1. Home
  2. Blog
  3. Economic Insights
  4. Industrial Production Shoots Up – Market Update

I don’t know about you, but Turkey Day can’t get here soon enough. My Detroit Lions have a big divisional game against the Minnesota Vikings. It should be fun because a family friend who’s originally from Minnesota will be joining us for Thanksgiving dinner. A little friendly rivalry will be good.

Last week was a feast of economic data, and this week, everything is being crammed in before Thursday. Let’s jump right in.

Headline News

Producer Price Index (PPI)

Producer prices were up 0.4% in October, beating consensus expectations for a 0.1% increase. This is important because the prices paid by producers of our goods and services are often passed on to consumers down the line. Prices have risen 2.8% on the year.

The same 0.4% price increase held true when food and energy were removed. Prices are up 2.4% on the year. When trade services are further removed, prices were up 0.2% and 2.3% on the year. Trade services were a major contributor, being up 1.1% on the month. There was a 0.5% increase in food prices, while energy prices were flat as gas prices fell.

Quicken Loans Home Price Perception Index (HPPI)

Homeowner estimates of home value were just 0.99% higher than actual appraisal values in October. The difference has narrowed for five consecutive months.

In terms of regional data, homeowners in the West overestimated value by just 0.81%. This is followed by the South and Midwest at 1.02% and 1.05% higher. The Northeast has homeowners overestimating by 1.11%.

Looking at the metro level, appraisals in Dallas come in 3.13% higher than homeowner estimates. Philadelphians are on the other end of the spectrum, overvaluing their homes by 2.69%. Tampa, Florida, is the closest to harmony. Appraisal values are 0.03% under homeowner expectations.

Quicken Loans Home Value Index (HVI)

Home values rose 0.76% in October and are up 4.76% on the year, given low supply. That said, the gains didn’t hold true nationwide.

Values in the West fell 0.98% on the month, but they’ve still risen 5.42% on the year. Midwestern home values were down 0.29%. They’re up 5.12% annually. Meanwhile, the South saw prices rise 3.31% on the month and 5.71% yearly. In the Northeast, prices were up 1.10% and 3.44% since last October.

MBA Mortgage Applications

Mortgage applications were up a little bit last week, rising 3.1% overall. Refinance applications were up 6.0%, while purchase applications rose 0.4%. The average rate on a 30-year fixed mortgage was unmoved at 4.18%.

Consumer Price Index (CPI)

On the consumer side, inflation was that 0.1% overall in the month of October and have risen 2.0% on the year. When food and energy are taken out, it was up 0.2% and 1.8% annually. The latter figure is the core rate that the Federal Reserve would eventually like to see get to 2.0% because it would encourage people to buy now before, prices rise.

Service pricing has seen back-to-back months with gains of 0.4%. Housing and medical costs were both up 0.3%. Even prices and wireless services are going up, an area where prices are usually rock-bottom because the carriers compete so heavily on price. On the other side, new vehicle prices are down 0.2% as are prescription drugs.

Retail Sales

Sales weren’t going to see the 1.9% hurricane-replacement bump they saw in September in October. Still, they were up 0.2%, meeting expectations.

When sales of cars and trucks were taken out, there was a 0.1%. Auto sales were up 0.7%. Other gainers included electronics and appliance stores and furniture, both of which matched the 0.7% gain. Finally, sales in health and personal care stores were up 0.8%.

Gasoline sales were down 1.2% courtesy of a price drop. When this is further taken out, sales were up 0.3%. Joining gasoline on the downside is the building materials category, also down 1.2%.

Jobless Claims

Initial claims were up 10,000 to 249,000 last week. Hurricane effects appear to be lessening, although claims in Puerto Rico are still roughly three times higher than normal. The four-week average of initial claims was up 6,500 to 237,750.

On the other hand, continuing claims were down 44,000 last week to 1.860 million. The four-week moving average was down 9,000 to 1.887 million.

Industrial Production

Industrial production was up 0.9% in October. There was a big assist from manufacturing, which rose 1.3%. Factories also utilized 0.6% more of their capacity last month. Capacity sits at 77.0%.

Motor vehicle production was up 1.0% in October, with people still replacing their vehicles after the hurricanes. Certain high-tech industries are also showing 1.1% production gains. Mining is down 1.3% last month, but it’s still up 6.4% on the year. Utilities were up 2.0% on the month and 0.9% on the year.

Housing Market Index

Home builder sentiment was up two points in November data to come in at 70. Current and future sales both come in at 77. Meanwhile, traffic of a new home buyers is up two points to 50 in the best reading since May. This means that there are no longer fewer people walking through homes.

Regionally, the Northeast saw its housing Outlook rise sharply, coming in at 63, while the Midwest is at 65. The South and West are leading the pack at 72 and 77, respectively.

Housing Starts

Housing starts were up 13.7% to a seasonally adjusted annualized rate of 1.290 million. Single-family home starts were up 5.3% to 877,000. Meanwhile, multi-family starts rose 36.8% to 413,000.

On the permit side, these were up 5.9% to a seasonally adjusted annualized rate of 1.297 million. Permits were up 1.9% on the single-family side to 839,000. Multi-family permits were up 13.9% to 458,000. Completions were up 12.6% to 1.232 million. Together with a 0.9% increase to 1.096 million in the number of homes under construction, this may help alleviate the supply problem.

Mortgage Rates

Fixed mortgage rates were up last week. That said, they’re still very low in the context of history. It remains a great time to lock your rate.

The average 30-year fixed mortgage rate was 3.95% with 0.5 points in fees last week. This is up five basis points on the week and up just one basis point on the year.

On the shorter-term side of things, the average rate for a 0.5 points on a 15-year fixed mortgage was 3.31%, up from 3.24% last week. Last year at this time, the average rate was 3.14%.

Finally, the average rate on a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) was 3.21% for 0.4 points, down one basis point on the week. This is up from 3.07% a year ago.

Stock Market

The market has concerns over whether tax reform could be passed by the end of the year. Because of this, the Dow Jones industrial average and S&P 500 were both down for the second week in a row. This is the first two-week downturn since August.

The Dow was down 100.12 points on the day to close at 23,358.24 points. This is down 0.27% on the week. The S&P 500 was down 0.13% on the week after finishing down 6.79 points Friday to close at 2,578.85. The NASDAQ closed at 6,782.79 Friday, down 10.50 points. It was the only index to post a weekly gain, up 0.47%.

The Week Ahead

Tuesday, November 21

Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops in which a sale closed during the month. Existing homes (also known as home resales) account for a larger share of the market than new homes and indicate housing market trends.

Wednesday, November 22

MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.

Durable Goods Orders (8:30 a.m. ET) – These are based on new orders placed with domestic manufacturers for factory hard goods.

Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.

Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.

Thursday, November 23

Markets are closed in observance of Thanksgiving. Enjoy your tryptophan- and calorie-induced coma!

There’s quite a bit going on next week. We’ll extract ourselves from the mountain of turkey and stuffing and have it all covered for you on Monday.

If economics and mortgage rates aren’t going to get you out of bed after this weekend, we have plenty more to share with you if you subscribe to the Zing Blog below. Black Friday and Cyber Monday are two of the biggest shopping days of the year. To help you prepare, we put together several gift guides to help you make your list. I got to write our tech gift guide. Check it out and have a great week!

Leave a Reply

Your email address will not be published. Required fields are marked *