After rising from 19 to 28 thru the winter months and falling to 24 in April, the NAHB home builder survey rose 5 pts to 29 in May, the best since May ’07 but still well below the breakeven of 50. Present conditions rose 5 pts and the Future Outlook was up by 3 pts. Prospective Buyers Traffic gained 5 pts to 23 in all regions except the West which has the greatest number of existing home inventory/foreclosure competition. While cheering the improvement, the NAHB chief economist said the “recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices.” He also leaves out still high existing home inventory and the secular decline in the homeownership rate. In their earnings conference call, the CEO of Home Depot put the market simply by saying “housing is better, but not that much better.”
The first May industrial number reported, the NY mfr’g survey, at 17.1 was almost twice better than expectations, up from 6.6 in April and vs 20.2 in March. New Orders were up almost 2 pts, Backlogs remained negative but were up about 2 pts and Inventories were higher by 3.5 pts. Employment was about 1 pt and the Avg Workweek rose to 12.1 from 6.0 but after falling from 18.5 in March. Prices Paid fell 8 pts to a 3 month low and Prices Received were down by 7 pts to a 5 month low. The caveat of the report was the 4th month in a row in the 6 month outlook which fell to 29.3 from 43.1, the weakest since Oct ’11. The individual components of the 6 month outlook were sharply lower across the board. An aside, the euro is now down on the day, rolling over as another meeting of Greek party leaders has broken down likely leading to a new election in June where the results will determine whether they stay in the euro or go.
Separately, April CPI was flat m/o/m but up by 2.3% y/o/y. This is down from 2.7% and the slowest pace of gains since Feb ’11 but the 15th straight month above the new Fed target of 2.0%. The core rate was up .2% m/o/m and 2.3% y/o/y (matching the fastest pace since Sept ’08). Owners Equivalent Rent, 24% of CPI, rose .2% for the 9th month in the past 11 as landlords continue to gain pricing power with lower vacancy rates and the secular decline in homeownership. Apparel prices rose by .4%, new vehicle prices by .4% and used cars by 1.5%. Commodity prices, 40% of the index, fell by .2% but was up .2% ex f&f. Bottom line, we hear all the time from the Fed how sanguine inflation is (CPI index though at a new record high) but hourly earnings continue to grow less than inflation and savers in fixed income lose purchasing power everyday.
April Retail Sales rose just .1% but that was in line with estimates. Sales ex auto’s and gasoline were up also .1% but that was below expectations of up .3%. Building materials, which were helped by the nice weather that saw solid gains Dec thru Mar, fell by 1.8% m/o/m. The core rate of sales which takes out auto’s, gasoline and building materials was up .4%, a touch better than the forecast of up .3%. Sales gains were seen for furniture, electronics, supermarkets, drug stores, sporting goods, online retailers and restaurant/bars and fell at Dept stores and clothing specialty stores. Bottom line, after the prior few months of weather helped consumer shopping, April was a give back month
