Week In Review 11.23.2018

Broad Economy—The index of leading economic indicators (LEI) posted a slight positive 0.1% increase in October, primarily due to improving consumer expectations for business conditions, the yield spread, and favorable credit readings which helped offset sharp declines in stock prices and a rise in unemployment claims. Importantly, the positive offsets are upward revisions to the prior two months, both one-tenth higher at strong gains of 0.6% and 0.5%, respectively. In the six month period ending October 2018, the LEI increased 2.6%, which is slower than the 3.2% growth rate over the previous six months.

Housing—Several housing indicators released during the week pointed to a continued slowdown in the housing sector. Notably, the biggest surprise was the marked eight-point drop in the National Association of Homebuilders/Wells Fargo Housing Market Index in November, its largest drop since February 2014, driven by declines in builder’s expectations of both current and future sales. Additionally, the expected buyer traffic index dropped below 50, which means a majority of builders see conditions softening in the coming months. Conversely, housing starts and existing home sales data rose in October, up 1.5% and 1.4%, respectively. All of the gains were concentrated in the multifamily components of the indexes, while the single-family components continued to struggle. Overall, rising home prices and mortgage rates continue to weigh on the housing sector.

Durable Goods Orders declined -4.4% in October, while September’s gain was revised downwards –0.9% to –0.1%. Core capital goods also disappointed, showing no growth from the prior month.  The three-month average annualized growth rate is now the lowest since March.