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Macro Monday 31 ~ Dallas Fed Manufacturing Index (Key Levels)Macro Monday 31 U.S. Dallas Fed Manufacturing Index This Index is compiled from a monthly survey conducted by the Federal Reserve Bank of Dallas to assess the health of manufacturing activity in the state of Texas. It provides insight into factors such as production, employment, orders, and prices, offering a snapshot of economic conditions in the region. Why is the Dallas Fed Manufacturing Index Important? ▫️ As stated above the index covers manufacturing activity in the state of Texas, the state of Texas ranks 2nd only to California in factory production & comes in at 1st as an exporter of manufactured goods, thus Texas is an important state for gauging manufacturing & production in the U.S. economy. ▫️ Texas also contributes an incredible c.10% towards the U.S. Manufacturing gross domestic product making the index an important metric to consider towards potential GDP trends in the U.S. ▫️ The Dallas Fed Manufacturing Index (DFMI) is one of several regional manufacturing surveys that feed into the national Purchasing Managers Index (PMI). The PMI is released later this week on Thursday 1st Feb thus the DFMI on Monday will give us an early indication of the potential direction of the PMI later in the week. FYI, I will be covering the PMI for you on Thursday so stay tuned for that. How to read the index? A reading above 0 indicates an expansion of the factory activity compared to the previous month; below 0 represents a contraction; while 0 indicates no change. The Chart The chart only dates back to 2005 so we have a limited dataset however we can still see definitive levels of importance and trends over this shorter historic backdrop. A few findings from the chart: The + 36.8 Level Since December 2005 any time we have hit the +36.8 level on the chart it has typically represented a peak in manufacturing and production signaling that a decline would likely follow. This has occurred 3 times and each time within 20 – 23 months of this +36.8 peak we had a recession or a financial crisis. 1) December 2005 21 Months later we had the Great Financial Crisis. 2) June 2018 20 months later we had the COVID-19 Crash. 3) April 2021 23 months later the U.S Banking Crisis occurred in March 2023 resulting in 3 small to mid size banks failing. - The remaining banks being saved by the Bank Term Funding Program (BTFP) which appears to have successfully contained the contagion for now. The BTFP is ceasing in March 2024 👀 ▫️ We can see above that in the event we reach the +36.8 level in the future, history informs us that within 20 – 23 months major economic issues will likely present. If we had known this back in April 2022. After April 2022 the S&P500 fell 15% to its recent lows. ▫️ The National Bureau of Economic Research (NBER) could declare the current period we are in as a soft recession. For the last six recessions, on average, the announcement of when a recession started was declared 8 months after the fact meaning we will would only get confirmation of a recession once we are 6 - 8 months into it. Its worth noting that some recessions were confirmed by the NBER after the recession was over. - 36.8 Level A reading below the -36.8 level has historically confirmed a recession. We have not hit this level since the COVID-19 Crash with May 2020 being the last time we have been at this level. Periods in Contractionary Territory There have been 2 previous periods where we have remained in contractionary territory for greater than 6 months. These are worth reviewing as we have been in contractionary territory for the 20 months now (April 2022 - Present). 1) Sept 2007 – Nov 2009: We fell into contractionary territory during the Great Financial Crisis for 26 months. From 2009 to 2016 the index seemed week oscillating around the 0 level and not really breaking out into persistent expansionary territory until 2017 forward. 2) Jan 2015 – Oct 2016: We fell into contractionary territory for 21 months however there was no recession. 3) Apr 2022 – Present: We are currently on month 20 of contraction. Now this could be just like point 2 above whereby we recover to expansionary territory in month 21 or 22 (Jan - Feb 2024) however if we do not, we are moving towards a timeline similar to point 1 which was the 26 month Great Financial Crisis. Q1 of 2024 will be very revealing in terms of what we can expect next. In the event we end up in contraction for 26 months or if we hit the -36.8 level we can presume, based on history, that we likely have a recession on our hands. And, if we recover into expansionary territory maybe we have got away with it this time 🙂 You can clearly see that the Dallas Fed Manufacturing Index is significant for assessing the U.S. economy because it provides timely insights into the health of one of the nation's key economic sectors: manufacturing & production. Since Texas is a major hub for manufacturing activity, trends observed in the Dallas Fed index can offer valuable indications of broader economic trends. It is one of several regional indices that contributes to a comprehensive understanding of the manufacturing landscape, aiding policymakers, investors such as ourselves, and businesses in making informed decisions about the state of the economy. The current economic environment just gets more and more interesting every week Thanks for coming along again folks 🫡 PUKA
