.
Manufacturers reported the greatest improvement in overall business conditions since September 2014 during April. This was highlighted by the seasonally adjusted IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index rising from 55.6 in March to 56.5. A reading above 50 indicates manufacturing is expending
The headline PMI was boosted by marked expansions in output and new orders, with the latter growing at the quickest pace in over three and-a-half years, according to the report.
Stronger growth in new orders drove a solid increase in the level of outstanding business at manufacturers.
Robust client demand and signs of sustained pressure on capacities did not, however, lead to improved employment growth. The rate of job creation eased to an eight-month low as firms reportedly pushed for greater efficiency.
The survey registered the second-strongest monthly expansion since last October, with factories reporting the strongest output gains for 15 months, according to Chris Williamson, chief business economist at IHS Markit.
“After a relatively disappointing start to the year, the second quarter should prove a lot more encouraging,”he said. “The current data point to an annualized GDP growth rate of 2.5%, with scope for some substantial upside surprises in coming months.”
Leading Economic Indictors Positive
This followed a report from late last week that showed the outlook for the U.S. economy for the next three to six months looks solid.
The Conference Board’s Leading Economic Index for the U.S. increased 0.3% in March to 109, following a 0.7% increase in February, and a 0.8% increase in January.
“The U.S. LEI increased in March, and while the monthly gain is slower than in previous months, its six-month growth rate increased further and points to continued solid growth in the U.S. economy for the rest of the year,” said Ataman Ozyildirim, director of business cycles and growth research at The Conference Board.
He said the strengths among the components of the leading index have been very widespread over the last six months. However, labor market components made negative contributions in March and bear watching in the near future.
New Concerns About Existing Home Sales
Meantime, the National Association of Realtors reported an increase in existing home sales, but there are concerns about lagging inventory levels and affordability constraints.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.1% to a seasonally adjusted annual rate of 5.6 million in March from February. Despite last month's increase, sales are still 1.2% below a year ago.
"Robust gains last month in the Northeast and Midwest, a reversal from the weather-impacted declines seen in February, helped overall sales activity rise to its strongest pace since last November at 5.72 million," said Lawrence Yun, NAR chief economist. "The unwelcoming news is that while the healthy economy is generating sustained interest in buying a home this spring, sales are lagging year-ago levels, because supply is woefully low and home prices keep climbing above what some would-be buyers can afford."
The median existing-home price for all housing types in March was $250,400, up 5.8% from March 2017, and the 73rd straight month of year-over-year gains.
"Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets, especially those out West," said Yun.
Single-family home sales, the majority of the market, inched higher by 0.6% to a seasonally adjusted annual rate of 4.99 million in March from February, but are 1% below the sales pace a year ago.