Input Stories

Building permits fell 1.2% in February and 6.8% over the year. Permits for single-family homes in February slipped 0.2% from January and declined 3.4% over the year. Meanwhile, permits for buildings with five or more units fell 4.3% from January and 15.7% over the year.

In February, housing starts surged 11.2% from January but fell 2.9% from February 2024. Similarly, starts for single-family homes soared 11.4% from January but declined 2.3% from February 2024. Meanwhile, starts for buildings with five or more units improved 12.1% from January but fell 6.6% over the year.

Meanwhile, housing completions decreased 4.0% over the month and 6.2% over the year. On the other hand, single-family home completions grew 7.1% from January but slipped 1.0% from February 2024. Completions for buildings with five or more units plummeted 20.7% over the month and 15.8% from one year ago.

Existing home sales increased 4.2% in February, but fell 1.2% from February 2024. Housing inventory grew to 1.24 million units, reflecting a 5.1% rise from January and a 17% jump from last year. The median existing home price was $398,400, up 3.8% from last year, with all four U.S. regions reporting price increases.

Single-family home sales fell 5.7% in February, with the median price increasing 3.7% from February 2024 to $402,500. Condo and co-op sales plummeted 9.8% to 370,000 units in February and were also down 9.8% from last year. Meanwhile, the median price rose 3.5% from the prior year to $355,100.

Homes were typically on the market for 42 days in February, up from 41 days in January and 38 days in February 2024. First-time buyers made up 31% of sales in February, up slightly from 28% in January and 26% in February 2024. All-cash sales accounted for 32% of transactions in February, up from 29% in January but down from 33% in February 2024. Meanwhile, investors or second-home buyers represented 16% of homes purchased in February, down from 17% in January and 21% in February 2024. Distressed sales, including foreclosures and short sales, represented 3% of purchases in February, unchanged from January and the previous year.

U.S. import prices advanced 0.4% in February, after increasing 0.4% in January, with both higher fuel and nonfuel prices contributing to the rise. Over the past year, import prices rose 2.0%. Meanwhile, U.S. export prices advanced 0.1% in February, following a 1.3% rise in January. Over the past year, export prices increased 2.1%.

Fuel import prices grew 1.7% in February, after rising 3.5% in January. These increases are attributed to higher prices for natural gas and petroleum. Prices for import fuel rose 2.8% over the past year. Import prices for petroleum advanced 1.7% in February. Meanwhile, natural gas prices surged 14.0% in February and 49.9% over the year.

Nonfuel import prices ticked up 0.3% in February and have not declined on a monthly basis since May 2024, when they fell just 0.2%. Higher prices for nonfuel industrial supplies and materials and consumer goods more than offset lower prices for capital goods in February. The price index for nonfuel imports increased 2.0% over the past year.

After declining 0.2% in January, agricultural export prices rose 0.8% in February. Over the past 12 months, agricultural export prices increased 0.6%, the largest over-the-year rise since February 2023. Meanwhile, nonagricultural export prices inched up 0.1% in February, after climbing 1.5% in January. Higher prices for consumer goods, capital goods, automotive vehicles and nonagricultural foods led the increase in February. Over the past year, nonagricultural export prices advanced 2.2%.

Manufacturing activity in New York state dropped dramatically in March, wiping out gains from the previous month. The headline general business activity index fell 25.7 points to -20.0. The new orders index declined 26.3 points to 11.4, and the shipments index dropped 22.7 points to -8.5, reflecting significant deterioration in both orders and shipments. Unfilled orders slipped to -2.0 from 1.1, while inventories inched up from 8.7 to 13.3, the highest reading in more than two years. Delivery times were little changed, dipping 4.4 points to 1.0, while supply availability improved slightly, edging up to -1.0 from -2.2.

Employment and hours worked both continued their slow decline in March, with the index for the number of employees falling from -3.6 to -4.1 and the average employee workweek slipping -1.3 to -2.5. Meanwhile, both input and selling price increases picked up, reflected in the prices paid index rising 4.7 points to 44.9, the fastest pace of increase in nearly two years, and the prices received index increasing 2.8 points to 22.4, the highest reading since May 2023.

Firms are less optimistic than they have been in previous months. The index for future business activity decreased 9.5 points to 12.7, falling for the second month in a row. Employment and the average employee workweek are forecasted to weaken, a change from expected growth in the six months ahead in February. New orders are anticipated to increase but at a slower pace than previously expected, while capital spending plans weakened. Input prices are expected to remain high. Meanwhile, supply availability is forecasted to contract slightly.

