Friday, June 23, 2017

New Home Sales stall, but no downturn

 - by New Deal democrat

Well, the May new home sales report is out.  The good news is, it did not confirm last week's negative reports in housing permits and starts.

This post is up at

Thursday, June 22, 2017

The post-hike flattening yield curve

 - by New Deal democrat

An inversion of the yield curve has always signaled at very least a steep slowdown, and usually an oncoming recession. With the Fed hiking short term rates, where do we cut and now?

Below are two graphs, using the Dynamic yield curve tool from In both cases the dark red line is the yield curve as of several days ago (post-hike). The light red line is the previous yield curve from the beginning of this year (first graph) and from last month (second graph):

Note that the curve is pivoting around a point between the 2 and 5 year yields, at about 1.5%. 

At this point, the yield curve is still positive, but if the trend continues, another two rate hikes should be enough to invert at least part of the curve.

Wednesday, June 21, 2017

Existing home sales: positive, but contain your enthusiasm

 - by New Deal democrat

It's a slow economic news week, but while we are waiting for new home sales Friday, we did get existing home sales today.

It was a good report. Not only was there an increase month over month, but it was the 3rd highest number for this entire expansion:

Even better, the three month moving average made a new high for this expansion.

But contain you enthusiasm, because even though existing home sales are about 90% of the market, they are the least economically important (because of all the activity that goes into building a new house).

The bad news is that prices made a new all time high, and inventory remains very constrained.

Absent housing, consumer inflation is running at only a little over 1%. The Fed raising rates is not going to bring on new inventory, and only make the inventory that does exist more expensive for mortgage borrowers.

So now we wait for Friday.

Tuesday, June 20, 2017

A further look at the housing slowdown

 - by New Deal democrat

As promised, I have a further look at last week's poor housing permits and starts numbers, and especially in the context of interest rates.

This is up at

Monday, June 19, 2017

May industrial production: no change in trend

 - by New Deal democrat

This was a post I meant to put up Friday, but was pre-empted by the important housing news.

May industrial production came in unchanged. But that didn't stop Doomers, who had been silent about April's big increase in manufacturing, from trumpeting its 0.4% decline (go ahead, just try to find their acknowledgement of April's good number. You won't.).

So, let's put industrial production in perspective. First, here is the overall stat:

The uptrend since a year ago is still intact.

Next, let's break it down by manufacturing (blue) and mining (red):

The uptrend in each of these since a year ago also still looks intact.

Here is a bar graph of the m/m change in manufacturing:

The 0.4% decline is well within the range of normal monthly volatility.

So there's nothing in the May report which causes me to think that any economic downturn is imminent.