Brief Respite for Manufacturing Shipments
Following several months of steady gains, manufacturing shipments were virtually flat in April. They rose minimally to $492.8 billion, although they are 7.2% higher than a year ago. At the same time, new orders for manufactured goods fell in April by 0.8% to $494.4 billion.
Manufacturing production is nearly evenly split between two broad categories: durable goods (such as transportation equipment) and non-durable goods (like food products). The chart below displays the relative shares of the principal types of manufactured goods, with durable goods in the right half of the chart, and non-durables on the left.
The gains in shipments made over the last 12 months bring monthly volume to just shy of its highest level ever, $497.4 billion reached in November 2014. The red line in the chart below illustrates the highest level.
And the Foreign Trade Balance Improves
For the second consecutive month, the U.S. foreign trade balance improved in April; it was 2.1% lower than the prior month. The last two months’ data partially reverse the deterioration in trade seen since October of last year.
But, despite all efforts to “bring manufacturing back,” lower production costs of some countries such as China or Mexico prevent the U.S. from making any significant progress. The arm-twisting and higher-tariff tactics of the current administration might be able to obtain some relief, but it comes at the risk of retaliation from foreign countries.
U.S. policy has traditionally relied on lowering tariffs imposed on foreign goods, on the well-accepted understanding that free trade benefits all. The American position has been that our example and soft persuasion would lead other countries to follow our lead and lower their tariffs levied on U.S. goods. But that obviously has not been always the case, leading the U.S. to its current predicament.
Mortgage Rates Moderating
Mortgage rates moderated further last week, dropping a nearly negligible two basis points to 4.54%. Even though the Fed is still expected to raise its benchmark interest rate this week (the so-called Fed Funds rate), the market is currently expecting the Fed to follow a less aggressive posture regarding future rate hikes.
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 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.