ECONOMICS:USDFMI
by PukaCharts
U.S Core PCE Price Index (MoM)ECONOMICS:USCPCEPIMM Core PCE prices in the US, which exclude food and energy, rose by 0.2% from the previous month in December of 2023, aligned with market estimates, and picking up slightly from the 0.1% increase in November. From the previous year, Core PCE prices edged 2.9% higher, undershooting market estimates of 3% to mark the lowest reading since February 2021. The data extended the disinflation trend in prices measured by the Federal Reserve’s preferred gauge, consistent with previous signals of rate cuts to be delivered this year. Regarding the whole national PCE that includes energy and food, prices rose by 0.2% from the prior month and 2.6% from the prior year, consistent with expectations. Prices for goods rose by less than 0.1% from 2022, while those for services remained elevated at 3.9%. source: U.S. Bureau of Economic Analysis
ECONOMICS:USCPCEPIMM
by Mr_J__fx
The Phillips Curve with SPY(Inflation/Unemployment)I had read something on the, "Phillips Curve" From Investopedia "The concept behind the Phillips curve states the change in unemployment within an economy has a predictable effect on price inflation. The inverse relationship between unemployment and inflation is depicted as a downward sloping, concave curve, with inflation on the Y-axis and unemployment on the X-axis. Increasing inflation decreases unemployment, and vice versa. Alternatively, a focus on decreasing unemployment also increases inflation, and vice versa. 3 The belief in the 1960s was that any fiscal stimulus would increase aggregate demand and initiate the following effects. Labor demand increases, the pool of unemployed workers subsequently decreases and companies increase wages to compete and attract a smaller talent pool. The corporate cost of wages increases and companies pass along those costs to consumers in the form of price increases. This belief system caused many governments to adopt a "stop-go" strategy where a target rate of inflation was established, and fiscal and monetary policies were used to expand or contract the economy to achieve the target rate. However, the stable trade-off between inflation and unemployment broke down in the 1970s with the rise of stagflation, calling into question the validity of the Phillips curve" I just wanted to get a grasp of the concept myself
FRED:UNEMPLOY
by JustAHunch
RECESSION PROABILITY SIGNIFICANTLY INCREASES JAN - JUN 202410Y/2Y Yield Spread & Unemployment Rate Originally shared back in July 2023 (see below charts) Its interesting to see that the yield curve is rising fast (up towards the 0 level) We are reaching into dangerous recessionary territory. No guarantees, just a significantly increased probability. Continuous jobless claims are reaching pre-recession warning levels in both time and volume. Meaning more and more people are becoming unemployed and remaining unemployed for longer. More info in links below. The average interest rate pause timeframe is closing in fast at June 2024 also(Contained in Charts below also). Its time to pay very close attention. The initial 6 months of this year Stay safe out there PUKA
FRED:T10Y2Y
by PukaCharts
U.S. Core PCE Comes in Lower than Expected U.S Core PCE (FEDS FAVOURITE METRIC) Rep: 2.9% ✅ Lower Than Expected ✅ Exp: 3.0% Prev: 3.2% U.S. Headline PCE Rep: 2.6% ✅ In Line with Expectations ✅ Exp: 2.6% Prev: 2.6% Historical Core PCE Norms On the chart you can see that since 1990 the typical Core PCE range is between 1 - 3% (red dotted lines on chart). We are slowly getting back down into this more historically moderate level. We have just fallen below the 3% level and down into the historically moderate zone for PCE levels. The Federal Reserve have advised that Core PCE is expected to decline to 2.2% by 2025 & finally reach its 2% target in 2026. At this rate we might reach 2% a little sooner than that. For the full breakdown of the Core and Headline PCE and to know the differences between PCE and CPI, please review the Macro Monday I previously released which explains it all (in the comments below). PUKA
ECONOMICS:USCPCEPIAC
by PukaCharts
ECB maintains interest rate at 4.50% but for how long? History of prior EU Rate pauses: 4 months | Oct 00 - Apr 01 12 months | Jun 07 - Jun 08 3 months | Jul - Oct 2011 4 months | Sept 2023 - Present ⏳SO FAR⏳ At least they could say that this is not the shortest one ever now that we are into month 4. Historical Average: 6 months (March 2024) Interestingly this is when the Bank Term Funding Program in the US is ending which was providing liquidity to the banks. It might be a case of one foset gets turned off and another gets turned on. PUKA
