3/23/2015
By Jennifer Coombs

The Chicago Fed National Activity Index (NAI) clearly points to the economy starting off 2015 incredibly slow at a reading of -0.11 in February versus a revised -0.10 reading in January. This puts the 3-month average in negative territory at -0.08 for February versus 0.26 in January. The weakest component of the index was personal consumption & housing at -0.17, while the component for production-related indicators was at -0.07. Ultimately, these readings offer some tangible evidence that both housing and manufacturing are responsible for the pulldown of economic growth so far. Most importantly, there is a glimmer of hope in the form of employment, which continues to be the bright spot of the economy at a reading of +0.11. The chart below shows the performance of the NAI since the peak of the recession.

Next, it appears that there’s some hope to be found in the housing market going into the spring selling season. In February, existing home sales bounced by 1.2% month-over-month to an annual pace of 4.88 million, which was above the 4.82 million pace from January, but still remains relatively weak. In fact, 2015 opened with the two weakest months for existing home sales since April 2014. However the year-over-year rate is showing some strength at +4.7% in February for the strongest reading since October 2013. The data is divided between single-family and condos with the single-family component ahead, which is encouraging to us. Existing single-family home sales were up 1.4% in February for a 4.10 million annual pace and a year-over-year gain of 5.9%. Sales in the South (the largest region) surged in the month, while the West and Midwest remained unchanged and the Northeast dropped substantially over the same period last year. Existing homes that are available for sale on the market remain on the scarce side, with only a 4.6-month supply which was unchanged from January’s reading. In February 2014, the number of homes on the market was a supply of 4.9 months. Prices also firmed during the month, increasing by 2.5% to a median price of $202,600 and up a strong 7.5% over last year. Ultimately, the housing market remains soft, but there are some signs of life in single-family sales which is very encouraging. The data for new home sales will be released tomorrow, and these have been known to be soft so far in 2015, too.

Jennifer Coombs
Wall Street Strategies

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