Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From the AIA: Architecture Billings Index ends year on positive note
The Architecture Billings Index (ABI) concluded the year in positive terrain, with the December reading capping off three straight months of growth in design billings. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the December ABI score was 55.9, up sharply from 50.6 in the previous month. This score reflects the largest increase in design services in 2016 (any score above 50 indicates an increase in billings). The new projects inquiry index was 57.2, down from a reading of 59.5 the previous month. Click on graph for larger image.
“The sharp upturn in design activity as we wind down the year is certainly encouraging. This bodes well for the design and construction sector as we enter the new year”,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “However, December is an atypical month for interpreting trends, so the coming months will tell us a lot more about conditions that the industry is likely to see in 2017.”
• Regional averages: Midwest (54.4), Northeast (54.0), South (53.8), West (48.8)
• Sector index breakdown: commercial / industrial (54.3), institutional (53.3), mixed practice (51.9), multi-family residential (50.6)
This graph shows the Architecture Billings Index since 1996. The index was at 55.9 in December, up from 50.6 in November. Anything above 50 indicates expansion in demand for architects' services.
Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.
According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This index was positive in 9 of the last 12 months, suggesting a further increase in CRE investment in 2017.
After a post-election surge in December, homebuilder confidence pulled back more than expected to kick off the year. While economists were forecasting the NAHB homebuilder sentiment survey to come in at a level of 69 this month, the actual reading came in two points lower at 67, and down three points from December’s originally reported reading of 70. We would note that last month’s initial reading was also revised down one point, so the m/m decline was just two points. Looking at the chart below, even after this month’s decline, sentiment remains above every other reading of this expansion prior to December.
The table to the right shows the breakdown of this month’s report by traffic as well as present and future sales along with sentiment broken down by region. Every component of the overall index declined in January, with the biggest decline coming in Present Sales while Traffic saw the smallest decline. In terms of regions, sentiment on the coasts saw the largest decline, while homebuilder sentiment in the Midwest, which includes the rust belt states that went in favor of Trump, was unchanged at its highs for the cycle. Even for the other three regions, though, it is important to remember that January’s decline in sentiment comes from what were the highest levels of the cycle.
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The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 67 in January, down from 69 in December. Any number above 50 indicates that more builders view sales conditions as good than poor.
From CNBC: Homebuilder confidence pulls back by 2 points in January after election euphoria
A monthly sentiment index retreated 2 points in January, and December's seven-point jump was revised down by one. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) now stands at 67. Click on graph for larger image.
"NAHB expects solid 10 percent growth in single-family construction in 2017, adding to the gains of 2016," said NAHB Chief Economist Robert Dietz. "Concerns going into the year include rising mortgage interest rates as well as a lack of lots and access to labor."
Regionally, on a three-month moving average, sentiment in the Northeast rose two points to 52 and rose three point in the Midwest to 64. The South and West each held steady at 67 and 79, respectively.
This graph show the NAHB index since Jan 1985.
This was below the consensus forecast of 69, but still another solid reading.
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From the Fed: Industrial production and Capacity Utilization
Industrial production rose 0.8 percent in December after falling 0.7 percent in November. For the fourth quarter as a whole, the index slipped 0.6 percent at an annual rate. In December, manufacturing output moved up 0.2 percent and mining output was unchanged. The index for utilities jumped 6.6 percent, largely because of a return to more normal temperatures following unseasonably warm weather in November; the gain last month was the largest since December 1989. At 104.6 percent of its 2012 average, total industrial production in December was 0.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.6 percentage point in December to 75.5 percent, a rate that is 4.5 percentage points below its long-run (1972–2015) average. Click on graph for larger image.
This graph shows Capacity Utilization. This series is up 8.8 percentage points from the record low set in June 2009 (the series starts in 1967).
Capacity utilization at 75.5% is 4.5% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.
Note: y-axis doesn't start at zero to better show the change.
The second graph shows industrial production since 1967.
Industrial production increased in December to 104.6. This is 19.7% above the recession low, and is close to the pre-recession peak.
This was above expectations of a 0.6% increase.
click for ginormous graphic Source: Visual Capitalist
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It seems that most forex and futures symbols continue to run in circles ahead of the Friday presidential inauguration and unfortunately I found little to share on that front. Which leaves us only with stock symbols but fortunately I was able to uncover a few goodies.
First a quick update on our LXP campaign which I posted for the subs last week. We snagged a pretty decent entry and thus far it’s sticking to the script. Time to advance or stop to near the break/even mark at 10.79.
APC is a possible long term campaign which is why I’m showing you the weekly and monthly panels. As you can see it’s been trading inside of tight range for the past few weeks and I’m sure it wants out. As it’s near the lower boundary plus given the monthly context I am tempted to grab a long position with a stop below 68.
Seasonality courtesy of Financhill – click on the chart or here to look at a dynamic chart plus some juicy stats. I don’t see any red flags here so this is a go for me.
LOW has been trading even lower lately but managed to reconquer a daily NLBL plus its 100-day SMA. I’m interested in a long position but only if it drops back down to the 72 mark. Stop would be placed below 70 – how’s that for nice round numbers?
Seasonality very supportive – we’re looking good here.
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