ECONOMICS:EUINTR
by PukaCharts
The risk manager – putting the US Treasury’s QRA on the radar While the US500 and NAS100 juggernaut rolls on and the VIX index remains under 13%, we ask what could derail this risk rally. One event which has shown form through 2023 as a market mover is the US Treasury’s QRA (Quarterly Refunding Announcement). For background the ‘QRA’ – or Quarterly Refinancing Announcement – is where the US Treasury Department announce and quantify its financing needs for the quarter ahead, as well as the composition and breakdown of T-bill and bond issuance. In effect, the QRA could be a complete non-event for markets, or conversely result in a repeat of the powerful moves that we saw in both episodes in August and November - where the US Treasury’s (UST) QRA marked major turning points and trending conditions across bond, equity, and FX markets. In the art of risk management, the QRA is an event worth monitoring. Dates for the risk diary On 29 January the UST announce its financing estimates for the period ahead. 2 days later (31 Jan) we get the breakdown of issuance and USD amount per maturity that they plan to target – this is key. Coincidentally, just to spice things up, the breakdown of the USTs bond issuance falls on the same day as the FOMC meeting. The August 2023 QRA case study In August 2023 the US Treasury detailed they would finance its ballooning fiscal deficit by issuing a greater amount of longer-term US Treasuries than what was expected. With the Fed no longer a buyer of US Treasuries and Japan and China reducing its UST holdings, the highly price-sensitive private sector was asked to take down the increased bond supply. The result was a sharp sell-off in the US 10yr Treasury, with yields rising from 4% to 5%. As US bond yields soared the S&P500 fell from 4600 to 4100, while the USD index (DXY) rallied by over 5%. The November 2023 QRA case study Turn to the following QRA in November 2023 and the US Treasury was keen to curb the sell-off in Treasuries, and a rising interest expense bill - subsequently announcing they would finance its fiscal shortfall away from longer-term bonds and towards US T-bills (debt instruments with maturities of less than 12 months). While we can also attribute some of the move in markets to the Fed ‘pivot’ and rising expectations of a rate-cutting cycle, amid a soft landing – the move towards ultra short-term T-bill issuance saw the US 10yr yield trend to 3.78%, largely driven by term premium falling from +40bp to -45bp. Subsequently, the DXY fell 6% and the S&P500 rallied 16%. Watch RRP balances The RRP facility is an important monetary policy tool for the Fed, as it sets a floor on short-term interest rates (repo, money markets). With money market funds holding a preference to buy US T-bills at govt auctions, over investing in the RRP facility, we’ve seen a consistent drawdown in the level of the RRP facility to $639.56b (search this on TradingView under code – RRPONTSYD). There are growing concerns that should RRP balances fall below $200b it may start to cause real stress in market funding rates, which as we saw in 2019 would have significantly negative implications for broad market sentiment. Many consider SOFR (Secured Overnight Finance rate) to be the most important market rate of all, as it represents the cost of short-term financing. If SOFR rates move higher than the level the Fed pays banks to park their excess reserves on their balance sheet (currently 5.4%) – a tool used to put a ceiling on short-term rates - it would show the Fed’s monetary policy levers are no longer functioning efficiently, and that the funding channels are broken. Traders can monitor this on TradingView by using the code FRED:SOFR-FRED:IORB – should this push above 0bp and certainly above 10bp it will get great attention. Break it down So, the concern is if the UST keep its current funding needs to be skewed towards T-bills, then RRP balances will likely fall to worrying levels, funding costs could blow out and equities will take a bath with the USD rallying on safe-haven flows. Conversely, if the US Treasury move to skew its borrowing needs towards long-term Treasury issuance, then term premium would rise and US 10yr Treasury yields would move higher, again taking the USD higher and equity lower – a re-run of the bearish moves we saw between August and October. This is a very simplistic breakdown of what is a highly technical concept, but the mix of debt funding could cause some short-term gyrations and it potential result in an earlier end to QT. Given the US deficit is a growing market and political issue, how it’s funded matters for markets - One for the radar.
