There were few economic data releases last week, particularly ones that are likely to have a direct impact on our businesses. Nonetheless, an important one was the U.S.-international trade balance; it came in at a negative $43.7 billion in July. This is marginally worse than the prior month, when the deficit was negative $43.5 billion — but it’s still the second-best performance this year.
The chart below displays the monthly trade deficit for the last year. Note that the scale has been reversed for easier reading, with higher values representing a worse deficit.
It’s expected that the weakening U.S. dollar will continue to nudge further improvements in the U.S. foreign trade position. A weak dollar makes foreign goods more expensive, which naturally reduces their demand in America. The trade-weighted dollar has fallen nearly 8 percent since the beginning of the year. This roughly means that foreign goods are that much more expensive today than they were back in January.
While most people immediately associate foreign trade with the import or export of goods, a large component of U.S. foreign trade is in the category called “Services.” In fact, services account for more than one-third of our exports, but they are also nearly one-fifth of our imports.
But more importantly, as is shown in the table below, we have a favorable trade balance on services. The U.S. exports more services than it imports, to the tune of $148 billion.
And what are these services in which American businesses generate a favorable balance? The largest component, as shown in the table below, is “Travel,” which accounts for more than 25 percent of services exports. This is the volume that foreigners spend in the U.S. while visiting, either for tourism or business purposes.
IP in the chart stands for Intellectual Property.
The only indicator updated in the NKBA Economic Indicators chart is the Mortgage Rate. As it’s shown, the average mortgage rate continued on its steady decline last week. The average mortgage rate for the week ended Sept. 9 was 3.78 percent, four basis points below the previous week. Overall, rates have fallen a quarter of a percentage point over the last 8 weeks.
As we have mentioned previously, weakening demand for housing is partly the reason for lower rates. Both sales of new and existing homes fell in July and, for all practical purposes, they have been fairly stagnant since the beginning of the year.
Manuel Gutierrez, Consulting Economist to NKBA
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator with a colored triangle that highlights visually the recent trend for each of the drivers. “Green” is a positive signal, indicating that the latest value is improving; “Yellow,” as it’s commonly understood, denotes caution because the variable may be changing direction; “Red” indicates that the variable in question is declining, both in its current value and in relation to the recent past.
Note that all the data, except for “mortgage rate” and “appliance-store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single-Family Starts. This is the number of single-family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Existing-Home Sales. These data are issued monthly by the National Association of Realtors, and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series are sales of new homes priced at $750,000 and higher. The data are released quarterly by the U.S. Department of Commerce, and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building Materials Sales. These data, released monthly by the Department of Commerce, capture total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also includes sales to projects other than residential houses.
Appliance-Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as home centers, for instance.
We hope that you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.
