Category Archives: Finance & Economics

The Conference Board Leading Economic Index (LEI) for the U.S. decreased by 0.3% in March 2024 to 102.4 (2016=100), after increasing by 0.2% in February. Over the six-month period between September 2023 and March 2024, the LEI contracted by 2.2%—a smaller decrease than the 3.4 percent decline over the previous six months. “February’s uptick in the U.S. LEI proved to be ephemeral as the Index posted a decline in March,” said Justyna Zabinska-La Monica at The Conference Board. “Negative contributions from the yield spread, new building permits, consumers’ outlook on business conditions, new orders, and initial unemployment insurance claims drove March’s decline. The LEI’s six-month and annual growth rates remain negative, but the pace of contraction has slowed. Overall, the Index points to a fragile—even if not recessionary—outlook for the U.S. economy. …The Conference Board forecasts GDP growth to cool after the rapid expansion in the second half of 2023. 

WASHINGTON – The American Forest & Paper Association (AF&PA) released its March 2024 Packaging Papers Monthly report. Total packaging papers & specialty packaging shipments in March decreased 5% compared to March 2023. They were down 2% when compared to the same 3 months of 2023. The operating rate for bleached packaging papers was 82.5%, up 5.7 points from March 2023 and up 9.5 points year-to-date. Shipments of the biggest subgrade in unbleached packaging papers — bag & sack — were 99,700 short tons for the month of March, down 0.3% from the same month last year but up 3.5% year-to-date.

As economist Milton Friedman once quipped, monetary policy has a history of operating with “long and variable lags.” What Friedman was expressing is that it takes some time for the true effects of monetary policy, like the changing of the federal funds rate, to permeate completely through the larger economy. While some industries, like housing, are extremely rate-sensitive, there are others that are less so. Given the current inflation challenge, the question then becomes: how does monetary policy affect inflation across a diverse economy like the United States? This was the question that Leila Bengali and Zoe Arnaut, researchers at the Federal Reserve Board of San Francisco, asked. …The economists examined which components that make up the Personal Consumption Expenditures (PCE) Index, an inflation measurement produced by the Bureau of Economic Analysis, are the most and least responsive to changes in the federal funds rate. 

Housing starts fell in March with interest rates somewhat higher than expected last month as the latest inflation readings failed to show improvement. Builders are also still facing higher supply-side costs and tighter lending conditions. Overall housing starts decreased 14.7% in March to a seasonally adjusted annual rate of 1.32 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. …Within this overall number, single-family starts decreased 12.4% to a 1.02 million seasonally adjusted annual rate. Single-family starts are up 21.2% compared to a year ago. The three-month moving average is up to over 1.0 million starts, as charted below. …Single-family permits decreased 5.7% to a 973,000 unit rate but are up 17.4% compared to the previous year. Multifamily permits decreased 1.2% to an annualized 485,000 pace and are down 20.2% compared to March 2023.

An earlier NAHB post based on the report The Building Sustainably: Green & Resilient Single- Family Homes 2024 SmartMarket Brief focused on the prevalence of green home building. This post will examine commonly used practices in green building. This is the second part of a four-part series that will be published about the report.  Builders were asked how frequently they used each of the seven categories* of green building practices, regardless of whether it was a certified green home or not. The top practice that builders used in new homes was energy efficiency at 91%. This was followed by water efficiency at 52%, and healthier indoor living environments at 49%. For remodelers, the top three were: energy efficiency (86%), healthier indoor living environments (51%), and water efficiency (49%).  

Builder confidence in the market for newly built single-family homes was 51 in April, unchanged from March, according to the NAHB/Wells Fargo Housing Market Index (HMI). This breaks a four-month period of gains for the index, which nonetheless remains above the key breakeven point of 50. April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed. …We still anticipate the Federal Reserve will announce future rate cuts later this year, and that mortgage rates will moderate in the second half of 2024. …The HMI index charting current sales conditions in April increased one point to 57 and the component gauging traffic of prospective buyers also edged one point higher to 35. The component measuring sales expectations in the next six months fell two points to 60.

After reporting a substantial rebound in new residential construction in the U.S. in the previous month, the Commerce Department released a report on Tuesday showing housing starts pulled back by much more than expected in the month of March. The Commerce Department said housing starts plummeted by 14.7% to an annual rate of 1.321 million in March after soaring by 12.7% to a revised rate of 1.549 million in February. …Multi-family starts led the pullback in March, plummeting by 21.7% to an annual rate of 299,000 after surging by 7.0% to a rate of 382,000 in February. The report said single-family starts also tumbled by 12.4% to an annual rate of 1.022 million in March after skyrocketing by 14.6% to a rate of 1.167 million in February. The Commerce Department said building permits also dove by 4.3% to an annual rate of 1.458 million in March after jumping by 2.3% to a revised rate of 1.523 million in February.