FRED:SOFR
by Pepperstone
EURO Area Consumer Confidence - Confidence SLUMPSEURO Area Consumer Confidence - ECONOMICS:EUCCI The lower the minus figure on this chart the better the confidence is in the EU area (closer to zero the better). Rep: -16.10 🚨 Worse than Expected🚨 Exp: -14.30 Pre: -15.00 The Chart ▫️ We have a long term general downtrend in EU Consumer Confidence since 1985. ▫️ Prior to recessions we formed lower highs (red arrows on the chart) ▫️ We have not made a new all time high since Jan 2000 ▫️ Confidence has currently stalled and turned slightly lower coming in lower than expectations of -14.3 and instead coming in at -16.10. What's driving the data and how to read it? The Consumer Economic Sentiment Indicator (Consumer ESI) gauges the optimism levels among consumers in the EU. Conducted through phone surveys, the indicator encompasses 23,000 households, with variable sample sizes across the region. The survey includes questions on the current economic and financial conditions, savings intentions, and expectations related to consumer price indexes, the general economic situation, and major purchases of durable goods. The Consumer ESI is measured on a scale from -100 to 100, where -100 represents an extreme lack of confidence, 0 signifies neutrality, and 100 indicates an extreme level of confidence. Final Word The ESI indicator provides valuable insights into consumer sentiment, reflecting perceptions and expectations that can influence economic behavior and decision-making in the EU. Consumer sentiment is low in Europe with sentiment remaining below March 2022 levels with little sign of recovery as it stands coming in lower than expectations. Obviously with the ongoing conflict in Ukraine, EU migrant crisis and Germany having full year of GDP decline for 2023 (Europe's largest economy), one can understand why the sentiment is so low. WE can watch for a turning point and a new high lower than -15 for a change in the right direction. PUKA
ECONOMICS:EUCCI
by PukaCharts
Macro Monday 30~U.S. Net Treasury International Capital FlowsMacro Monday 30 U.S. Net Treasury International Capital Flows In essence the U.S. Net Treasury International Capital Flows (US TIC Flows) refer to the movement of funds into or out of the United States through the purchase or sale of U.S. Treasury securities by foreign investors and governments. These flows of capital are an essential component of the overall balance of payments, reflecting the financial transactions between the United States and the rest of the world. What does the data represent exactly? The U.S. Treasury International Capital (TIC) system is compiled by the U.S. Department of the Treasury and provides information on cross-border financial transactions. The TIC data include details on purchases and sales of various U.S. financial assets and liabilities, such as Treasury securities, corporate bonds, equities, and banking flows. In simple terms the Foreign Purchases of U.S. Securities (inflows) are taken away from the U.S. Purchases of Foreign Securities (outflows) to present a overall net figure. The net result of these two components determines whether there is a net inflow or outflow of capital. What are the drivers of positive & negative flows? Positive Flows (>0 on chart) POSITIVE FLOWS in U.S Net Treasury International Capital result from factors such as attractive U.S. interest rates, a stable domestic economy, and global uncertainty that drives foreign investors to seek the safety of U.S. Treasury securities. During these periods, there is a net inflow of capital into the United States pressing the number higher above zero. Negative Flows (<0 on chart) Conversely, NEGATIVE FLOWS occur when other countries offer higher returns, there are concerns about the U.S. economic outlook, or global risk aversion prompts investors to repatriate funds. Exchange rate movements also play a role, as a stronger U.S. dollar can make U.S. assets less appealing. The interplay of the above mentioned factors influences the direction of international capital flows, which impacts the balance of purchases and sales of U.S. Treasury securities by foreign and domestic investor. Now that we have a general sense of what’s driving the data, and what makes an overall net positive and or net negative flow, let’s have a look at the chart. The Chart ✅ Since Jan 2019 there has been an upward trend in Treasury Inflows into the U.S (Black Arrow). ❌This upward