INDICATOR: September Existing Home Sales and October Philadelphia and Richmond Feds Manufacturing Surveys
KEY DATA: Home Sales: -2.2%; Prices (Over-Year): +5.9%/ Phila. Fed (Manufacturing): +3.1 points; Expectations: -1.8 points/ Richmond Fed (Manufacturing): +17 points
IN A NUTSHELL: “The housing market is stable and manufacturing is stabilizing, which is a fairly accurate picture of overall economic activity.”
WHAT IT MEANS: The Fed meets next week and so we have just a few more days of economic data that could affect the decision. Of course, with GDP being released the morning the meeting ends, I suspect not much will actually change thinking until then. That said, we did get some interesting numbers today. The housing market is the housing market. Sales go up one month, down the next but the trend remains slightly up. New home purchases fell slightly in September after having jumped in August. Every region posted a relatively mild decline. While over the year, demand was up, the sales pace for the first nine months of the year is down about a half percent from the 2018 rate. In other words, the sector is largely stable. Still, prices seem to be rebounding and were up quite solidly over the year.
There were two regional manufacturing indices released today and they pretty much say the same thing. In the Philadelphia Fed/MidAtlantic region, overall economic activity expanded a little faster, but expectations of the future faltered a touch. Interestingly, respondents thought their own firms conditions deteriorated sharply. They still expanded, but at a much slower pace. Nevertheless, their outlook for future business growth jumped. Huh? I guess consistency is indeed the hobgoblin of small minds. Better off being able to change your mind.
In Richmond, there was a huge reversal of fortune, as the Richmond Fed’s manufacturing index rose sharply in October. That followed a large decline in September. Again, it looks like inconsistency in the outlook is at work here. Indeed, the average of the index for the last three months was zero. In other words, the manufacturing sector in the Richmond Fed’s region is stable. Ho hum.
MARKETS AND FED POLICY IMPLICATIONS: With the data telling us largely nothing, the best thing to say is that nothing much is happening with the economy. Growth continues, but at a largely mediocre pace. I suspect that third quarter GDP will echo that sentiment. Does that mean the FOMC takes out more “insurance” against a potential recession at its meeting next week? Who knows? Twenty five basis points really doesn’t do much for anyone, other than the druggies on Wall Street that need to constantly feed the beast. A small move will not change the direction of growth. In addition, the situation with China remains somewhat uncertain, though maybe a touch more hopeful that we will have only a disaster, not a total disaster. The mini-deal may give farmers some money, but it will not do much for anyone else. And in any event, the level of farm sales will likely remain well below where they were before this whole mess started. So, while investors may call that a victory and rally (how little they need to persuade themselves to buy, buy, buy), economists will yawn. What will the members of the Fed think? Again, who knows? They really have taken a liking to the hobgoblin approach.
Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.
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