10-Year Treasury Yield
The 10-year Treasury yield settled at 1.73% on March 30, just below its recent high settlement of 1.74% on March 19.
The Chicago Fed National Activity Index (CFNAI)
Chicago Fed National Activity Index down in February. February Chicago Fed National Activity Index: -1.09 vs. +0.72 consensus, +0.75 prior (revised from +0.66). The three-month moving average moved down to -0.02 in February from +0.46 (revised) in January. U.S. economy contracted in February, Chicago Fed index shows.
Existing Home Sales
Existing home sales fell sharply in February, as supply dropped by the largest amount on record. Closed sales of existing homes in February dropped a larger-than-expected 6.6% compared with January, according to the National Association of Realtors.That put them at a seasonally adjusted, annualized rate of 6.22 million units, which was 9.1% higher compared with February 2020. The supply of homes for sale fell 29.5% year over year, the largest annual decline ever, to 1.03 million homes. Despite being on the cusp of the historically busy spring housing market, homeowners are not listing their properties for sale at the pace they normally would this time of year. The supply of homes for sale fell 29.5% year over year, the largest annual decline ever, to 1.03 million homes. At the current sales pace, it would take two months to exhaust this supply. One year ago, there was a three-month supply, which is also considered low. That tight supply continues to fuel home prices, which were 15.8% higher in February year over year. The median price of an existing home sold during the month was $313,000. That is the highest February price on record. Prices are rising due to bidding wars for homes, but the median was also skewed higher because more sales are occurring on the higher end of the market. Buyers in February were also facing higher mortgage rates than they were at the end of last year, which cut into their purchasing power. The average rate on the 30-year fixed mortgage wavered around 2.8% in January, according to Mortgage News Daily. It then began to rise steadily in February, hitting 3.27% by the end of the month. Those closing on homes in February, however, would likely have locked in their rates in January.
Corporate Profits
US Corporate Profits Fall in Q4. Corporate profits in the United States decreased 3.3 percent to USD 1.95 trillion in the fourth quarter of 2020, down from a 27 percent jump in the previous period. Undistributed profits fell 14.5 percent to USD 0.58 trillion and net cash flow with inventory valuation adjustment, the internal funds available to corporations for investment, went down 2.9 percent to USD 2.54 trillion. Meanwhile, net dividends rose 2.3 percent to USD 1.37 trillion.
Current Account
The U.S. current account deficit, which reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries, widened by $7.6 billion, or 4.2 percent, to $188.5 billion in the fourth quarter of 2020, according to statistics released by the U.S. Bureau of Economic Analysis. The revised third quarter deficit was $180.9 billion. The fourth quarter deficit was 3.5 percent of current dollar gross domestic product (GDP), up from 3.4 percent in the third quarter. The $7.6 billion widening of the current account deficit in the fourth quarter primarily reflected an expanded deficit on goods and a reduced surplus on services that were partly offset by a reduced deficit on secondary income.
New Home Sales
New home sales take a hit as builders grapple with big delays and bigger costs. Sales of newly built homes fell more than expected in February 2021, as builders faced higher costs and persistent delays. Taken together with rising mortgage rates during the month, affordability for buyers took a major hit. The numbers of homes sold and for sale before even being built have surged over the past year. The headline sales numbers were disappointing, with an 18% monthly drop to the slowest pace since last May, according to the U.S. Census. But some of the technical numbers are more telling of where builders expect their business to go. The Commerce Department said on Wednesday that new home sales plunged 18.2% to a seasonally adjusted annual rate of 775,000 units last month. January's sales pace was revised up to 948,000 units from the previously reported 923,000 units. Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, tumbling 6.5% to a rate of 875,000 units in February. New home sales are drawn from a sample of houses selected from building permits.
MBA Purchase Applications
Homebuyer mortgage demand inches higher, but rates hit highest level since summer.Mortgage applications to purchase a home rose 3% last week from the previous week, according to the Mortgage Bankers Association. Mortgage applications to refinance a home loan decreased 5% for the week and were 13% lower than a year ago. Mortgage rates are up more than 50 basis points, or half a percentage point, since the start of the year, reducing the potential savings from a refinance. Higher mortgage rates do not appear to be dampening demand for home purchases but are crimping refinance volume. Mortgage applications to purchase a home rose 3% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. That is the fourth straight week of gains. Volume was 26% higher than a year ago. Annual comparisons, however, will likely get very large over the next month because homebuying stalled at the start of the pandemic one year ago.