trend had one sudden interruption causing a decline from Mar - May 2023 going from positive inflows of $114B to negative outflows of $159.4B, the timing of which coincided with the 2023 U.S Banking Crisis where three small-to-mid size U.S. banks failed. ✅ Since the Banking Crisis in May 2023 Treasury Capital flows have moved from overall negative outflows of $159.4B to overall positive inflows of $260.2B. A major turn around and reversion to the long term trend. ✅The recent surge in positive inflows to $260.2B are the highest recorded since August 2022 ($275B) In summary inflows to U.S Treasuries have been in an general uptrend since January 2019 with one brief interruption from Mar – May 2023 and inflows have increased significantly in recent months and look like they may be about to take out the Aug 2022 highs. Recession Patterns 1. More isolated recessions that were not globally systemic events led to positive net inflows into the U.S. Treasury however larger global events led to outflows from U.S. Treasuries, particularly if those global events involved the U.S. engaging in foreign conflicts. ▫️ During the DotCom Crash (No. 3 on the chart) – The tech sector was badly hit but it was not necessarily a global recession with the associated geopolitical turmoil. Foreign investors sought safety in the U.S. Treasury Market during this time. ▫️ Similarly during the brief Gulf War Recession (No. 4 on the chart) you can see that initially, there was increased net inflows however in Jan 1991 inflows sharply turned to outflows which coincided with the U.S. led invasion of Kuwait (a response to Iraq’s invasion of Kuwait). This was considered a global event and thus led to an exodus of outflows and repatriation of funds from the U.S Treasury Market. ▫️ More recently during the Great Financial Crisis (no. 2 on the chart) and the COVID-19 Crash (No. 1 on the chart) there was a significant outflow from U.S. Treasuries due to the magnitude of these global events. You can imagine foreign market participants clawing funds back into their respective countries to batten the hatches and get into a defensive financial position with global systemic risks high. Better to have a bird in the hand than two in the bush when the bush is on fire. ▫️One other pattern worth mentioning is highlighted in yellow on the chart with an A, B and C. Prior to the Great Financial Crisis and COVID-19 crashes we first had a reduction in overall U.S. Net Treasuries of $373B (A on chart) and $393B (B on chart), respectively. Within 13 to 16 months of both treasure drawdowns we had a recession. We recently had a drop of $437B (C on chart) which ended in May 2023. If history repeats and we had a recession within 13-16 months of this happening, this would be sometime between June and Sept 2024. An alternative view would be that the increase in declines from $373B (A) to $393B (B) to $437B (C) may correspond with the shortening timeframes from 16 months(A) to 13 months(B) to potentially 10 months(C) for the current $437B drop (C on the chart). This would suggest March/April 2024 as a potential recession timeframe (based on the historic reductive time pattern). The U.S. Net Treasury International Capital Flows is a fascinating chart to keep an eye on and should be added to the economic data armory as it will help us interpret what is really going on in the treasury market (there is a lot of false narratives out there ATM). It is also useful in informing us on what the global perspective is in terms of systemic risk vs isolated risk, and also from a historic recessionary standpoint offers value. The best investors in the world call the bond market the market of truth but I have found it hard to find a chart that illustrates this through a global lens UNTIL today. This chart captures that beautifully. Thanks for coming along again PUKA
ECONOMICS:USCFLong
by PukaCharts
2
$RUGRES 'August/2023 Accumulation'ECONOMICS:RUGRES The latest data from the International Monetary Fund’s (IMF) International Financial Statistics (IFS) report shows that Russia’s central bank increased its gold reserves in August, restoring reserves back to previous levels from earlier this year.⁠ ⁠ “IMF IFS data shows gold reserves at the Central Bank of Russia rose by 3 tonnes in August,” according to Krishan Gopaul, Senior Analyst at the World Gold Council. ⁠ ⁠ Analysts reacted positively to the data, but some raised questions regarding Russia's gold production and where the precious metal is going.⁠
