Author: Helen Thomas

December 23, 2014

Sales of newly built, single-family homes dropped 1.6 percent in November to a seasonally adjusted annual rate of 438,000 units, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“Though home sales have edged slightly lower, builders are reporting confidence in the market and are increasing their inventory in anticipation of future business,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

“Sales have held in a relatively stable range during the past four months,” said NAHB Chief Economist David Crowe.  “As the labor market and broader economy continue to strengthen, we can expect the housing sector to gain momentum heading into next year.”

The inventory of new homes for sale rose to 213,000 in November, which is a 5.8 month supply at the current sales pace.

Regionally, new home sales rose 14.8 percent in the West.  Sales dropped 12 percent in the Northeast, 6.3 percent in the Midwest and 6.4 percent in the South.

Source: National Association of Home Builders

December 30, 2014

The Conference Board Consumer Confidence Index, which had declined in November, improved in December.  The Index now stands at 92.6, up from 91.0 in November.  The Present Situation Index rose to 98.6 from 93.7, while the Expectations Index decreased to 88.5 from 89.3 in November.

Says Lynn Franco, Director of Economic Indicators at The Conference Board, “Consumer confidence rebounded modestly in December, propelled by a considerably more favorable assessment of current economic and labor market conditions.  As a result, the Present Situation Index is now at its highest level since February 2008.  Consumers were moderately less optimistic about the short-term outlook in December, but even so, they are more confident at year-end than they were at the beginning of the year.”

Consumers’ appraisal of current conditions was considerably more favorable in December.  Those saying business conditions are “good” was unchanged at 24.8 percent, while those claiming business conditions are “bad” decreased from 21.8 percent to 19.6 percent.  Consumers were also more positive in their assessment of the job market, with the proportion stating jobs are “plentiful” increasing from 16.2 percent to 17.1 percent, and those claiming jobs are “hard to get” decreasing from 28.7 percent to 27.7 percent.

Consumers’ optimism about the short-term outlook eased moderately in December.  The percentage of consumers expecting business conditions to improve over the next six months edged down from 18.3 percent to 18.0 percent, but those expecting business conditions to worsen declined slightly from 10.4 percent to 10.1 percent.  Consumers’ outlook for the labor market was marginally less optimistic.  Those anticipating fewer jobs rose from 16.1 percent to 16.9 percent.  The proportion of consumers expecting growth in their incomes declined moderately from 16.9 percent to 16.4 percent; however the proportion expecting a decrease also declined, from 11.0 percent to 10.0 percent.

Source: The Conference Board

December 18, 2014

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.6 percent in November to 105.5, following a 0.6 percent increase in October, and a 0.8 percent increase in September.

“The increase in the LEI signals continued moderate growth through the winter season,” said Ken Goldstein, Economist at The Conference Board.  “The biggest challenge has been, and remains, more income growth.  However, with labor market conditions tightening, we are seeing the first signs of wage growth starting to pick up.”

“Widespread and persistent gains in the LEI point to strong underlying conditions in the U.S. economic expansion,” said Ataman Ozyildrim, Economist at The Conference Board.  “The current situation, measured by the coincident economic index, has been improving steadily, with employment and industrial production making the largest contributions in November.”

The Conference Board Coincident Economic Index (CEI) for the U.S. increased 0.4 percent in November to 110.7, following a 0.2 percent increase in October, and a 0.3 percent increase in September.

The Conference Board Lagging Economic Index (LAG) for the U.S. increased 0.3 percent in November to 125.4, following no change in October, and a 0.1 percent increase in September.

Source: The Conference Board

December 16, 2014

Following an upwardly revised rate last month, housing starts in November slipped 1.6 percent to a seasonally adjusted annual rate of 1.028 million units, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Three-month moving averages for total and single-family production were at their highest levels since the Great Recession.

“These numbers are in line with our latest surveys, which show that single-family builders are confident that the market is gradually recovering,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

“Over the course of the year, the number of houses under construction has been on an upward trajectory, signaling that housing is moving forward,” said NAHB Chief Economist David Crowe.  “With strong demand, affordable home prices and favorable interest rates, we should see housing production continue to grow into 2015.”

Single-family housing starts were down 5.4 percent to a seasonally adjusted annual rate of 677,000 units in November, while multifamily production rose 6.7 percent to 351,000 units.

Regionally in November, combined housing production increased in the Northeast, Midwest and West, with respective gains of 8.7 percent, 14.4 percent and 28.1 percent.  Total production dropped in the South by 19.5 percent.

Issuance of building permits registered a 5.2 percent loss to a seasonally adjusted annual rate of 1.035 million units in November.  Multifamily permits dropped 11 percent to 396,000 units while single-family permits slipped 1.2 percent to 639,000.

Regionally, the Northeast posted an overall permit gain of 27.4 percent.  The Midwest, South and West registered respective losses of 7.3 percent, 10 percent and 5.6 percent.