Durable Goods Orders
U.S. durable-goods-orders decline is first in 10 months. Orders for U.S. durable goods unexpectedly declined in February 2021 for the first time in nearly a year, indicating a pause in the months-long manufacturing rebound. Bookings for durable goods -- or items meant to last at least three years -- decreased 1.1% from the prior month, the first drop since April, after an upwardly revised 3.5% gain in January, Commerce Department figures showed Wednesday.Core capital goods orders, a category that excludes aircraft and military hardware and is seen as a barometer of business investment, dropped 0.8% after an upwardly revised 0.6% gain. The median estimates in a Bloomberg survey of economists called for 0.5.
Wholesale Inventories Advance
Advance Wholesale Inventories. Wholesale inventories for February 2021, adjusted for seasonal variations and trading day differences, but not for price changes, were estimated at an end-of-month level of $681.1 billion, up 0.5 percent (±0.4 percent) from January 2021, and were up 1.8 percent (±1.1 percent) from February 2020. The December 2020 to January 2021 percentage change was unrevised at up 1.4 percent (±0.9 percent).
U.S. PMI Composite Flash - Business Activity
Flash PMI survey data showed business activity in the United States rising sharply at the end of the first quarter of 2021, rounding off the economy's best performance since the third quarter of 2014. The IHS Markit composite PMI registered 59.1 in March 2021 compared to 59.5 in February 2021, resulting in a first quarter average of 59.1. The quarterly average signifies strong economic growth of around 1.5%, or approximately 5% on an annualised basis, which builds on a 1.0% rise in the fourth quarter of last year
Jobless Claims
Weekly jobless claims totaled 684,000 last week, a decline from the 781,000 the week before and below the 735,000 Dow Jones estimate.This was the first time claims had been below 700,000 during the pandemic era. First-time claims for unemployment insurance unexpectedly fell sharply last week amid signs that hiring has picked up in the U.S. economy, the Labor Department reported Thursday. Claims totaled 684,000 for the week ended March 20, the first time the number has been below 700,000 during the Covid-19 era. The level was a substantial decline from the 781,000 from a week earlier and was the lowest since March 14, 2020, just as the pandemic had begun. Last week’s progress showed that the jobs market is gaining traction amid aggressive government stimulus and a vaccination program that is seeing close to 2.5 million Americans a day getting shots aimed at stopping the Covid spread. The most recent weekly claims total also marks the first time the total is less than the pre-pandemic record of 695,000 hit in early October 1982. In addition to the drop in weekly claims, continuing claims, which run a week behind, declined to 3.87 million, a slide of 264,000.
Real Gross Domestic Product - GDP
Fourth-quarter GDP was stronger than expected at 4.3%. A separate release Thursday showed that gross domestic product was stronger than anticipated in the fourth quarter. The third and final reading on GDP showed a gain of 4.3%, up from previous estimates and the Wall Street consensus of 4.1%.Government Revises 4th Quarter GDP up Slightly to 4.3%/ The U.S. economy grew at an annual rate of 4.3% in the final three months of 2020, slightly faster than previously estimated, as recovery expectations for 2021 rise along with vaccinations and the provision of another nearly $2 trillion in government support. GDP in the October-December quarter rose from an estimated rate last month of 4.1%, the Commerce Department reported Thursday. The upward revision reflected stronger inventory restocking by businesses. For the entire year, the GDP shrank by 3.5%, the largest annual decline since a plunge of 11.6% in 1946 when the U.S. demobilized after World War II. The 3.5% drop was unchanged from the previous estimates. Economists are looking for a huge rebound this year, helped by government support packages including a $1.9 trillion package signed by President Joe Biden on March 11 that is delivering $1,400 payments to individuals, extending emergency unemployment until early September and providing billions of dollars in relief to state and local governments.
Consumer Sentiment UM
The Consumer Sentiment Index was 84.9 in the March 2021 survey, up from 76.8 in February 2021. Although just below last March’s 89.1, it was substantially ahead of the April 2020 low of 71.8. The Expectations component posted a sizable gain to 79.7 from last month’s 70.7, and the Current Conditions Index rose to 93.0, up from last month’s 86.2. Consumer sentiment continued to rise in late March, reaching its highest level in a year due to the third disbursement of relief checks and better than anticipated vaccination progress. As prospects for obtaining vaccination have grown, so too has people's impatience with isolation, as those concerns were voiced by nearly one-third of consumers in March, the highest level in the past year.
The majority of consumers reported hearing of recent gains in the national economy, mainly net job gains. The data clearly point toward robust increases in consumer spending. The ultimate strength and duration of the spending surge will depend on the rate of draw-downs in savings since consumers anticipate a slower pace of income growth. Despite the vast decline in precautionary motives sparked by the easing of pandemic fears, those precautionary motives will not completely disappear.
