Markets & Finance

Vital Signs: Reading the Yearend Yardsticks


On tap: November figures on home sales, regional factory activity reports, and December consumer confidence

As investors return to work after Christmas they will be greeted by the latest figures on the housing market as well as new numbers on chain store sales, and consumer confidence. The figures will give the financial markets an update on whether the housing recession is hitting bottom and how that may be affecting consumers during the most critical period for retailers.

Economists believe that sales figures for new and existing homes should remain fairly steady. New home sales are expected to edge higher while existing home sales are seen slipping slightly. Besides sales, however, the key numbers to look at are inventory levels and prices. Despite a rapid cooling off of home price appreciation, inventories haven't declined much. That points to more price cuts or incentives by home builders.

Existing homeowners may also have to lower asking prices in order to get a deal done, or many may begin to just take their home off the market. Either way, more adjustments are needed in order for to complete the correction in supply and demand within housing.

It is still not certain if consumers have scaled back on holiday shopping as a result of a weaker housing market or other concerns regarding the economy. The November retail sales report showed a solid and broad increase in sales. However, weekly chain store reports remain mixed. One reason for this disparity may be due to strong online sales. Nonstore retail sales, which includes Internet retailers and mail-order houses, grew 1.3% in November.

Manufacturers are suffering some fallout from housing's demise. November industrial production figures showed a 0.9% drop in construction supplies for the month and a 1.9% drop from a year ago. This impact may be reflected in weaker regional factory activity readings from the Chicago and Richmond areas. The production slowdown among U.S. automakers may also weigh on the Chicago business barometer reading for December.

All financial markets will be closed on Monday, December 25 in observance of the Christmas holiday. The financial markets will close early on Friday, December 29 ahead of the New Year's Day holiday.

Here's the weekly economic calendar, from Action Economics.

Economic Reports

Report

Date

Time

For

Median Estimate

Last Period

New Home Sales (million, annual rate)

Wednesday, December 27

8:30 a.m.

November

1.02

1.00

Consumer Confidence

Thursday, December 28

10:00 a.m.

December

102.0

102.9

Existing Home Sales (million, annual rate)

Thursday, December 28

10:00 a.m.

November

6.18

6.24

Chicago Business Barometer

Thursday, December 28

10:00 a.m.

December

51.3

49.9

ICSC-UBS STORE SALES - Tuesday, December 27, 7:45 a.m. EST

This weekly tracking of retail sales, compiled by the International Council of Shopping Centers and UBS bank, will update buying activity for the period ending December 23. Weekly sales grew at a quicker pace of 1.6%, after a 1% gain in the week ended December 9. Sales plunged 2.6% for the week ended December 2. Even with the improved weekly performance, the increase from a year ago slowed to 2.4%, from 3.2% in the prior period.

JOHNSON REDBOOK INDEX - Tuesday, December 27, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the fourth fiscal week of December, ended December 23. Sales during the first three weeks of the month were off 1.6% from the same period in November. For the full month of November, sales ended up 0.1% better than October sales.

RICHMOND FED SURVEY - Tuesday, December 27, 10 a.m. EDT

The Richmond Federal Reserve Bank issues its December survey of business conditions within the district. The region's manufacturers felt more positive about their current position. The manufacturing index rebounded to 7, from -2 in October. The index stood at 9 in September. The shipments and new orders indexes also bounced back into positive territory, from -7, and -1, respectively, in October. The employment index improved to 10, from 4 in the prior month, and 8 in September.

Looking ahead to the next six months manufacturers continued to feel pretty positive. The November shipments reading held at 35 for a second straight month, from 31 in September. The lifetime average is 34. At the same time, the new orders and unfilled orders indexes improved in November, returning to the long-term average level. There was a slip in the employment index but the capital expenditures reading remained strong.

MORTGAGE APPLICATIONS - Wednesday, December 27, 7 a.m. EST

The Mortgage Bankers Association releases its weekly mortgage application volume figures for home buying and refinancing activity during the week ending December 22. Activity pulled back as mortgage rates edged back up. The purchase index slowed to 436.5, from 463.8 for the week ended December 8. The refi index pulled back to 1968.8 in the week ended December 15, from 2304.4, the highest level since September of 2005. Even with the retreat in the refi index, the level is up 34.9% from a year ago.

The four-week moving average for the purchase index rose to 433.4 through the week ended December 15, from 424.6 for the week ended December 8. At the same time, the four-week average for the refi index climbed to 2003.1, from 1994.8 in the week ended December 8.