Source: National Association of Home Builders

December 17, 2014

Anemic growth in worker compensation since the start of the decade has substantially strengthened the cost advantages of U.S. manufacturing against other mature economies, according to data on 34 countries released today by the International Labor Comparisons (ILC) progrm of The Conference Board.  In 2013 (the last year for which data is available), hourly compensation costs for American manufacturers averaged $36.34, up just $1.59 from 2010.  This represents slower growth than even the crisis years of 2007-2010, over which hourly costs grew $2.71.

“Despite a rapidly shrinking unemployment rate, U.S. manufacturing saw exceptionally low worker costs growth in recent years, especially compared to European countries with often weaker recoveries but more rigid labor markets,” said Elizabeth Crofoot, Senior Economist with the ILC program.  “Our dollar-denominated data reveal a broad spectrum among advanced economies: At one end, countries where labor costs are relatively low and still declining – notably Japan and Greece.  At the other end, countries – led by Switzerland, Sweden, Australia, Norway, and Germany – where already high pay and benefits continue to rise at relatively rapid rates.”

“Looking ahead, the dollar’s recent return to appreciation may somewhat shrink the cost advantage built by U.S. manufacturing in 2010-2013 over other mature economies,” said Bart van Ark, Chief Economist at The Conference Board.  “And while emerging markets in Asia, Latin America and Eastern Europe will maintain large cost advantages over the U.S. for the foreseeable future, depreciation of their currencies could significantly narrow the gap and put more pressure on productivity gains to avoid further erosion of those countries’ competitiveness.”

In dollar terms, only Greece, Japan, and Ireland among countries compared saw slower manufacturing compensation growth than the U.S. between 2010 and 2013.  Hourly labor costs in Japan ($29.13) and the U.K. ($31.00) were below American levels in 2013; compensation was higher in most other large mature economies.  Taking a longer view, local costs in manufacturing as a percentage of U.S. costs rose between 1997 and 2013 in all economies compared except Japan, Brazil, and Taiwan.

Source: The Conference Board

December 17, 2014

Half of Consumers Polled Will Wrap Up Christmas Shopping Online

For millions of Americans the rush to find the perfect gift started early this year, and according to the National Retail Federation’s latest Holiday Consumer Spending Survey, the average holiday shopper has completed 52.9 percent of their shopping as of December 10, up from 49.9 percent last year.

“This year we witnessed ‘a tale of two holiday shoppers’ with many jumping on retailers’ early, hard-to-pass-up in-store promotions, and others waiting until the last minute to wrap up their lists,” said NRF President and CEO Matthew Shay.  “In the final stretch, retailers will continue to look for creative ways to attract those with shopping left to do by offering exclusive Super Saturday promotions, extending their in-store holiday hours and promoting deals on expedited shipping.  We are optimistic the holiday season will end on a high note for retailers.”

For the first time, NRF asked those who had completed less than half (50%) of their shopping why they have chosen to wait until December to wrap up their shopping.  The survey found that nearly half (46.8%) said they waited this year because they were still trying to decide what to buy, nearly three in 10 (28.4%) said they are waiting for input from their family and friends, and another 28.4 percent said they are waiting for the best deals on holiday merchandise.

When it comes to where people will do the remainder of their shopping, the survey found nearly half (49.1%) of holiday shoppers will shop online; two in five (44.3%) will shop at department stores, 30.1 percent will head to discount stores, 22 percent will visit clothing stores and 19.3 percent will shop at electronics stores.

NRF also asked holiday shoppers about their use of price matching this holiday season.  According to the survey, 15.6 percent said they have requested a price match from a retailer.  However, broken out by age it is clear that young adults have taken advantage of this service: nearly three in 10 (27.9%) 18-24 year olds say they have requested a price match from a retailer this holiday season; one in five (21.8%) 25-34 year olds and 18 percent of 35-44 year olds have also asked for a price match.

Christmas Day activities run the gamut for holiday celebrants, however, most say they will spend the day visiting with family and friends (66.2%).  Another 59.6 percent say they will open gifts on Christmas Day, and 48.8 percent will cook a holiday meal.  When not opening gifts or visiting with friends and family, one in five (22.2%) will browse the web and just 7.4 percent plan to actually shop online on Christmas Day.

While there’s plently of shopping left to do, nearly one-third (32.8%) plan to buy their last holiday gift before Thursday, December 18; 14.5 percent will look to Super Saturday (Saturday, December 20) to purchase their last gift, and 9.1% will wait until the very last minute and buy their last gift on Christmas Eve.  Additionally, more men than women will wait until Christmas Eve to purchase the last gift (10.5% versus 7.9% respectively).

“Though millions of eager consumers jumped on early holiday promotions, there is still plenty of shopping left to do.  Hurried last-minute shoppers will look for gift cards, clothing items, toys and other popular gifts from a variety of retailers, likely even hoping to win big with expedited shipping deals and extremely low prices online and in stores.”