ECONOMICS:RUGRES
by Mr_J__fx
U.S. Building Permits U.S Building Permits Rep: 1.495m ✅Higher Than Expected ✅ Exp: 1.480m Prev: 1.467m This chart is very similar to the Housing Starts chart I just shared in that it is in a long term uptrend since March 2009 (slightly before above charts April 2009). However there are a few differences. The drop in permits now versus 1998-2000 period is much much sharper. Like the U.S Housing Starts chart, lets watch the diagonal support and see IF we get a change of trend. What are U.S. Building Permits U.S. building permits are official approvals granted by local government authorities that authorize the construction, alteration, or demolition of structures within a specified jurisdiction. Worth noting that I shared the below chart earlier this week that seems to illustrate a sharp drop in New Home Sales which coincides with the sharp drop in permits above. Interestingly Existing homes sales appear to be increasing with this drop new home sales. Potentially with more existing homes (old supply) coming onto the market this may present a headwind for new permits and new homes going forward. With existing supply coming onto the market, you would think that this might help lower house prices, however demand and lower interest rates could offset this. Fascinating to watch this all play out Happy Thursday PUKA
ECONOMICS:USBP
by PukaCharts
U.S. Housing Starts U.S. Housing Starts Rep: 1,460m ✅Higher Than Expected ✅ Exp: 1.426m Prev: 1.525m (revised down from 1.560m) The chart illustrates that we are on a long term uptrend since April 2009 and this looks like a pull back similar to the pull back from 1998 - 2000 but on a large scale. If we lose the diagonal support I think this would show a real shift in the structure and trend. What’s included in U.S. Housing Starts? U.S. Housing Starts refer to the number of new residential construction projects on which construction has begun during a specific period, usually reported on a monthly basis. The data includes Single-Family homes, Multifamily homes (apartments), Building Permits (houses approved with construction not necessarily started by likely imminent) and house build completions. HAVE A FUPPIN GREAT DAY PUKA
ECONOMICS:USHST
by PukaCharts
PMI the last drop into march 2024The chart posted is the PMI and the green up arrows are when the PMI turned up . What also happened was the stock market began rather strong up moves at or within 60 days of the Up turn. The pmi is telling me we have been in a RECESSION and the treasury to mask the recession as been funding the Quarterly with T Bill .I look for the drop in the markets rather soon . And I also look to Yellen to do this with the fed at the same time dropping rates 25 basis by late march of may cycle . This is only being done to make sure they try everything they can do to stop yes I will say it TRUMP. 2025 the beginning of the phase seen 1937 to 1942 I am basis is the chart patterns and data from 1902 and money velocity data since 1913
ECONOMICS:USBCOI
by wavetimer
Understanding Initial Jobless Claims as a Market IndicatorIntroduction In the complex and multifaceted world of economic indicators, initial jobless claims hold a special place. As a measure of the number of individuals filing for unemployment benefits for the first time, this statistic offers a real-time glimpse into the health of the labor market, which in turn is a vital component of the overall economic landscape. This article delves into how initial jobless claims function as an indicator and their impact on the financial markets. Understanding Initial Jobless Claims Initial jobless claims refer to claims filed by individuals seeking to receive unemployment benefits after losing their job. These are reported weekly by the U.S. Department of Labor, providing a timely snapshot of labor market conditions. A lower number of claims typically signifies a strong job market, suggesting that fewer people are losing their jobs. Conversely, an increase in claims can indicate a weakening labor market, often a precursor to broader economic downturns. Initial Jobless Claims as an Economic Indicator Health of the Labor Market: The primary significance of initial jobless claims is its reflection of the labor market's health. A steady, low number of claims often correlates with job growth and declining unemployment rates, indicating a robust economy. Leading Indicator for the Economy: