The Boock Report

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Succinct Summation of the Week’s Events – 6/23

Positives

  1. New home sales in May totaled 610k, 20k more than expected and April was revised up by 24k to 593k. Smoothing out this volatile data point puts the 5 month year to date average to also 610k which is an improvement from the pace of 561k on average last year. The median sales price spiked to 16.8% y/o/y growth to a record high of $345,800 and again, a lot was the mix. Home sales in the price range of $200-$299k plunged by 36% m/o/m and which is the area of the market that most needs new supply. Home sales were higher for the $300k+ range with gains particularly in the those homes priced above $500k. Notwithstanding the better home sales number, months’ supply held at 5.3 because the number of homes for sale rose to the highest since July 2009.
  2. Existing home sales in May totaled 5.62mm, 70k more than expected while April was revised down by 10k to 5.56mm. The May figure is just about in line with the average year to date of 5.61mm. For a 3rd straight month, months’ supply crept up to 4.2 which is the most since October which also coincides with the most amount of homes for sale since October as higher prices start to bring out more supply slowly but surely. After rising to a multi year high last month at 34%, first time home buyers made up 33% of purchases. The median home price at closing rose 5.8% y/o/y to $252,800, a record high.
  3. With the 30 yr mortgage rate holding steady for a 3rd week at 4.13%, refi’s rose 2.1% w/o/w but are still down by 30% y/o/y.
  4. The KC manufacturing index rose 3 pts to +11, 2 pts more than expected. But, new orders fell 5 pts to the weakest since August 2016 and backlogs fell 18 pts to -6, the worst since last May. Employment and workweek did improve while exports fell 1 pt.
  5. French business confidence in June rose 1 pt to 106 which matches the best level since 2011. It still though remains well below its ’07 peak of 115.
  6. Macron officially quantifies his solid control of the French Government.
  7. The UK CBI industrial orders index rose 7 pts to +16 instead of falling to +7 as forecasted. This survey of 464 manufacturers is now at the best level since 1988. The CBI said “This was underpinned by a broad based improvement in 13 of the 17 sub sectors, led by the food, drink and tobacco and chemicals sector. Export orders also improved to a 22 yr high, hitting similar peaks to those seen in 2011 and 2013.” The price index was unchanged and off 9 pts from the February high “but pricing pressures remain strong, with manufacturers continuing to expect a sharp rise in average selling prices.”
  8. A day after Mark Carney said it’s not time to hike rates, which came a few days after 3 BoE members said yes it is, the BoE chief economist said he wants to get going in the 2nd half of this year. Taking away the emergency cut after Brexit should not be this much of an indecision in light of what has happened since.
  9. German PPI was lower by .2% m/o/m in May. Ex energy wholesale prices were up by .1%, a slowdown from recent months. Prices though were still up 2.8% y/o/y and 2.7% ex energy.

 

Negatives

  1. The Markit US services and manufacturing composite index moderated in June to 53 from 53.6 in May with both components down m/o/m. The 53 print matches the lowest level since September and thus pre election territory. The services component fell to 53 from 53.6 while manufacturing was lower by .6 pts to 52.1. The internals though were more mixed with new orders, employment, and future optimism and we got this quote, “input cost pressures intensified in June, which survey respondents linked to higher staff salaries and rising raw material prices.” Markit said, “While official GDP data are expected to turn higher in Q2 after an especially weak start to the year, the relatively subdued PMI readings suggest there are some downside risks to the extent to which GDP will rebound.”
  2. Initial jobless claims totaled 241k, about in line with the estimate of 240k and last week was revised up by 1k to 238k. As a 235k print drops out of the average, the 4 week average rose to 245k from 243k. Continuing claims, delayed by a week, rose by 8k.
  3. Mortgage applications to buy a home fell 1% w/o/w but are still up 9.2% y/o/y.
  4. It would be great if Chicago Fed President Charlie Evans can fully explain why he is so rooting for higher inflation (has he seen these home price gains?). The Walmart and Amazon shopper in particular would love to know.
  5. The Japanese manufacturing PMI fell 1.1 pts to 52, a 7 month low. Markit said “Slower growth was signaled in June, with both orders and output rising at the weakest rates since last year amid reports of a slight softening in market conditions.” Of note, both input and out prices rose and Markit said that firms were able to “pass costs on to clients to the greatest degree in over 2 ½ years.”
  6. Japanese exports jumped by 15% in May but that was slightly below the estimate of up 16% while imports surprised to the upside with a 17.8% y/o/y rise. On a volume basis, exports were higher by 7.5% and imports were up by 5.4%.
  7. Price changes for apartments in China’s biggest 70 cities were a mixed bag in May. On a y/o/y basis, prices rose in 69 of 70 cities for new apartments for the 2nd straight month and were up in 65 of 70 cities for existing apartments vs 63 in April. On a m/o/m basis though prices were up in 56 cities vs 58 last month for new apartments and 60 vs 61 for existing ones. In the biggest 3 cities prices further moderated but still are rising at sharp levels. In Beijing, prices were up by 13.5% y/o/y vs 16% in April. Price gains in Shanghai slowed to 11% from 13.2% and in Shenzhen they were up ‘just’ 5.4% from 6.6% in the month prior. It was last April when prices in Shenzhen rose 62% y/o/y.
  8. The Eurozone manufacturing and services composite index fell to 55.7 from 56.8 in May and was below the estimate of 56.6. The components were mixed though as manufacturing improved a touch but the services component was down by 1.6 pts to the weakest in 5 months. To this differential, new orders in manufacturing rose to the best level since February 2011 but weaker services sent the overall component to the lowest in 4 months. Input prices fell to a 7 month low and output prices rose at the slowest pace since January. Lower commodity prices were the main reasons. Sorry Mario. There is though some inflation in the pipeline as “with supplier delivery delays worsening to the greatest extent for just over 6 years” which “suggest that inflationary pressures persist in supply chains.”