Fixed Mortgage Rates
Mortgage rates are rising, consumers are shifting spending to reopening activities vs. at-home and we aren't looking at the same degree of pent-up demand as in early 2020," economists at Bank of America wrote in a note to clients this week. "We think housing activity is set to moderate." Mortgage rates remain very low historically, although they have crept higher in recent months. The average interest rate on a 30-year fixed-rate mortgage hit 3.09% last week, the highest since June. Higher borrowing costs will help cause housing affordability to decline by 5% to 6% this year, despite strong income growth, according to Bank of America.
US Trade in Goods - Growth
The U.S. merchandise-trade deficit widened to the biggest on record in February 2021 as imports dropped from an all-time high and exports retreated by a larger margin. The deficit grew to $86.7 billion from a revised $84.6 billion in January 2021, according to Commerce Department data released Friday. Economists in a Bloomberg survey had called for an $86 billion shortfall in February. Imports fell 1.4% to $216.9 billion, while exports decreased 3.8% to $130.1 billion, the first drop since May. Demand from American companies and consumers has been propelling U.S. merchandise imports to record highs, overwhelming U.S. ports, even as exports remain sluggish. Freight rates have soared after a trade boom in the second half of last year caught container producers by surprise, leaving them to scramble to meet a surge in demand.
Retail Sales
Sales at U.S. retailers fell 3% in February due to a lapse in government aid and unusually bad weather, but cash registers are expected to ring loudly again soon after Washington sent $1,400 stimulus checks to most Americans. Sales had soared a revised 7.6% in January after the government sent out $600 stimulus checks before President Trump left office. It was the biggest increase since businesses exited a lockdown last May after the coronavirus pandemic first hit the economy. Some slowdown in sales was expected in February after the government aid was spent, but the Democratic-led Congress just approved additional payments to bring the total to $2,000 for those who meet the income thresholds.
Personal Income
Personal income tumbled 7.1% after surging 10.1% in January. Personal income tumbled 7.1% after surging 10.1% in January. Economists polled by Reuters had forecast consumer spending would decrease 0.7% in February and income would decline 7.3%.Unseasonably harsh weather in the second half of February, including severe winter storms in Texas and other parts of the densely populated South region, depressed homebuilding, production at factories, orders and shipments of manufactured goods last month. But activity is expected to rebound in March amid warmer weather, the White House’s $1.9 trillion pandemic rescue package and increased vaccinations against the coronavirus.
Consumer Spending or Real PCE
U.S. consumer spending fell by the most in 10 months in February 2021as a cold snap gripped many parts of the country. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 1.0% last month after rebounding 3.4% in January, the Commerce Department said. U.S. consumer spending fell by the most in 10 months in February as a cold snap gripped many parts of the country and the boost from a second round of stimulus checks to middle- and lower-income households faded, though the decline is likely temporary.Consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 1.0% last month after rebounding 3.4% in January, the Commerce Department said on Friday. That was the largest drop since April 2020, when the economy was reeling from the shutdown of nonessential businesses like restaurants to slow the spread of Covid-19 infections.
U.S. consumer spending posted the biggest decline in February 2021 in 10 months owing to harsh winter weather and a temporary respite in government stimulus payments, but new federal checks are expected to spawn a rebound in the next few months. Consumer spending sank 1% last month, the government said Friday, marking the biggest drop since the onset of the coronavirus pandemic last year. That matched the forecasts of economists polled by Dow Jones and the Wall Street Journal.Outlays had surged a revised 3.4% in January after the government sent out $600 stimulus checks to families and boosted unemployment benefits. So spending was expected to retreat in February.Incomes tumbled 7.1% last month after leaping 10.1% in January.
The government is sending out $1,400 checks this month to most Americans and that’s expected to boost spending in March and April.
Core PCE Price Index February 2021 - Inflation
US: Annual Core PCE Price Index edges lower to 1.4% in February 2021 vs. 1.5% expected. The Personal Consumption Expenditures (PCE) Price Index in February edged lower to 0.2% on a monthly basis and came in lower than the market expectation of 0.5%, the data published by the US Bureau of Economic Analysis showed on Friday. On a yearly basis, the PCE Price Index rose to 1.6% as expected. More importantly, the annual Core PCE Price Index, which excludes volatile energy and food prices, arrived at 1.4% and fell short of analysts' estimate of 1.5%.
The personal consumption expenditures (PCE) price index excluding the volatile food and energy component gained 0.1% in February 2021 after rising 0.2% in January. In the 12 months through February, the so-called core PCE price index climbed 1.4% after increasing 1.5% in January. The core PCE price index is the Fed’s preferred inflation measure for its 2% target, a flexible average. When adjusted for inflation, consumer spending decreased 1.2% last month after jumping 3.0% in January. The drop in so-called real consumer spending did nothing to dampen enthusiasm about economic growth in the first quarter, with a sharp reversal anticipated in the coming months. |
