- Retail sales were stronger than expected and up from a year ago.
- Residential construction slowed. Home sales declined again.
- Jobless picture remains bright.
Retail sales growth accelerated in October and was stronger than expected. Adjusted for inflation, retail sales were up slightly from a year ago.
Residential construction slowed again in October, with single-family activity driving much of the decline. Existing home sales declined in October for the ninth straight month.
Initial jobless claims declined in the latest week, and jobless claims overall remain very low.
October Retail Sales Growth Stronger Than Expected
Retail sales growth in October accelerated and was stronger than expected. The initial estimate for October showed spending up 1.3% when an increase of 1.0% was expected.
The auto sector performed even with the overall market as sales excluding motor vehicles and parts increased by 1.3% while sales of motor vehicles and parts also rose 1.3%. As gas prices were up for much of the month, spending at gas stations increased by 4.1%.
Most categories saw gains in October. Sporting goods, hobby, book, and music stores (-0.3%) and general merchandise stores (-0.2%) were down. Gas stations, food services and drinking places (+1.6%), and food and beverage stores (+1.4%) were the largest gainers.
Retail sales were up 8.3% from a year ago on a nominal basis. Only furniture, home furnishing, and electronics (-4.7%) were down compared to last year. Adjusted for inflation using the CPI, retail sales increased 0.8% for the month and were up 0.5% from a year ago.
Construction suffers: Residential construction trends continue to show declining activity, especially in single-family. The seasonally adjusted annualized rate (SAAR) of starts fell by 4.2%, and the decline was worse than expected.
Permits declined 2.4% when a larger decline had been expected. The decrease was heavier in single-family starts with a 6.1% decline and a smaller 1.2% decline in multi-family. After the October decline, starts were down 8.8% from a year ago but up 7.3% compared to October 2019. The permits decline was also larger in single-family, with a 3.6% year-over-year decline compared to a 1.0% decline in multi-family. Permits were down 10.1% from last year but up 0.4% compared to 2019.
Permits lead to starts, so the permitting pace at 1.526 million units was higher than the 1.425 million starts pace, which indicates that starts could increase in the coming months. However, single-family permits are at an 839,000 pace compared to a starts pace of 855,000, which shows that single-family starts are likely to decline further.
The massive move up in mortgage rates experienced this year is clearly reducing demand for single family. Compared to 2019, single-family permits were down 4.6% in October, while multi-family permits were up 31.9%.
Home Sales Drop in Line With Expectations
Existing home sales declined in line with expectations in October and extended the streak to nine straight months of decreases. The market continues to see the impact of the substantial increase in mortgage rates this year and rivals any other period of change in modern history.
The sales pace in October declined to the slowest since May 2020 and was even slightly lower than in April 2020. Before the COVID lockdowns, the last time we saw existing home sales even lower was December 2011.
The existing home sales SAAR declined 5.9% to 4.43 million from 4.71 million in September. At the October rate, existing home sales were down 28.4% from a year ago and down 16.3% compared to October 2019.
Inventory declined to 1.22 million units, down 0.8% from a year ago. The National Association of Realtors reported that inventory levels are still tight, and as a result, homes for sale are still receiving multiple offers. Inventory is still moving quickly, as 64% of the homes sold in October were on the market for less than a month, and the typical time on the market was 21 days, up from 19 days in September and up from 18 days in October last year. The months’ supply of homes for sale was up slightly to 3.3 months, which is just half of what is considered normal. The median sales price declined to $379,100, up 6.6% from a year ago.
Jobless Claims Fall After Moving Higher
Seasonally adjusted initial jobless claims declined by 4,000 to 222,000 for the week ending November 12. Non-seasonally adjusted claims declined by 6,000. The measures had been moving higher before these declines. The non-seasonal number remains lower than at the beginning of 2020 before the pandemic began.
Continuing claims, which represent people who previously filed and remain on traditional unemployment compensation, increased by 13,000 from the week earlier, bringing the total up to 1.51 million as of the week ending November 5. That level of continuing claims was 256,000 lower than before the pandemic but the highest level in 31 weeks.
The broadest measure of continuing claims increased by 24,000 to 1.29 million in the latest data, which lags the traditional number and is not seasonally adjusted. That total measure is up 63,000 over the last four weeks but is 815,000 lower than the pre-pandemic level.
Join us for the Cox Automotive Industry Insights and Forecast Call hosted by Chief Economist Jonathan Smoke and the Industry Insights team on Thursday, January 12, at 11 a.m. EST. During this 90-minute session, you will hear how the auto industry performed in 2022 and how the Cox Automotive team sees the industry progressing in the new year.
Jonathan Smoke is the chief economist at Cox Automotive.