Category Archives: Finance & Economics

Consumer prices in February saw the smallest year-over-year gain since September 2021 with an eighth consecutive month of a deceleration. However, the shelter index (housing inflation) continued to rise at an accelerated pace and was the largest contributor to the total increase, accounting for over 70% of the increase. Shelter inflation is a lagging indicator and will primarily be cooled in the future via additional housing supply. …The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by 0.4% in February on a seasonally adjusted basis, following an increase of 0.5% in January. …The index for shelter rose by 0.8% in February, following an increase of 0.7% in January. The indexes for owners’ equivalent rent (OER) increased by 0.7% and rent of primary residence (RPR) increased by 0.8% over the month.

For 2022, U.S. total number of single-family permits issued year-to-date nationwide reached 972,180. On a year-over-year basis, this is 12.5% below the 2021 level of 1,111,414. Over the first month of 2023, the total number of single-family permits issued year-to-date nationwide reached 53,062. On a year-over-year basis, this is 36.4% below the January 2022 level of 83,404. Year-to-date ending in January, single-family permits declined in all four regions. The Northeast posted a decline of 20.3%, while the West region reported the steepest decline of 46.9%. The Midwest declined by 39.1% and the South declined by 33.5% in single-family permits during this time. …Year-to-date, ending in January, the total number of multifamily permits issued nationwide reached 47,936. This is 2.0% below the January 2022 level of 48,912.

The count of open, unfilled jobs for the overall economy declined slightly in January, falling to 10.8 million, after an 11.2 million reading in December, which was the highest level since July. The count of total job openings should fall in 2023 as the labor market softens and the unemployment rises. From an inflation perspective, ideally the count of open, unfilled positions slows to the 8 million range in the coming quarters as the Fed’s actions cool inflation. …The construction labor market saw a more significant decline for job openings in January as the housing market cools. The count of open construction jobs decreased from a revised data series high of 488,000 in December to just 248,000 in January. Not only is this a significant decline from the January 2022 reading of 396,000, but the January 2023 levels marks the lowest estimate for construction sector job openings since October 2020.

The United States is not building enough homes to account for the number of people setting up their own households. As a result, there is a sizable shortage of new homes after more than a decade of under-building relative to population growth, according to a new analysis from Realtor.com. The gap between single-family home constructions and household formations grew to 6.5 million homes between 2012 and 2022. …If multi-family construction is included — which is predominantly rental units — this gap is cut to 2.3 million homes. …The rate of overall housing starts slowed in 2022 while completions climbed. In 2022, roughly 1 million single-family homes were started, which is 10.6% fewer than in 2021, though still more than in any other single year back to 2012. …Multi-family housing can ease ongoing housing affordability challenges… but while a single-family home typically takes 7 months to complete, multi-family housing takes 15 months.

WASHINGTON, DC – The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased 3.6 points in February to 58.0, breaking a streak of three consecutive monthly increases and returning the index closer to its all-time survey low set in October 2022. Overall, four of the HPSI’s six components decreased month over month, most notably those associated with job security and home-selling conditions. While both components remain positive on net… year over year, the full index is down 17.3 points. Doug Duncan, Fannie Mae Chief Economist… “The decline was partly driven by a substantial decrease in consumers’ sense of home-selling conditions, with most respondents who indicated it’s a ‘bad time to sell’ citing unfavorable economic conditions. With home-selling sentiment now lower than it was pre-pandemic – and homebuying sentiment remaining near its all-time low – consumers on both sides of the transaction appear to be feeling cautious about the housing market. 

While nationwide single-family housing starts have slowed in the past year, the largest drop on a percentage basis is occurring in the densest counties, due to high housing costs. Meanwhile, multifamily growth was robust throughout much of the nation at the end of 2022, with the notable exception in high-density markets, according to the latest findings from the National Association of Home Builders for the fourth quarter of 2022. …The market share in the single-family market has consistently been changing since the pandemic. As many families move out of densely populated urban centers, there has been more single-family building in outlying areas of metros, small metros, and non-metro areas. The largest increase in market share since the fourth quarter of 2019 was in Micro Counties, where the share increased from 6.0% to 7.4% in the fourth quarter of 2022. 

The home improvement market is bracing for a bumpy road. Two of the largest home improvement retailers, Home Depot (HD) and Lowe’s (LOW), warned of softness in the market in recent earnings reports. “In 2023, residential investment will be under some pressure, given elevated levels of inflation, higher interest rates and a more cautious consumer,” Lowe’s CFO Brandon Sink told analysts on the earnings call on Wednesday. “We are forecasting a slight decline in the home-improvement market.” …Home Depot CEO Ted Decker told analysts, “People are also starting to shift spend more towards services. And as we’ve said, we see some more price sensitivity,” he added. …Shares of both Home Depot and Lowe’s are down over 10% in the last month.

The Conference Board Consumer Confidence Index® decreased in February for the second consecutive month. The Index now stands at 102.9 (1985=100), down from 106.0 in January (a downward revision). The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased to 152.8 (1985=100) from 151.1 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell further to 69.7 (1985=100) from a downwardly revised 76.0 in January. Notably, the Expectations Index has now fallen well below 80—the level which often signals a recession within the next year. It has been below this level for 11 of the last 12 months.

