The data released this week show a contradiction about the largest economy in the world, as corporate activity declined and jobless claims rose, new home sales rose contrary to expectations, bucking the downward trend in the US real estate market over the past months.
Decline in corporate activity
Data showed a further decline in US corporate activity in November. US business activity contracted for the fifth month in a row in November, with the new orders index dropping to its lowest level in two-and-a-half years as higher interest rates slowed demand. The industrial sector also declined strongly amid weak demand.
Standard & Poor’s data showed that the composite purchasing managers’ index in the United States reached 46.3 points in the initial reading for the month of November, which is the lowest level in three months, compared to 48.2 points in last October, and the index is farther away from the neutral 50-point level.
The services sector contracted to 46.1 points from 47.8 points in October, while the manufacturing PMI recorded the lowest level in 30 months at 47.6 points, compared to 50.4 last month.
Demand conditions worsened this month, with new orders falling at the fastest pace since the start of the pandemic in May 2020.
According to the report, companies are seeing increasing headwinds, including rising costs of living, tightening financial conditions, rising borrowing costs, and weak demand in domestic and foreign markets.
Unemployment claims rise
Also, the number of Americans filing new applications for unemployment benefits rose more than expected last week, but this is likely not to indicate a significant shift in labor market conditions.
The Labor Department said on Wednesday that first-time jobless claims increased by 17,000 to a seasonally adjusted level of 240,000 in the week ending Nov. 19.
The previous week’s data was revised to show an increase of 1,000 requests over the previously announced figure. Economists in a Archyde.com poll had expected the number of jobless claims to reach 225,000 in the most recent week.
It is likely that the increase recorded last week was due to technical reasons, as economists said that the model used by the government to adjust data to accommodate seasonal fluctuations usually expects an increase in applications due to companies closing their doors temporarily on holidays.
New home sales soar
In addition, new home sales rose against expectations last October, bucking the downward trend in the US real estate market over the past months.
And the Statistics Office data revealed that new home sales reached 632 thousand units in October, compared to 588 thousand units in September after adjusting the data downward, and contrary to expectations that it will decline to 570 thousand units.
The average sale price of a new home in October was $493,000, compared to $455.7,000 in September, and compared to $427.3,000 a year ago.
On a yearly basis, new home sales fell 5.8% in October compared to the same month a year earlier.
Durable goods orders soar
In addition, the month of October recorded a surprising rise in orders for durable goods, supported by demand for transportation equipment and military aircraft. Durable goods orders rose 1% in October on a yearly basis, above expectations of 0.5%.
Orders excluding transportation increased 0.5% in October on a monthly basis, and orders excluding defense rose 0.8%.
As for non-defense capital goods orders, excluding aircraft, they increased by 0.7% on a monthly basis, and by 9.2% on an annual basis.
High car prices
For his part, a recent report expected the stability of retail sales of new cars in the United States during the current month, with a slowdown in demand due to high prices and interest rates.
“JD Power” and “LMC Automotive” expected in a report that new car sales would reach 933.4 thousand units in November, a decrease of 0.3% compared to the same month in 2021.
The report indicated that total new car sales will reach 13.9 million units a year, compared to 12.9 million units a year earlier.
Average monthly financing payments needed to purchase cars are set to reach $712 in November, up 7.2% from the same period a year earlier.
Consumers who were previously willing to pay more money to buy cars due to the short supply, are cutting back on spending due to declining affordability as borrowing payments increase.