Inputs to residential construction, goods less food and energy, increased for the fifth straight month, according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. The index for inputs to residential construction, goods less food and energy, represents building materials used in residential construction. The non-seasonally adjusted index increased 0.21% in March following a 0.54% increase in February and a 1.25% in January. While the index increases are slowing, the index continues to grow at a faster rate than 2023 as the average monthly change in 2023 was 0.15%. Additionally, the index increases for the first three months of 2024 mirrors previous years, showing consistent monthly increases for January, February and March. …The seasonally adjusted PPI for softwood lumber rose for the first time since July of 2023, up 1.90% in March from February. Softwood lumber prices were 6.76% lower in March 2024 when compared to 2023. 

The NAHB/Westlake Royal Remodeling Market Index (RMI) for the first quarter of 2024 posted a reading of 66, down one point compared to the previous quarter. Demand for remodeling remains solid and an RMI of 66 is consistent with NAHB’s forecast for remodeling spending in 2024. Nevertheless, construction costs are still an issue in some places, as rising prices for labor and building materials continue to be major headwinds to faster growth for this sector. …The Remodeling Market Index (RMI) is an average of two major component indices: the Current Conditions Index and the Future Indicators Index. …The Current Conditions Index averaged 74, remaining unchanged from the previous quarter. …The Future Indicators Index was 59, which was also unchanged from the previous quarter.

Consumer prices continued to rise in March, with shelter and gasoline prices driving over half of the total increase. This marks the third consecutive strong reading. Despite a slowdown in the year-over-year increase, shelter costs continue to put upward pressure on inflation, accounting for over 60% of the total increase in all items excluding food and energy. This ongoing elevated inflation is likely to keep the Federal Reserve on hold and delay rate cuts this year. …With respect to the aggregate data, the Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.4% in March on a seasonally adjusted basis, the same increase witnessed in February. In March, the index for shelter (+0.4%) and gasoline (+1.7%) continued to be the largest contributors to the monthly rise in the overall CPI. …During the past twelve months, on a non-seasonally adjusted basis, the CPI rose by 3.5% in March, following a 3.2% increase in February.

Fastmarkets has collected feedback from the industry on pricing methodologies for Random Lengths and Random Lengths International as part of its annual methodology review. …Beginning with the lumber report on June 20, Random Lengths will publish assessed fingerjointed stud prices, delivered Dallas, Texas, for ES-LP, Fir&Larch, and Western S-P-F. …Random Lengths will also make changes to the veneer report beginning on June 21, but will seek additional industry feedback until Friday, May 3. Random Lengths is proposing to eliminate all Douglas Fir 1/8-inch CD items and Douglas Fir AB-Grade. Respondents supported the discontinuation of those items, but favored keeping White Woods 1/6-inch CD in all widths. Random Lengths will publish its final decision for price guide changes to veneer on May 13. …Additionally, Random Lengths will move forward with a European Spruce #2 2×4 assessment, but is extending the feedback period. 

NAHB and the Dodge Construction Network published research on the prevalence of green building in The Building Sustainably: Green & Resilient Single- Family Homes 2024 SmartMarket Brief.  The research found that the overall share of home builders classifying more than half their projects as green is at 34% for 2023 a one-percentage point increase from 2019. Similarly, for remodelers, this figure stands at 22%, a five-percentage point increase from 2019. …The largest proportion for both builders and remodelers are those with “no green engagement”. However, these numbers have diminished since the 2019 report, decreasing two percentage points for builders and seven percentage points for remodelers. Following those with no green engagement, are those with “little green engagement” (1-50% green projects). For builders, the next highest share is “dedicated green builders” (more than 90% green projects), and then “green builders” (51-90% green projects). The opposite is true for remodelers with the least prevalent share being dedicated green builders. 

BETHESDA, Maryland — Enviva announced that on April 2, 2024, the Company received notice from the New York Stock Exchange that it is not in compliance with Section 802.01E of the NYSE Listed Company Manual due to a delay in filing its Annual Report on Form 10-K for the year ended December 31, 2023, with the Securities and Exchange Commission. The NYSE Notice has no immediate effect on the listing of the Company’s common stock on the NYSE. Under the NYSE’s rules, the Company will have six months from April 1, 2024 to file the Form 10-K with the SEC. …If the Company fails to file the Form 10-K within the six-month period, the NYSE may, in its sole discretion, grant an extension of up to six additional months for the Company to regain compliance.

