Analyzing the numbers: Economic Nuggets

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Bernard M. Markstein, Ph.D.Economic Nuggets is a monthly analysis from Bernie Markstein, US Chief Economist for Reed Construction Data. He is a Senior Business Economist with extensive experience analyzing, interpreting and forecasting macroeconomic and regional data. His primary experience in analysis and research in housing and financial markets. He was previously the Vice President, Economic Forecasting and Analysis for the National Association of Home Builders. Here are his July Economic Nuggets, which can be found here.

1. Congress passed the Water Resources Reform and Development Act (WRRDA), which the President signed into law. The act provides for badly needed improvements to existing ports and waterways, including enlarging some ports to accommodate the bigger ships that will come through the expanded Panama Canal

2.Legislation to provide funding for the Highway Trust Fund (HTF), which may run out of money as early as the end of this month, appears to be headed nowhere. Reauthorization of MAP-21 (“Moving Ahead for Progress in the 21st Century”), which provides for spending from the HTF for federal highway projects and will end as of October 1 under current law, is faring no better

3. At the conclusion of its June Federal Open Market Committee (FOMC) meeting, the Federal Reserve announced it will reduce its purchases of long-term assets from $45 billion per month to $35 billion per month beginning this month. This announcement continues the Fed’s pattern of decreasing its monthly long-term asset purchases by $10 billion after each FOMC meeting, roughly every six weeks

4. Long-term interest rates have been largely unaffected by the Fed’s reduction in purchases. Although long-term rates are up from their cyclical lows of  two and a half years ago, they are down from December of last year when the Fed first announced it would decrease its long-term asset purchases and from January when the reduced purchases began

5. The third estimate of first quarter 2014 real (inflation-adjusted) gross domestic product (GDP) growth was revised from -1.0% to -2.9% at a seasonally adjusted annualized rate (SAAR). The sharp downward revision was surprising, but at this point is ancient history in the sense that first quarter is long over and we are two-thirds through a clearly better second quarter

6. The May AIA Architecture Billings Index (ABI) moved above 50, a positive for the outlook of commercial construction, to 52.6, up from April’s 49.6

7. The June NAHB/Wells Fargo Housing Market Index (HMI) jumped 4 points to 49, just shy of the neutral reading of 50. The improvement in the survey of home builders is an indication that the single-family housing market is about to pull out of the doldrums and return to slow, but steady growth

8. Evidence that the single-family housing market is recovering from a difficult winter can be found in the May new home sales numbers. May sales surged 18.6% to 504,000 (SAAR) following a 3.7% increase in April. Given the weather-related disruptions, the three-month moving average, which increased 5.7% to 446,000, provides a better picture of new home sales. On a year-to-date NSA basis, sales were up 2.1% from the same period last year

9. A price index for inputs used in nonresidential construction, excluding capital equipment, fell 0.2% (NSA) in May after rising 0.5% in April. The index was up 1.3% (NSA) from May 2013, while the PPI for inputs for residential construction was up 1.9% over the same period

10. The May Consumer Price Index (CPI) rose 0.4% (SA) following a 0.3% increase in April. The CPI was up 2.1% (NSA) from May 2013. Core CPI, which excludes food and energy prices, increased 0.3% (SA) in May following a 0.2% advance in April. The index was 2.0% higher than in May 2013

The full report can be found here.

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