Economic Data

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Economic

Commentary

Economic Data

April 25, 2016

LINDSEY M. PIEGZA

CHIEF ECONOMIST

(312) 454-3873

PIEGZAL@STIFEL.COM

New Home Sales Unexpectedly Fall for the Third Consecutive Month

Saudi Arabia is set to unveil a sweeping new plan to overhaul the economy’s significant reliance on

oil revenues which are said to account for 80% of the country’s income. According to reports, the

kingdom intends to create a sovereign-wealth fund with $2tr in diversified assets and sell

approximately 5% in the state oil monopoly Saudi Aramco in an IPO.

Crude oil is responding favorably, continuing to erase loses this morning; Brent is up 0.35%,

currently trading at $45.27 a barrel as of 9:20am ET.

Brent Crude, $/Barrel

Source: Bloomberg

According to the FT, China’s debt has grown to a whopping 237% of GDP or 163tr yuan ($25tr) as

of Q1 2016. According to the report, many of those familiar with the situation are not concerned

about the outright nominal figure of the country’s debt but the speed at which the country has

accumulated the debt as the Chinese government continues to “turn on the spigots” in an attempt to

boost slowing growth.

Back in the U.S., republican presidential candidates Ted Cruz and John Kasich have reportedly

joined forces in an attempt to “stop” Donald Trump from winning the Republican nomination for

president outright before the party’s national convention in July.

This morning, new home sales unexpectedly fell 1.5% in March from 519k to a 511k unit pace, the

third consecutive month of decline. February’s 2.0% rise in sales was revised down to -0.4%.

According to Bloomberg, new home sales were expected to rise 1.6% at the end of the first quarter.

Please see the last page of this

report for important

disclosures and disclaimers.

2016 Stifel, Nicolaus & Company, Incorporated One South Street, 15 th Floor Baltimore, MD 21202 Member NYSE Member SIPC 888.290.1762


Economic

Commentary

Economic Data

April 25, 2016

New Homes Sales, k, SA

Source: Bloomberg

From a price standpoint, the cost of a newly constructed home fell 3.2% in March, the fourth month of decline in the past six.

Year-over-year, the median cost of a new home is down 1.8% or $5,400 as of March.

From a regional standpoint, sales in the Midwest rose 18.5% in March with a 5% gain in the South. New home sales in the

Northeast were flat in March. The weakness in last month’s sales report was centered on the West with sales down a sizable

23.6%.

New Home Sales, West, k, SA

Source: Bloomberg

Bottom Line: New home sales unexpectedly declined in March, led by the weakest sales pace in the West since July 2014.

The longer-term declining trend across topline sales since the start of the year, however, suggests a more broad-based decline

in construction activity during one of the sector’s busiest seasons of the year. While construction activity has been positing

limited activity as of late, with still-low borrowing costs and relatively positive employment trends, the housing market is,

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2016 Stifel, Nicolaus & Company, Incorporated One South Street, 15 th Floor Baltimore, MD 21202 Member NYSE Member SIPC 888.290.1762


Economic

Commentary

Economic Data

April 25, 2016

nevertheless, well positioned to continue to positively contribute to headline GDP growth amid a positive, albeit it modest,

pace of recovery. In other words, the housing sector remains a welcome support to an otherwise fragile economy; however,

unlike the run-up leading into the Great Recession, the housing market will no longer be the driver of the economy with a

positive but limited contribution.

Also this morning, the Dallas Fed Manufacturing Index unexpectedly fell from -13.6 to -13.9 in April. According to

Bloomberg, the Dallas Index was expected to improve to -10.0 at the start of Q2.

Tomorrow, durable goods orders are expected to rise 1.8% in March, according to Bloomberg.

Later this week, the Fed gathers for a two day meeting concluding Wednesday, April 27. Unlike the last meeting, however,

which offered a plethora of commentary, updated data including a revised Summary of Economic Projections (SEP), and a

press conference with Chair Yellen, this month’s FOMC statement alone will act as the sole source of updated

communication from policy officials.

Industry insiders will be combing through and dissecting the statement word for word in hopes of uncovering any additional

information regarding the eventual timeline for liftoff. We expect, however, only modest adjustments in the statement itself

with the Committee likely to downgrade their assessment of overall growth, as well as household spending. (See last week’s

edition of the Economic Insight, April 27, 2016 FOMC Statement Preview, for further analysis.)

With the FOMC rate decision less than a week away, the market is pricing in a zero probability of a rate increase at

Wednesday’s meeting and furthermore, less than a 50% probability of any further adjustment in policy until December,

according to Bloomberg. We agree with the market’s assessment and do not expect any further adjustment in rates at the

April FOMC meeting. In fact, the combination of stagnant economic conditions, a still-restrained consumer, and ongoing

concerns regarding risks of contagion from developments abroad will make it increasingly difficult for the Fed to raise rates

once in the remaining nine months of 2016, if at all.