The backsliding is most likely due to rebounding mortgage rates. The average 30-year fixed-rate mortgage stood at 6.1% in the week ended December 15, from 6.02% in the prior period.

NEW RESIDENTIAL SALES - Wednesday, December 27, 10 a.m. EST

New single-family homes sales probably held fairly steady in November. Sales during October eased to an annual rate of 1 million units, from 1.04 million in the previous month. In August and July sales hovered around 1 million. October sales plunged further in the Northeast, by 39%. Sales hit an annual rate of 81,000 in August, but October sales in the Northeast stood at a pace of 36,000.

The slowdown in sales during October led to a rise in the months supply of homes for sale, to 7 months, from 6.7 months in September. However, the number of homes available did slip to 558,000, from 562,000 in September. The number of completed homes that are yet to be sold continues to grow. The October level was 166,000, up 50.9% from a year ago. The share of new homes for sale that are already completed has moved up to 29.7%, the highest share since December of 2000. That high percentage implies greater pressure on builders to lower prices in order to clear inventories. The October median home price did jump back to $248,500, from 218,200 in the prior month. Compared to a year ago, the median price was up 1.9% in October, after a 9.2% drop in September. On a six-month average, which helps reduce the month to month volatility, prices are up 1.3% from a year ago, the slowest pace since June of 2003.

JOBLESS CLAIMS - Thursday, December 28, 8:30 a.m. EST

Jobless claims fell some more, back to 304,000 in the week ended December 9. In the prior week, claims fell to 324,000, from 358,000 in the week ended November 25. The further decline pulled the four-week moving average back to 327,250, from 328,750 in the week ended December 2. Continuing jobless claims for the week ended December 9 cooled off to 2.48 million, from 2.51 million in the prior period.

EXISTING HOME SALES - Thursday, December 28, 10 a.m. EST

Existing homes probably cooled off a little more in November. Sales rose to an annual pace of 6.24 million in October, from 6.21 million in September. The yearly rate of decline was 11.5%. Sales of condominiums are still falling slightly faster than single-family homes. The steepest slide in single-family homes continues to be in the West where the yearly decline was 18.9% in October. The monthly level of unsold existing homes edged up to 7.4 months, from 7.3 months in September. The nominal level of unsold homes also rose, to 3.85 million in October, from 3.78 million.

Prices continue to slide. Compared to a year ago, the median price of existing homes was down 3.3% in October. The yearly decline is steeper for condominiums. On a six-month average the median sales price was off 0.5% from a year ago. The price of single-family homes on this basis were off 0.1% while condominium prices were down 2.3%.

CONSUMER CONFIDENCE INDEX - Thursday, December 28, 10 a.m. EST

The Conference Board's monthly index of consumer confidence is expected to edge lower in December. The November reading slipped to 102.9, from 105.1 in October, and 105.9 the month before. The readings for current and future business conditions deteriorated in November. There was a slight increase in the share of respondents who thought that jobs were hard to get, while fewer thought business conditions were better. The boost to confidence from lower gasoline and other energy prices has faded.

CHICAGO PURCHASING MANAGERS SURVEY - Thursday, December 28, 10 a.m. EST

The Chicago-area purchasing managers' December index of industrial activity probably bounced back above 50%, indicating an overall increase in activity. The November index fell to 49.9%, from 53.5% in October, and 62.1 in September.

The production, new orders, and order backlogs indexes moved in the same direction as the overall business barometer, slipping further in November, after easing in October. The orders backlog index stood at 45.9% in November, as only 20% of respondents reported an increase in their backlogs, the smallest level since December of 2004.

HELP-WANTED INDEX - Friday, December 29, 10 a.m. EST

The Conference Board releases its November index of help-wanted ads, based on ads culled from major newspapers across the nation. The monthly index edged up to 30 in October, from 29 in September, and 30 in August. However, the percentage of markets with a rising want-ad volume rose to 57%, from 33% in the prior period, and 27% in August. Help-wanted ads fell during the three-month period through September in eight of the nine U.S. regions. The region with improving volume was the West South Central, which includes Texas, Louisiana, Oklahoma, and Arkansas.

The Conference Board's tracking of online job ads deteriorated in November. Total online job ads fell by 119,800. That resulted in 2.4 advertised vacancies for every 100 persons in the labor force, down from 2.5 in October, and 2.2 in November, 2005. The level of online job ads rose in just 11 states.


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