BETHESDA, Maryland — Enviva released financial and operating results for fourth-quarter and full-year 2022, provided financial guidance for 2023, and announced three new take-or-pay contracts with industrial customers. …From a financial reporting perspective, this accounting treatment results in net revenue for fourth-quarter 2022 of $239.3 million, a net loss of $77.4 million, and adjusted EBITDA of $18.6 million. For full-year 2022, net revenue was approximately $1.1 billion, with a net loss of $168.4 million and adjusted EBITDA of $155.2 million. …Adjusted EBITDA for fourth-quarter 2022 was $18.6 million as compared to $55.1 million and $68.0 million for fourth-quarter 2021 on a recast and non-recast basis, respectively. 

Declining mortgage rates and home prices in January, coupled with home builders use of sales incentives, helped boost new home sales last month. The U.S. Department of Housing and Urban Development and the U.S. Census Bureau estimated sales of newly built, single-family homes in January at a 670,000 seasonally adjusted annual pace, which is a 7.2% increase over upwardly revised December rate of 625,000 but is 19.4% below the January 2022 estimate of 831,000. …New single-family home inventory declined in January but remained elevated at a 7.9 months’ supply. A measure near a 6 months’ supply is considered balanced. …A year ago, there were just 34,000 completed, ready to occupy homes available for sale. By January 2023, that number increased 115% to 73,000, reflecting flagging demand. …The median new home sale price declined for the third straight month after peaking in October at $496,800.

U.S. real gross domestic product (GDP) increased at an annual rate of 2.7% in the Q4 2022, according to the “second” estimate released by the Bureau of Economic Analysis. In the Q3, real GDP increased 3.2%. …In the advance estimate, the increase in real GDP was 2.9%. …The increase in real GDP… was partly offset by decreases in residential fixed investment and exports. Imports decreased. Current‑dollar GDP increased 6.7% at an annual rate, or $421.1 billion, in the Q4 to a level of $26.15 trillion, an upward revision of 0.2 percentage point, or $12.5 billion, from the previous estimate.

The US economy is confusing: Jobs are surging. Inflation has been cooling but still running relatively hot. Gas prices are on the rebound. Consumers keep spending, and their confidence is growing. But holiday sales were tepid. Corporate layoffs are mounting. Company earnings aren’t stellar. And mortgage rates are ticking higher. In a time when the economic data has delivered mixed messages or flat out busted expectations, economists’ predictions for the year ahead are growing increasingly opaque. The National Association for Business Economics’ latest survey, shows a “significant divergence” among respondents about where they think the US economy is heading in 2023. …Nearly 60% of survey respondents said they believe the US had a more than 50% shot of entering a recession in the next 12 months. When such a recession would start was another matter: 28% said first quarter, 33% said second quarter, and 21% said third quarter.

WASHINGTON, DC – Due to economic headwinds from unsustainably high consumer spending relative to income, significant declines in monetary aggregates, an increasingly inverted yield curve, and stickier-than-expected inflationary pressures, the Fannie Mae Research Group continues to expect the economy to fall into a modest recession… in the second quarter of 2023. …While some of the recently reported economic strength is probably a side effect of abnormal seasonal consumption and hiring/layoff patterns overstating the true strength of the economy, these data releases were consistent with an easing in financial market conditions to start the year. Importantly, it raises the possibility of the Federal Reserve pushing its federal funds rate target higher. …Housing also started 2023 on a relative high note given a roughly 100 basis point pullback in mortgage rates since November; although the ESR Group expects this, too, to likely prove temporary. 

Continued economic downturn ripples across manufacturing. Sentiment is down somewhat, but the services sector is showing promise after an unexpectedly high number of new jobs added to the economy. However, the wood products market continues its dip with a significant year-over-year (YoY) change in softwood lumber price indices. The Institute for Supply Management’s (ISM) monthly sentiment survey of U.S. manufacturers for January 2023 contracted further. …Some good news is present in the forest products sector – at least in pulp & paper. The price index for pulp, paper & allied products rose 0.4% (+9.2% YoY). Wood fiber also saw a modest increase of +0.4%, reflecting a +4.6% YoY rise. Conversely, lumber & wood products dipped -1.5% for a -3.8% YoY decrease. Softwood lumber also fell 5.1%, a stark YoY difference of -26.1% from the same time in 2022. Drops in these numbers highlight continued manufacturing hesitancy in new home starts as interest rates continue rising to combat inflation.

Companies exported a little less recovered fiber and a lot less scrap plastic last year, recently released trade data shows.  U.S. exports of scrap fiber were down 8% in 2022, compared with the year before, and exports of scrap plastic fell 22%. That’s according to data from the U.S. Census Bureau. U.S. scrap fiber and plastic exports have been decreasing since China began its National Sword campaign in earnest in 2018… but the country continues to allow imports of pulp produced from recycled paper. In fact, 2022 was the first year U.S. shipments of recycled pulp to China exceeded U.S. shipments of scrap fiber to the country. U.S. companies shipped out 16.5 million short tons of fiber in 2022. The numbers marked the continuation of declines. On a country basis… shipments to China, Taiwan and Vietnam decreased 34%, 18% and 17%, respectively.