The biggest economic news of the past several weeks stems from the impact of the spreading coronavirus.
Stock markets have tumbled, and investors remain uncertain. In spite of this, reports from manufacturing, retail, and housing indicate growth in each respective industry.
Stock Market Falls Amidst Coronavirus Concerns
Coronavirus concerns have caused a tremendous shift for investors to safer assets, such as gold. The stock market experienced historical drops, but mortgage rates have reached their lowest level in years.
As people reduce the amount of time working, traveling, and consuming during this period of uncertainty, investors, too, have sought to reduce their risks. Mortgage-backed securities are a fairly safe asset and their increased attention has helped lower mortgage rates.
Inflation levels have remained low and relatively unchanged amidst the coronavirus concerns. The PCE price index showed a 1.6% increase year-over-year since last January. This index is highly favored by Fed officials who have suggested that a 2.0% annual rate would be ideal. However, low inflation and high uncertainty have many people anxiously awaiting the Fed’s reaction.
Manufacturing and Retail Job Growth
The economy added 225,000 jobs in January, far exceeding the expected 160,000. Due to an increasing number of people joining the workforce, the unemployment rate increased from 3.5% to 3.6%. Average hourly earnings were higher than expected and wages are up 3.1% since last year.
The ISM national manufacturing index has risen to 50.9 which is its highest reading since July 2019. Readings over 50 signal an expansion in manufacturing. While the trade war with China has halted manufacturing growth in recent months, this report could be a positive sign moving forward.
The ISM national services index also remained above 50, clocking in at 55.5. Retail sales rose again from December to January, up 0.3%. That is 4.4% higher than a year ago and the fourth month in a row with gains. The Consumer Sentiment, which measures how well people are feeling about their economic prospects, reached its highest level since March 2018.
Hope for Housing
The economy saw sales of existing homes decline slightly between December and January, but the overall number is still 10% higher than a year ago. The national median price of those homes is also up 7% over the last year. Inventory continues to hold back sales activity across the United States. The number of existing homes for sale remains low, 11% lower than a year ago. Inventory is at a 3.1-month supply, its lowest since the economy began tracking in 1982.
December’s unexpected increase in housing brings some hope. A report released in January actually indicated that housing starts were at a 13-year high in December. Many investors anticipated that that growth would actually level out in January, but reports indicated that the actual decline in housing starts was significantly smaller than expected.
That said, housing starts between December and January were stronger than the rest of 2019. Building permits increased in January as well to their highest level since 2007 providing further hope for the housing market.
Looking ahead, the coronavirus will undoubtedly remain on the radar. China, Iran, and Italy continue to be hit hardest by the virus, but its overall impact on both the United States and the global economy remains to be seen. Investors have taken a step back from it all and await further response from the federal government.
For further information on the loan and real estate market, get in touch with one of the title and escrow specialists at Plymouth Title Guaranty Corporation.
Information accredited to MBSQuoteline.