As a leading economic indicator, jobless claims can provide early signals about the direction of the economy. Spikes in claims can forewarn of economic contraction, while consistent decreases might indicate economic expansion. Consumer Spending: Since employment directly affects consumer income, initial jobless claims can also indirectly signal changes in consumer spending, a major driver of economic growth. Impact on Financial Markets Market Sentiment: Traders and investors closely watch initial jobless claims to gauge market sentiment. Fluctuations in these numbers can lead to immediate reactions in the stock, bond, and forex markets. Monetary Policy Implications: Central banks, like the Federal Reserve, consider labor market conditions when setting monetary policy. Rising jobless claims can lead to a more dovish policy stance (like lowering interest rates), while decreasing claims might justify tightening policies. Sector-Specific Implications: Certain sectors are more sensitive to changes in jobless claims. For instance, a rise in claims can negatively impact consumer discretionary stocks but might be favorable for defensive sectors like utilities or healthcare. Analyzing the Data Understanding initial jobless claims requires context. Seasonal factors, temporary layoffs, and unique economic events (like a pandemic) can skew data. Analysts often look at the four-week moving average to smooth out weekly volatilities for a clearer trend. Conclusion In conclusion, initial jobless claims serve as a crucial barometer for the economy and financial markets. Investors, policy makers, and economists alike monitor these figures for insights into labor market trends and the broader economic picture. As with any indicator, it's essential to consider jobless claims in conjunction with other data to fully understand the economic landscape.
ECONOMICS:USIJCEducation
by AlgoAlpha
MM29(b) - Existing Home Sales Versus New Home Sales U.S. Existing Home Sales & New Home Sales Comparing the Charts When you look at both charts and compare them you can see that between June 2022 and Sept 2023 the decreasing EXISTING home sales negatively correlated with the increase in NEW home sales. This would make surface level sense given the lack of existing homes being available creating a need for new housing. In recent months there has been a sharp divergence in the opposite direction, particularly in NEW home sales, which plunged from 717k in Sept 2023 to 590k in Nov 2023. EXISTING Home Sales increased marginally from 3.79m in Oct 2023 to 3.82m in Nov 2023. Is this a turning point? Obviously a combination of factors are at work here and its not just existing supply coming to the market that might be disrupting new home sales or vice versa but its interesting seeing this correlation and its something to keep an eye on for investors and policy makers. Sale of brand new homes creates a lot of economic activity and if sales are declining significantly whilst existing homes are starting to come back onto the market, one would presume it would stress the housing market and the economy. We may need reduced interest rates sooner rather than later to help fan the flames of the new housing market, or maybe its time the market takes a breather? What do you think? It certainly adds to the argument for lower rates sooner from the Federal Reserve to "soften the landing" or that divergence noted today. Each Chart is covered separately in todays Macro Monday PUKA
FRED:EXHOSLUSM495S
by PukaCharts
Macro Monday 29 - U.S. Existing Home Sales & New Home Sales U.S. Existing Home Sales & New Home Sales U.S. Existing Home Sales U.S. Existing Home Sales data helps us to gauge the strength of the U.S. housing market and is a key indicator of overall economic health in the U.S. In simple terms U.S. Existing Home Sales is a seasonally adjusted record of previously owned homes that have been sold in the United States (per unit). The monthly data report is released by the National Association of Realtors (NAR) and It is a lagging indicator since people often make housing choices in response to a changes in interest rates (which would lead ahead of this dataset). Decembers report will be released this Friday 19th Jan. I will update the chart then so we can see how the trend is developing. The Chart You can clearly see that we have been in a downtrend since October 2020 where we topped out at 6.73m units. Thereafter from Jan 2022 – October 