Economy Watch: Non-Manufacturing Sectors Expand Again; Residential Asking Price Appreciation Slows; Tight Credit Remains Drag on Economy
- Nov 07, 2013
The Institute for Supply Management reported on Wednesday in its latest Non-Manufacturing ISM Report on Business that the U.S. non-manufacturing sector is continuing to grow. The month’s expansion was the 46th month in a row in which the non-manufacturing sector, which is by far the largest part of the economy, continued its expansion.
In fact, the non-manufacturing index came in at 55.4 in October, a full percentage point above September’s reading. That means not only was the non-manufacturing economy still growing during the month, it was growing at a faster rate than the previous month. The result surprised on the upside, considering the perceived impact of the federal government shutdown for part of the month, and the prospect of default (which apparently purchasing managers didn’t believe was going to happen).
Even so, “a number of respondents indicate that they were negatively impacted by the government shutdown,” according to Anthony Nieves, chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee. Overall, respondents’ comments were mixed, with the majority reflecting an uptick in business.
Residential Asking Price Appreciation Slows in October
Trulia reported this week that asking prices in the U.S. residential market increased 0.6 percent month-over-month in October, the second-slowest monthly gain in seven months. The company chalked up the slowdown in asking prices to expanding inventory, rising mortgage rates, and declining investor activity, and added that asking prices could slow further if consumer confidence suffers.
Still, the monthly, quarterly, and yearly gains are all high compared with historical norms. In fact, asking prices rose 11.7 percent year over year, according to Trulia – the highest rate of increase since the housing bubble burst.
“Although October’s asking home prices rose at the second-slowest pace in seven months, prices are still rising unsustainably fast,” Jed Kolko, Trulia’s chief economist, said in a statement. “Even though the market is far from bubble territory, we still see the effects of fast-rising prices, including investors flipping homes and would-be sellers waiting longer to put their homes on the market.”
Tight Credit Remains Drag on Economy
In a report released this week, “Housing in the National Economy: A Look Back, a Look Forward,” Cleveland Fed President Sandra Pianalto said that “a major reason why the economic recovery has been so slow and has required so much policy support has been the performance of the housing market market. Ordinarily, deep recessions are followed by strong economic snap-backs. But an economist at my bank and his co-author found two exceptions to that rule: the Great Depression and the recent recession.
“Looking ahead, tight conditions in mortgage credit markets will continue to hold the housing sector and broader economy from getting back to full strength more quickly,” she continued. “In a recent Federal Reserve survey of senior loan officers, bankers reported that credit standards for all categories of home mortgage loans have remained tighter than the standards that have prevailed on average since 2005.”
Wall Street had another mixed day on Wednesday, with the Dow Jones Industrial Average up 128.66 points, or 0.82 percent, and the S&P 500 registering an increase of 0.43 percent. The Nasdaq managed lost 0.2 percent.