We had two surprises in today’s economic data. Weather may have played a role in both surprises.
Initial Jobless Claims for the week ended 3/18/17 surged to 258,000 from a prior reading of 243,000. The Street consensus called for 240,000 new jobless claims, last week. Although a surge such as this could indicate a change in the job market, I believe most, it not all, of the surge was due to workers being displaced by the blizzard which impacted the Northeast and kept many workers from their jobs.
New Home Sales, which are signed contracts rather than closings, surged 6.1% to an annual pace of 592,000. The Street expected annualized sales of 564,000. Much of the New Home Sales activity occurred in the upper-tier of the housing market. A mild winter is seen as pulling forward sales which might have otherwise occurred in the spring. Thus, while New Home Sales data were encouraging, they probably overstated the strength of new home construction.
The Kansas City Fed Manufacturing Activity Index rose to 20 from a prior 14 and was above the Street consensus estimate of 14. Prints over 0 indicate improving conditions. The Kansas City Fed region includes significant energy production. Details were:
- Prices paid for raw materials rises to 28 vs 26 prior month
- Volume of new orders rises to 32 vs 26
- New orders for exports falls to 2 vs 9
- Production rises to 37 vs 11
- Number of employees falls to 13 vs 17
- Average employee workweek falls to 13 vs 15
- Shipments rises to 35 vs 16
- Composite six-month outlook rises to 32 vs 29
Even components which fell remained solidly in positive territory. Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas, said: Our composite index accelerated again, and has only been higher one time in the last 15 years. The future employment index was the strongest in the 23-year history of the survey.” In my opinion, this underscores the strength and staying power of the U.S. energy recovery. On March 28th, we get the Dallas Fed report. In February, the Dallas Fed Index printed at 24.5. The Street consensus for the March print is 21.0. I would not be surprised if the actual report surpasses the Street consensus estimate.
I believe that those who believe that U.S. production will be unable to offset OPEC production cuts will be severely disappointed. There is a concern rippling through the oil market that Russia will not renew its production cut agreement with OPEC, when the current agreement expires, in May.
Now we wait on our intrepid representatives in the House.