Succinct Summation of the Week's Events

Succinct Summation of the Week’s Events:

Positives,

1)Initial jobless claims remained low at 210k vs 212k last week and 3k under the estimate. Continuing claims were little changed w/o/w at 1.807mm, though just below the forecast of 1.82mm.

2)The Philly manufacturing index was positive for a 2^nd month at 3.2. That was better than the estimate of -2.5. Maybe we’re finally seeing some signs of inventory restock as this component went positive for the 1^st time since September at +4.4 and that is the highest since February 2023. New orders got back to positive territory, though backlogs remain deeply negative. Employment remained deeply negative at -9.6 while the workweek was flat. Notwithstanding the recent lift in commodity prices, prices paid and received both fell. The real positive within the Philly index was the 6 month outlook which spiked to 38.6 from 7.2 and also driven by a 25 pt rise in inventories to 12.2 which was combined with a 25 pt rise in new orders. Capital spending plans rose too.

3)Housing starts in February, as the weather thawed, totaled 1.521mm, up from 1.374mm and that was 80k more than anticipated. Single family made up 1.129mm of this and that is the most since April 2022. The multi family side saw starts totaling 392k, up by 30k m/o/m but continues to trend below 400k and this compares with the 5 yr average of 460k. On the permit side, single family rose by 10k m/o/m and that is also the highest in almost 2 years. Multi family permits were up by 19k m/o/m to 487k but after falling by 26k last month. The 5 yr permit average is 578k.

4)The March NAHB home builder sentiment index got back above 50 at 51, up from 48 in February and where the estimate was for no change. That’s the best since last July. While builders feel better, Prospective Buyers Traffic remains very low at 34, well below 50, though up 2 pts m/o/m and why discounting is still prevalent. The Present Situation was up 4 pts m/o/m and Expectations were higher by 2 pts to 62. The NAHB’s bottom line was this, “A lack of existing inventory that continues to drive buyers to new home construction, coupled with strong demand and mortgage rates below last fall’s cycle peak helped push builder sentiment above a key marker in March.” The NAHB also talked about the supply side constraints however, “builders continue to face several supply side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes.”

5)February existing home sales totaled 4.38mm, well more than the estimate of 3.95mm and up from 4mm in the month before. These closings likely cover contract signings in the fall/early winter. The negative was that only 26% of purchases came from first time buyers. Investor purchases picked up instead. Prices rose 5.7% y/o/y as months’ supply fell to 2.9 from 3.0.

6)In the Fed’s Credit Access Survey, maybe just in response to the slack credit demand, the overall rejection rates fell to 18.7% in February, down from 21.1% in October 2023. "The decrease was broad based across credit score groups but driven by those over age 40." The sector to watch though is autos as the average reported probability of a loan application being rejected rose for auto loans to a new series high.

7)From General Mills: On the tailwind side, they see "moderating inflation, reduction in supply chain disruptions, and increased US consumer confidence, bolstered by wage growth and a strong labor market." Specifically on inflation, "It's 4% now. It was double digits last year, and long term it's been kind of 2% to 3%."