After already a sharp decline in the NY and Philly Fed index, also the Richmond Fed manufacturing index plunged in May. The Richmond Fed dropped from 10 to - 6 (!), the third consecutive decline, while the consensus was looking for only a marginal drop. And the details are even worse! Shipments (-13 from 6), new orders (- 15 from 10) and capacity utilization (-12 from 2) fell into contraction in May and order backlog fell further into negative territory (-19 from -1). Vendor lead time (5 from 18), average workweek (0 from 7) and wages (6 from 22) fell sharply, while only employment stabilized (at 14). Upward price pressures, on the contrary, accelerated as both prices paid (6.12 from 4.81) and prices received (3.36 from 2.60) rose further. A single positive note to end: the forward looking index improved somewhat. Overall, this is an awful report, providing further evidence that the US manufacturing sector is fast losing momentum. With already three extremely poor regional business confidence indicators, we should make ourselves up for a weak ISM reading too.
In April, US new home sales unexpectedly rose, while the consensus was looking for stabilization. New home sales increased by 7.3% M/M to a total level of 323 000, while the previous data were marginally upwardly adjusted. The details show that strength was broad-based, as new home sales rose in all regions. The number of homes for sale fell from 180 000 to 175 000 and months’ supply dropped from 7.2 to 6.5. Price data showed also a positive development as both median and average prices rose in April (compared to the month before). New home sales rose for a second consecutive month in April, which is an encouraging sign, but home sales remain close to record low levels as the market faces intense competition from foreclosed homes, which usually sell at a lower price.