2023 we fell precipitously from 6.34m down to 3.79m. Sales of previously owned homes in the U.S. went up 0.8% month-over-month to a seasonally adjusted annualized rate of 3.82m units in November 2023 (a turning point?), rising for the first time in five months, and rebounding from 3.79m in October which was the lowest level since August 2010. Whilst we are waiting for December 2023 figures, the Jan – Mar 2024 figures will also provide a good sentiment gauge for the direction in 2024. The chart has that look at present that it is basing here or potentially changing trend. Accessibility to existing homes is clearly low at present and one would think that low existing home sales clogs up the market and liquidity that might flow with it and the economy however, the low existing house sales also appears to create demand for New Homes which we will cover next. U.S. New Home Sales New Home Sales, also known as "new residential sales," is an economic indicator that measures sales of newly built homes (seasonally adjusted for annualized figures). The New Home Sales measure compiles data through interviews with home-builders and analysis of the U.S. Census Bureau's Survey of Construction. Specifically, it utilizes information on building permits issued for new construction projects. A home is considered part of the measure if a deposit was paid for its purchase or if a contract to purchase was signed within or after the year of its construction. The construction of new homes contributes significantly to the Gross Domestic Product (GDP) of the U.S. It involves spending on materials, labor, and various services, which can stimulate economic activity. New home sales data is a critical metric for assessing economic health, understanding employment trends, and gaining insights into the dynamics of the housing market. The Chart You can clearly see that we never really recovered after the 2005 peak of 1.39m units, however bottomed in 2011 and started making a slow climb from 273k to a 1.04m peak in August 2020. This remains the recent peak and has not been recovered. An almost 50% reduction in New Home Sales followed reducing from 1.04m to 543k units over 23 months ending July 2022. We are currently 10% above this level at 590k (for Nov) having rolled over in July 2023 from 728k. The chart looks very concerning. Should we lose the diagonal and horizontal support with this month or next months data release, it could be very telling of a struggling new housing market. We have tested the horizontal support three times and you would hope that this would hold. Time will tell. Comparing the Charts Here is where it gets a little interesting. When you look at both charts and compare them you can see that between June 2022 and Sept 2023 the decreasing EXISTING home sales negatively correlated with the increase in NEW home sales. This would make surface level sense given the lack of existing homes being available creating a need for new housing. In recent months there has been a sharp divergence in the opposite direction, particularly in NEW home sales, which plunged from 717k in Sept 2023 to 590k in Nov 2023. EXISTING Home Sales increased marginally from 3.79m in Oct 2023 to 3.82m in Nov 2023. Is this a turning point? Obviously a combination of factors are at work here and its not just existing supply coming to the market that might be disrupting new home sales or vice versa but its interesting seeing this correlation and its something to keep an eye on for investors and policy makers. Sale of brand new homes creates a lot of economic activity and if sales are declining significantly whilst existing homes are starting to come back onto the market, one would presume it would stress the housing market and the economy. We may need reduced interest rates sooner rather than later to help fan the flames of the new housing market, or maybe its time the market takes a breather? What do you think? It certainly adds to the argument for lower rates sooner from the Federal Reserve to "soften the landing" or that divergence noted today. On Macro Monday 21 we covered the NAHB Housing Market Index and its close correlation to U.S Housing Starts. If you enjoyed this read today, you should take a look at that. They are two useful additions that give another view. I'll throw the link in the comments. Thanks for coming along again 🤓 if you enjoyed this or found it informative please let me know PUKA
FRED:EXHOSLUSM495S
by PukaCharts