Fed Funds Target Rate

Source: Bloomberg

-Lindsey Piegza, Chief Economist

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2016 Stifel, Nicolaus & Company, Incorporated One South Street, 15 th Floor Baltimore, MD 21202 Member NYSE Member SIPC 888.290.1762


Economic

Commentary

Economic Data

April 25, 2016

Glossary

FOMC – Federal Open Market Committee

IPO – Initial Public Offering

SA – Seasonally Adjusted

SEP – Summary of Economic Projections

Economic Releases

Date Time Event Period Prior Revised Surv(H) Surv(L) Surv(M) Actual

04/21 07:30 Chicago Fed Nat Activity Index Mar -0.29 -0.38 0.2 -0.7 -0.15 -0.44

04/21 07:30 Initial Jobless Claims 16-Apr 253k -- 285k 245k 265k 247k

04/21 07:30 Continuing Claims 9-Apr 2171k 2176k 2201k 2135k 2173k 2137k

04/21 07:30 Philadelphia Fed Business Outlook Apr 12.4 -- 15 -1.5 9 -1.6

04/21 08:00 FHFA House Price Index MoM Feb 0.50% 0.40% 0.80% 0.20% 0.40% 0.40%

04/21 08:45 Bloomberg Economic Expectations Apr 42 -- -- -- -- 44.5

04/21 08:45 Bloomberg Consumer Comfort 17-Apr 43.6 -- -- -- -- 42.9

04/21 09:00 Leading Index Mar 0.10% -0.10% 0.60% 0.20% 0.40% 0.20%

04/22 08:45 Markit US Manufacturing PMI Apr P 51.5 -- 53 51.3 52 50.8

04/25 09:00 New Home Sales Mar 512k 519k 540k 488k 520k 511k

04/25 09:00 New Home Sales MoM Mar 2.00% -0.40% 5.50% -4.70% 1.60% -1.50%

04/25 09:30 Dallas Fed Manf. Activity Apr -13.6 -- -8 -15 -10 --

04/26 07:30 Durable Goods Orders Mar P -3.00% -- 3.70% -0.60% 1.80% --

04/26 07:30 Durables Ex Transportation Mar P -1.30% -- 2.00% -1.00% 0.50% --

04/26 07:30 Cap Goods Orders Nondef Ex Air Mar P -2.50% -- 2.00% 0.00% 0.60% --

04/26 07:30 Cap Goods Ship Nondef Ex Air Mar P -1.70% -- 1.50% -0.50% 0.90% --

04/26 08:00 S&P/Case-Shiller US HPI MoM SA Feb 0.52% -- -- -- -- --

04/26 08:00 S&P/CaseShiller 20-City Index NSA Feb 182.56 -- 183.55 182 182.83 --

04/26 08:00 S&P/CS 20 City MoM SA Feb 0.80% -- 1.10% 0.00% 0.80% --

04/26 08:00 S&P/CS Composite-20 YOY NSA Feb 5.75% -- 5.83% 5.00% 5.50% --

04/26 08:00 S&P/Case-Shiller US HPI NSA Feb 175.42 -- -- -- -- --

04/26 08:00 S&P/Case-Shiller US HPI YOY NSA Feb 5.43% -- -- -- -- --

04/26 08:45 Markit US Services PMI Apr P 51.3 -- 52.5 50.5 52 --

04/26 08:45 Markit US Composite PMI Apr P 51.3 -- -- -- -- --

04/26 09:00 Consumer Confidence Index Apr 96.2 -- 99 92.5 95.9 --

04/26 09:00 Richmond Fed Manufact. Index Apr 22 -- 15 7 12 --

04/27 06:00 MBA Mortgage Applications 22-Apr 1.30% -- -- -- -- --

04/27 07:30 Advance Goods Trade Balance Mar -$62.864b -- -$58.000b -$65.700b -$62.800b --

04/27 09:00 Pending Home Sales MoM Mar 3.50% -- 2.00% -1.50% 0.50% --

04/27 09:00 Pending Home Sales NSA YoY Mar 5.10% -- 1.30% -1.40% 1.00% --

04/27 13:00 FOMC Rate Decision (Upper Bound) 27-Apr 0.50% -- 0.50% 0.50% 0.50% --

04/27 13:00 FOMC Rate Decision (Lower Bound) 27-Apr 0.25% -- 0.50% 0.25% 0.25% --

Source: Bloomberg

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2016 Stifel, Nicolaus & Company, Incorporated One South Street, 15 th Floor Baltimore, MD 21202 Member NYSE Member SIPC 888.290.1762


Economic

Commentary

Economic Data

April 25, 2016

This material is prepared by the Fixed Income Strategy Department of Stifel Nicolaus & Co (“Stifel”). This material is for

informational purposes only and is not an offer or solicitation to purchase or sell any security or instrument or to participate

in any trading strategy discussed herein. The information contained is taken from sources believed to be reliable, but is not

guaranteed by Stifel as to accuracy or completeness. The opinions expressed are those of the Fixed Income Strategy

Department and may differ from those of the Fixed Income Research Department or other departments that produce similar

material and are current as of the date of this publication and are subject to change without notice. Past performance is not

necessarily a guide to future performance. Stifel does not provide accounting; tax or legal advice and clients are advised to

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Stifel Nicolaus & Co is a broker-dealer registered with the United States Securities and Exchange Commission and is a

member FINRA, NYSE & SIPC. © 2016

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST

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2016 Stifel, Nicolaus & Company, Incorporated One South Street, 15 th Floor Baltimore, MD 21202 Member NYSE Member SIPC 888.290.1762

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