Economic Advisor - March 4, 2020

 

Last Week's Economic News in Review
March 4, 2020
New home sales enjoyed solid gains, and consumer sentiment improved. Meanwhile, layoffs saw an increase.

New Home Sales

Sales of new single‐family homes grew to an annual rate of 764,000 in January, marking a 7.9 percent increase over December's pace of 708,000, according to last week's joint report from the Census Bureau and the Department of Housing and Urban Development. Compared to the same period a year ago, January's new home sales were 18.6 percent higher than January 2019's rate of 644,000.

Looking at price, the median price for new homes sold in January 2020 was $348,200. Looking at inventory, the number of new homes for sale at the end of January totaled 324,000, representing a 5.1-month supply at January's sales rate.

Housing market jumps such as January's can have a multiplier effect on the consumer economy, as well, noted Chris Rupkey, chief economist at MUFG.

''The strength of new home sales should generate extra consumer expenditures on household items like appliances and furniture, and the spending is sorely needed because the coronavirus is likely to weigh on GDP growth in the first quarter,'' Chris Rupkey told the Reuters news service.

Consumer Sentiment

Consumer outlook continued to improve, with the Consumer Sentiment Index hitting 101 in February, which was 1.2 percent higher than January's score of 99.8, the University of Michigan Surveys of Consumers reported last week. Compared to the same period a year ago, this was 7.7 percent higher than February 2019's score of 93.8.

The Current Economic Conditions Index for February, which assesses how consumers feel about the current state of the economy and their place in it, saw a slight increase to 114.8, which was 0.3 percent higher than January's score of 114.4. The Index of Consumer Expectations, which measures how consumers feel the economy will improve over the near future, hit 92.1 in February, which was 1.8 percent higher than January's 90.5.

Of course, the big question when it comes to consumer outlook is how will the coronavirus impact consumers' views on the economy - especially after various stock markets saw significant declines last week related to COVID-19 reports in the United States?

''The coronavirus was mentioned by 8 percent of all consumers in February when describing the reasons for their economic expectations,'' noted Surveys of Consumers Chief Economist Richard Curtin in a public statement. ''However, on Monday and Tuesday of [last] week, the last days of the February survey, 20 percent mentioned the coronavirus due to the steep drop in equity prices as well as the CDC warnings about the potential domestic threat of the virus. While too few cases were [reported] to attach any statistical significance to the findings, it is nonetheless true that the domestic spread of the virus could have a significant impact on consumer spending.''

Initial Jobless Claims

In employment news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending Feb. 22 grew to 219,000, a gain of 8,000 claims from the preceding week's total of 211,000, the Employment and Training Administration reported last week. This was higher than the increase to 214,000 economists had forecasted.

The four-week moving average - regarded as a more reliable measure of jobless claims - ticked up to 209,750 claims, which was 500 claims over the previous week's average of to 209,250. This marked the 260th week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect a light calendar of economic releases:
  • Monday - Construction spending for January from the Census Bureau and Bureau of Housing and Urban Development.
  • Tuesday - Car and truck sales for February from the auto manufacturers.
  • Thursday - Initial jobless claims for last week from the Employment and Training Administration; factory orders for January from the Census Bureau.
  • Friday - Unemployment, payrolls and average hourly earnings for February from the Bureau of Labor Statistics; consumer credit for January from the Federal Reserve; wholesale inventories and trade deficit for January from the Census Bureau.