1/20/2015
By Jennifer Coombs

Despite two major homebuilders issuing negative outlooks for 2015, the National Association of Home Builders’ (NAHB) index is showing solid conditions so far in January. The NAHB index showed a reading of 57 in January, compared to the upwardly revised 58 reading in December. January 2015 marks the 7^th consecutive month with a score above 50. Strength for the month was primarily led by the most heavily weighted component (present sales) which held steady from December at 62. Traffic, the second-heaviest weight, was weaker for the month, down 2.0 points to a reading of 44. This reflects a significant lack in the traffic of first-time buyers in the new home market. Lastly, future sales fell by 4.0 points in the month, but remained very solid with a reading of 60. On a regional basis, the West came in at a reading of 65, the Midwest at 60, and the Northeast at 43. The South, which is far and away the largest region for new home sales, came in at 55. Although the report appears healthy on the surface, it has not been tracking well with the new home sales report. There are several other housing-related reports that will be released later this week; however, report is one check in the positive column.

While not a US economic release, the Chinese gross domestic product (GDP) reading is impacting many global markets today. China’s GDP grew by only 7.3% in Q4-2014, which is the same as Q3-2014 and slightly better than economist expectations. As with Q3, a weaker property market, weaker investments and unstable exports were the culprits behind slower growth. For the full year, economic growth in 2014 reached 7.4% which undershot the government’s ambitious target of 7.5%. This marks China’s weakest annual economic expansion since 1990. Overall, consumption contributed to 51.2% of the GDP growth in 2014, up 3 percentage points from a year earlier, while services made up 48.2% of the economy, up 1.3 percentage points over last year. Within China’s GDP, both industrial output and retail sales beat expectations in December 2014. Industrial output increased 7.9% year-over-year while retail sales grew 11.9% year-over-year. However, fixed asset investment, which is a key driver of the economy, grew only 15.7% in 2014. In spite of these results, it is expected that the Chinese central bank will release more stimulus measures as deflationary pressures continue and the real estate market remains weak.

Jennifer Coombs
Wall Street Strategies

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