Mostly Positive Data for FOMC to Ponder, Policy Announcement Due Tomorrow
- New Home Sales for December increased by 11.6 percent to an annual rate of 481,000 units.
- December Existing Home Sales gained4 percent, to a 5,040,000 unit annual rate.
- New Orders for Durable Goods fell in December by 3.4 percent with volatile aircraft orders.
- The Conference Board’s Consumer Confidence Index surged in January to 102.9.
- The November Case-Shiller 20-City House Price Index was up 0.7 percent for the month.
The Federal Open Market Committee is looking at a mostly positive set of U.S. data as they meet today and tomorrow to ponder monetary policy. Home sales and prices were up at the end of 2014. Existing home sales gained 2.4 percent in December to finish the year at a 5.04 million unit pace. The months’ supply of existing homes for sale dropped to a tight 4.4 months’ worth in December, the tightest supply number of the year. The median sales price of an existing home was up 6.0 percent in December over the previous 12 months. New home sales increased by a strong 11.6 percent in December, up to a 481,000 unit annual sales rate, the best monthly new home sales rate for 2014. This is still a weak sales rate by historical standards, but at least it is moving in the right direction. The months’ supply of new homes for sale dropped from 6.0 months’ worth in November to 5.5 in December. The median sales price of a new house was up 8.2 percent over the previous 12 months. The Case-Shiller 20-City Composite House Price for November was up by 0.7 percent, seasonally adjusted. All 20 cities showed gains in November, paced by Tampa, up 1.8 percent. Over the previous 12 months the Case-Shiller 20-City HPI is up by 4.3 percent.
New orders for durable goods fell by 3.4 percent in December, after falling by 2.1 percent in November. The chief culprit in the weak orders numbers were commercial aircraft orders. After a record year for Boeing, commercial aircraft orders fell 55.5 percent in December on a seasonally adjusted basis. Defense aircraft orders also fell by 19.9 percent. Even accounting for earth-bound aircraft orders, the durable goods report was a little soft. New orders for nondefense capital goods excluding aircraft eased by 0.6 percent for the month. It is impossible to tell from the official report, but manufacturing and metals orders may start to be weighed down by retrenchment in the oil patch. Meanwhile, consumer confidence surged in January, to 102.9, up from 93.1 in December. Strong job growth and lower gasoline prices are a potent combination.
The positive U.S. economic data sets the FOMC up to continue their pivot toward monetary policy normalization this year. We will look for any change in their view on oil prices and inflation in tomorrow’s policy announcement. We expect to see no significant changes in the policy statement, and that will keep expectations centered on a mid-year lift-off for the fed funds rate.
Market Reaction: U.S. equity markets opened with losses. Treasury yields are down at the long end of the yield curve. NYMEX crude oil is up to $46.13/barrel. Natural gas futures are up to $2.95/mmbtu.
For a PDF version of this Comerica Economic Alert click here: New_Home Sales 01-27-15.