In February, the Philadelphia Fed manufacturing index rose for a third consecutive month. The headline index jumped from 7.30 to 10.20, slightly above the market consensus and the highest level since October last year. The details show that new orders (11.7 from 6.9), shipments (15.0 from 5.7), unfilled orders (2.2 from -4.1), delivery time (1.5 from -3.8) and average workweek (10.1 from 5.0) rose significantly, while inventories (-12.9 from -6.3) and number of employees (1.1 from 11.6) weakened considerably. Upward price pressures accelerated as both prices paid (38.7 from 31.8) and prices received (15.0 from 11.2) rose in February. The forward looking index weakened from 49.0 to 33.3. The increase is encouraging, but the Philadelphia Fed index misses some momentum, as the index is moving broadly sideways for several months. The sharp improvement in shipments and orders is an encouraging sign for the coming months.
In the week ending the 11th of February, US initial jobless claims unexpectedly extended their downtrend. Initial claims dropped by 13 000 from an upward revised 361 000 to 348 000, reaching the lowest level in almost four years. The less volatile four week moving average dropped lower too, from 367 000 to 365 250 and reached its lowest level since April 2008. The labour department added that there was nothing unusual in the data. Continuing claims, which are reported with an extra week lag, surprised on the downside of expectations too. In the week ending the 4th of February, US continuing claims fell by 100 000 to 3 426 000, which is also a new cyclical high. After already two strong payrolls reports, also the claims are now continuing their downward trend, after disruptions due to the Christmas holidays. The claims are now again at multi-year lows, providing further evidence that the US economy is on the right track.
At the start of the new year, both US housing starts and building permits picked slightly up. In January, housing starts rose by 1.5% M/M, from an upwardly revised 689 000 to 699 000, while the consensus was looking for a decline to 675 000. The details show that strength was again based in multi-family starts (8.5% M/M), while single-family starts dropped by 1.0% M/M. Also regional data show a mixed picture as starts rose in the West, South and Northeast, while they fell in the Midwest. Building permits, on the contrary, were marginally weaker than expected. On a monthly basis, building permits rose by 0.7% M/M, from a downwardly revised 671 000 to 676 000, while an increase to 680 000 was forecast. Both within the singlefamily (0.9% M/M) and multi-family (0.4% M/M) sector permits rose only slightly. Housing under construction picked up by 1.2% M/M to 438 000, while housing completed fell sharply (by 12.0% M/M to 530 000). The housing data were all in all very close to expectations, but continue to suggest that housing market conditions are very gradually improving. The upcoming spring selling season will be an important barometer and hopefully provide further evidence that the US real estate sector is finally recovering, although restrictive lending conditions continue to pose a risk.