Job growth accelerated in March, following a strong gain in February. Furthermore, the unemployment rate fell to 3.8%. March’s jobs report shows that the labor market remains resilient despite elevated interest rates. The strong job numbers likely reduce prospects for a Federal Reserve rate cut in the near-term (NAHB has just two rate cuts in our forecast for 2024). Also, for March 2024, we saw the wage growth slow down. On a year-over-year basis (YOY), wages grew 4.1% in March, the lowest annual gain since June 2021. Wage growth is positive if matched by productivity growth. If not, it can be a sign of lingering inflation. …In March, the unemployment rate fell to 3.8%, from 3.9% in February. The number of unemployed persons declined by 29,000 to 6.4 million, while the number of employed persons rose by 498,000. Meanwhile, the labor force participation rate rose two percentage points to 62.7%. 

Wall Street’s expectation that the Federal Reserve will cut interest rates several times this year has helped power stocks to records. Now, some investors think the central bank might not cut rates at all. After the latest blockbuster jobs report Friday showed continuing strength in the economy, more traders are betting the Fed may cut the benchmark federal-funds rate just once or twice this year, fewer than officials’ last median forecast of three quarter-point cuts. And a handful are even starting to wager that the central bank will leave rates where they are. The shift could pose a challenge to a stock-market rally. …Investors will get a new perspective with Wednesday’s release of the consumer-price index. Inflation has cooled significantly from 40-year highs, but two months of hotter-than-expected readings have helped reinforce the Fed’s wait-and-see approach to cuts. [to access the full story a WSJ subscription is required]

Lowe’s CEO Marvin Ellison pointed to three factors that are planted firmly in the positive column of the home improvement industry. He calls them “core demand drivers.” Disposable personal income is up. Home prices are up. And housing stock is getting older, and therefore in need of home improvement retailers like Lowe’s. Against these positive factors are several negatives and unknowns, including high interest rates and low existing home sales”. …All those factors played into the company’s performance of 2023, during which the company’s net income of $7.7 billion was up from $6.5 billion in the previous year. Net sales for the full year were $86.4 billion, down 11% from $97.1 billion in the prior year. …The big decline came in the lumber aisle. But despite lumber deflation, the company generated positive comparable sales for the pro customer for the year. And the stand-alone building materials category stands out starkly as a bright spot in year-over-year sales.

According to the latest What Home Buyers Really Want Study, home buyers have rather diverse preferences when it comes to the architectural style of their home. In fact, there is no national consensus on exterior design. …Like exterior design, buyers also have divergent preferences for the material used to frame the home. A plurality of 37% would like wood, 25% concrete, and 23% steel to be the framing material on their home. Importantly, the 48% who preferred concrete or steel did so despite the explicit notice that those choices would involve $15,000 to $35,000 in additional costs. This is an important finding, given than over 90% of new homes built in the United States use wood framing. It provides builders an opportunity to explore diversification into non-lumber alternatives, especially as the U.S. Commerce department is poised to increase tariffs on Canadian lumber from 8% to 14% in 2024. From the same study: Outdoor Features & a Laundry Room Among Most Wanted Features.

When U.S. governors gathered in Washington this February, Montana Gov. Greg Gianforte… shared a practical political lesson about the nation’s housing shortage. He detailed his state’s efforts to add homes by removing restrictions on development, in response to a surge in the state’s population. Gianforte offered a simple sales pitch to disarm the opposition to new development. “Every time I got pushback from the left or the right in our legislature, I would say, ‘Do we want our nurses, teachers and police officers to live in the community where they work?’” the governor said. The result was a package of reforms passed in 2023, and he cited early progress: rents have dropped over the past year. Across the country, there are states and municipalities tackling the same pervasive but tedious problem: overly restrictive zoning that makes it challenging or nearly impossible to build new housing.

NAHB analysis of Census data shows that private residential construction spending rose 0.7% in February, the third month of gains in a row. It stood at a seasonally adjusted annual pace of $901.1 billion. The monthly increase in total construction spending is attributed to more single-family construction and improvements. Spending on single-family construction rose 1.4% in February. This marks the tenth straight month of increases since April 2023. The gain for single-family construction is aligned with the strong reading of single-family starts and rising builder sentiment, as the lack of existing home inventory and strong demand are boosting new construction. Compared to a year ago, spending on single-family construction was 17.2% higher. Multifamily construction spending went down 0.2% in February after a dip of 0.8% in January. However, spending on multifamily construction was 6.1% higher than a year ago.