Source: National Retail Federation

December 11, 2014

Lowe’s CEO Robert Niblock cited the recovering U.S. economy as among the reasons why the company plans to focus more on market differentiation and omnichannel retailing.

The company said it will outline these and other strategic priorities in a meeting with investors on December 11 in North Carolina.

“We’re at a great point in our company’s evolution.  The housing market and broader economy are recovering just as our transformation is gaining momentum,” Niblock said.  “We’re building on our past success and finding new ways to serve and connect with customers.”

Although the company shared few specifics, the company announced that it plans to increase its focus on:

• Enhancing its relevance to customers through omnichannel retailing
• Differentiating itself through better customer experiences
• Adapting to a changing home improvement landscape
• And delivering long-term profitable growth and substantial returns for shareholders

“We continue to generate solid cash flow and have exciting opportunities ahead of us,” said Robert F. Hull, Jr., Lowe’s CRO.  “Return on invested capital is expected to reach approximately 19 percent by 2017, an increase of almost 500 basis points over the next three years.”

Lowe’s also reiterated its sales and earnings guidance for the 2014 fiscal year:

• Total sales are expected to increase 4.5% to 5%.
• Same store sales are expected to increase 3.5% to 4%.
• The company expects to open six home improvement and four hardware stores.
• Diluted earnings per share of approximately $2.68 are expected for the fiscal year ending January 30.
• Lowe’s currently operates more than 1,835 home improvement and hardware stores and has more than 260,000 employees.

Source: Retailing Today

December 10, 2014

The holiday season started strong at Costco where U.S. same store sales advanced 7 percent during the company’s first quarter ended November 23.

Total company sales during the period increased 7 percent to nearly $26.3 billion from $24.5 billion.  Membership income grew slightly slower, advancing 6 percent to $582 million.  Same store sales excluding the effects of the strengthening U.S. dollar and fuel price deflation were 7 percent at U.S. and international locations.

Profits during the period increased to $496 million, or $1.12 per share, three cents better than analysts’ consensus forecast, compared to $425 million, or 96 cents a share the prior year.

Costco ended the quarter with a total of 671 warehouses, including 474 in the United States and Puerto Rico, 88 in Canada, 34 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, seven in Australia and one in Spain.

Source: Retailing Today

December 15, 2014

Following a four-point uptick last month, builder confidence in the maket for newly built single-family homes fell one point in December to a level of 57 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

“Members in many markets across the country have seen their businesses improve over the course of the year, and we expect builders to remain confident in 2015,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

“After a sluggish start to 2014, the HMI has stabilized in the mid-to-high 50s index level trend for the past six months, which is consistent with our assessment that we are in a slow march back to normal,” said NAHB Chief Economist David Crowe.  “As we head into 2015, the housing market should continue to recover at a steady, gradual pace.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”  The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”  Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two of the three HMI componenets posted slight losses in December.  The index gauging current sales conditions fell one point to 61, while the index measuring expectations for future sales dropped a single point to 65 and the index gauging traffic of prospective buyers held steady at 45.

Looking at the three-month moving averages for regional HMI scores, the West rose by four points to 62 and the Northeast edged up one point to 45, while the Midwest registered a three-point loss to 54 and the South dropped two points to 60.

Source: National Association of Home Builders

December 9, 2014

The national level of customer satisfaction fell 0.7% in the third quarter of 2014 to 75.6 on a 100 point scale, according to the American Customer Satisfaction Index (ACSI), pointing to weak spending growth for the fourth quarter.  This is the third consecutive quarterly decline in customer satisfaction for the country as a whole, which is at its lowest level since early 2011.

While most predictions for the Thanksgiving period projected strong growth, retail sales actually fell relative to the previous year.  The suggestion that weak income growth is to blame is inconsistent with the data.  Income growth has indeed been weak, but not worse than it was in 2013.  In fact, American households are marginally better off now.  Unemployment is down, and a major factor boosting consumers’ ability to buy, gas price, is at its lowest level in years, much lower than it was in 2013.

Based on income, gas price, and even consumer confidence, ACSI says an increase in consumer spending would be expected, but not if customer satisfaction is used as a predictor.  There are two major factors that determine spending: expected satisfaction and ability to spend.  The latter has improved somewhat, but the former has gotten worse, and continues to deteriorate.  Accordingly, the ACSI prediction for the fourth quarter is weak spending growth of 1.8 to 2%, a pace behind the overall pace of the economy.

“The US economy needs more consumer demand to shake off these seemingly persistent doldrums,” said Claes Fornell, ACSI chairman and founder.  “Low interest rates, some inflation and wage growth would all help, but consumers also need a reason to buy.  Their satisfaction matters not only to them as individuals, but for the economy as a whole.”

Source: Retailing Today