According to American Chemistry Council (ACC) Weekly Chemistry & Economic Trends report on March 24, 2023, the number of new jobless claims decreased by 1,000 to 191,000 during the week ending March 18. Continuing claims increased by 14,000 to 1.69 million, and the insured unemployment rate for the week ending March 11 was unchanged (1.2%) from the week prior.
For the first time in a year, existing home sales rose in February, up by 14.5% compared to January. The boost in sales follows a dip in mortgage rates through mid-February. All regions posted higher sales. The inventory of unsold homes was unchanged and represents an historically lean 2.6 months at the current sales pace. The median price of an existing home fell 0.2% Y/Y for the first annual decline in more than a decade.
New home sales rose for a third straight month in February, up by 1.1%. Sales were down 19.0% Y/Y, however. Higher sales in the South and West offset declines in the Northeast and Midwest. The inventory of new homes declined from 8.3 months of supply in January to 8.2 in February. The median price for a new home rose 2.5% Y/Y continuing a slowing pace of gains.
Orders for long-lasting durable goods fell for a second straight month in February, off by 1.0%. There were declines across a broad set of sectors, including aircraft, motor vehicles, computers, communications equipment, and machinery. Orders for metals, metal products, and electrical equipment were higher, however. Core business orders rose modestly for a second month, up by 0.2%. Compared to a year ago, core business orders were up 3.2% Y/Y while headline durable orders remained ahead by 1.0% Y/Y.
According to its monthly survey, the Kansas City Fed reported that manufacturing activity remained flat in March, virtually unchanged from January and February. Its composite index of activity includes production, new orders, employment, supplier delivery time, and raw material inventory. Nondurable goods plants reported decreased activity in March, notably plastics and chemical manufacturing. The year-over-year factory index increased slightly. Since the beginning of the year, factories reported a slight decrease in profit margins given current pricing pressures.
SURVEY OF ECONOMIC FORECASTERS
- The outlook for 2023 has improved for several indicators at the end of Q1. While the balance of risks continues to suggest a recession in the U.S., a “soft landing” remains possible.
- Expectations for 2024, however, continue to deteriorate with ongoing weakness in consumer spending and business investment.
- U.S. GDP is expected to grow by a modest 1.0% in 2023 before expanding by a below-trend 1.3% in 2024.
- Consumer spending growth is expected to slow to a 1.3% Y/Y pace in 2023 before rising by 0.8% in 2024.
- Business investment is also expected to grow modestly, by 1.5% in 2023 and 0.5% in 2024.
- The deterioration in industrial production, that began in late-2022 is expected to continue through mid-year before recovering. In 2023, industrial production is expected to contract by 1.3% and grow only 0.3% in 2024.
- Vehicle sales started the year higher as dealer inventories are rebuilt. However, higher borrowing costs and economic uncertainty will temper pent-up demand that has accrued over the past three years. As a result, sales of autos and light trucks are expected to grow to 14.6 million in 2023 (well below trend) and 15.7 million in 2024.
- As mortgage rates remain above 6%, expectations for interest rate-sensitive housing continue to show a lower level of homebuilding. Housing starts are expected to come in at 1.28 million in 2023, before edging higher to 1.35 million in 2024.
- The unemployment rate is expected to move higher from 50-year lows to 4.0% in 2023 and 4.5% in 2024.
- Following an 8.0% surge in consumer prices in 2022, growth in consumer prices are expected to decelerate to a 4.2% pace in 2023 and 2.6% in 2024.
- Compared to last month, expectations for interest rates (10-year Treasury) were higher as recent data suggest additional Fed tightening will be necessary.
