US industrial production in April rose .5% m/o/m which was better than the estimate of no change but that no change was disrupted by the 4 tenths downward revision to March. Manufacturing production, even with the March revision lower did exceed the estimate because of a big jump in the production of autos/parts of 9.3% m/o/m after falling by 1.9% in March. With supply chains normalizing and the procurement of semi’s and other important inputs much easier to get, auto inventory levels are normalizing. The question is more so what demand will look like after those vehicles stock back up on the lots. Machinery production fell for a 3rd month and down by 3.5% y/o/y. Computer/electronic production rose 2.1% m/o/m but after declining by .9% in March. Utility output moderated after the March jump. Mining production was higher by .6% m/o/m.
Bottom line, manufacturing production within this report is the most relevant and its index peaked in August 2018 just as the China tariff war was heating up and which billions of tariffs are still in place. We haven’t exceeded that August high since.
Mfr’g Production index
The May NAHB home builder index rose 5 pts and is finally getting back to the breakeven of 50. The estimate was for no change. The Present Situation was up 5 pts m/o/m to 56 and the Future Outlook was higher by 7 pts to 57. Lagging still is Prospective Buyers Traffic however which was up by 2 pts but still well below 50 at 33. As heard recently, home builders are taking share in terms of home sales from the existing side because of the limited supply of existing homes. The NAHB said “In March, 33% of homes listed for sale were new homes in various stages of construction. That share from 2000-2019 was a 12.7% average.” Thus, buyers have little choice but to look at new homes for options in certain supply tight markets.
Supplying enough homes though is still not smooth. The NAHB said builders “continue to face ongoing challenges to meet a growing demand for new construction. These include shortages of transformers and other building materials and tightening credit conditions for residential real estate development and construction brought on by the actions of the Federal Reserve to raise interest rates.” The big builders with the better balance sheets, most publicly traded, will gain market share as a result and helps to explain partly why the ITB builder etf is close to a record high.
Builders also are gaining share from the existing market because of the incentives they are utilizing. The NAHB said 54% of builders offered some type of incentive to help lift sales, though that is down from 59% in April and the recent peak of 62% in December. They also said 27% are reducing prices but that is down from 30% in April and 36% last November. The average price of this cut was 6%, unchanged for the past four months.
NAHB
Prospective Buyers Traffic
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