In March, Philadelphia’s regional manufacturing activity continued to expand but was less widespread than in February. The index for current general business activity fell from 18.1 to 12.5, the second consecutive monthly decline. Nearly 31% of firms reported increased activity this month, while 18.1% saw decreases in March compared to 22.5% reporting declines in February. Meanwhile, 46.7% experienced no change. The indexes for new orders and shipments both plummeted from 21.9 and 26.3 to 8.7 and 2.0, respectively. On the other hand, employment expectations rose to a multiyear high, increasing from 5.3 to 19.7. The average employee workweek index grew from 2.9 to 8.7.

The prices paid index increased nearly eight points to 48.3, the highest reading since July 2022, while the prices received index slipped three points to 29.8. As has been the case for many months, the prices received index remains lower than the prices paid index, indicating manufacturers have been absorbing a sizable portion of those higher costs paid.

Looking ahead, nearly all future indicators decreased. The index for future general business activity fell again, from 27.8 in February to 5.6 in March. A higher proportion of firms (25.8%) expect decreases in activity, compared to last month’s reading of 18.5%, while 31.4% expect activity to improve. Additionally, the future new orders and shipments indexes plunged from 33.1 and 36.5to 2.3 and 11.3, respectively. The index for future employment dropped from 23.7 to 17.3, a smaller reduction than in the prior month. The capital expenditures index slipped from 14.0 to 13.4. The future prices paid index fell 14 points to 44.6, while the future prices received index fell six points to 39.7, indicating manufacturers remain concerned about future costs rising but not as much as before.

Industrial production increased 0.7% in February after rising 0.3% in January. Meanwhile, manufacturing output jumped 0.9%, boosted by an 8.5% upsurge in the motor vehicles and parts index. Despite the dramatic increase in February, motor vehicles and parts output was still down 4.8% over the year and hasn’t recovered fully from the drops in output in Q3 and Q4. At 104.2% of its 2017 average, total industrial production in February rose 1.4% from the same month last year. Capacity utilization stepped up to 78.2% and increased 1.3% over the past year, but remains 1.4 percentage points below its long-term average from 1972 to 2024.

In February, a majority of major market groups posted gains. Among consumer goods, the production of durables increased 4.3%, led by automotive products (7.8%) and appliances, furniture and carpeting (1.7%), while the index for nondurables declined 0.8%, with the greatest decreases in energy (-3.2%) and foods and tobacco (-0.7%). The business equipment index improved 1.6% in February, with transit equipment up 7.9% after rising 7.7% in January and 12.7% in December.

Durable goods manufacturing increased 1.6% in February, with most durable manufacturing industry groups exhibiting gains. Nondurable goods manufacturing inched up 0.2% in February, led by apparel and leather (1.3%) and chemicals (1.0%). Manufacturing capacity utilization rose 0.6 percentage points to 77.0%, but remains 1.2 percentage points below the long-term average.

Manufacturers are increasing their investments in digital assets, according to a recent survey from the Manufacturing Leadership Council, the NAM’s digital transformation division.
 
What’s going on: Due in large part to expectations of economic growth, manufacturers plan to either maintain or boost their spending on smart factory investments, they told the MLC in the recently published results of the Smart Factories and Digital Production Survey.

• Respondents also said they are optimistic about continued digitization and adoption, with 69% expecting moderate growth and no recession.
• While 28% would call their current operations “smart” or “somewhat smart,” 76% expect to be there in the next two years.
• Awareness of AI is growing by leaps and bounds among manufacturers; some 34% said they see AI as very significant. (Last year, just 10% said the same.)   

Key points: The survey’s top takeaways include the following:

• Digital transformation is changing the game: Most manufacturers—60%—see digital transformation as something that is redefining the industry.
• More manufacturers are going digital: Some 75% of manufacturers say they are at “midlevel” digital maturity, up significantly from 2024 and 2023.
• AI’s role is inevitable: Fully 80% of manufacturers fully or partially agree self-managing and self-learning facilities powered by AI and machine learning are coming.

The NFIB Small Business Optimism Index fell 2.1 points in February to 100.7. Despite optimism falling, it was the fourth consecutive month above the 51-year average of 98 but also 4.4 points below the most recent peak of 105.1. Of the 10 components included in the index, three increased and seven decreased. The Uncertainty Index rose 4 points to 104, the second highest reading of the index.

Labor quality was cited as the top concern for many small business owners in February, surpassing inflation as the top issue, with 19% reporting labor quality as the most important problem. However, inflation was the second most important concern, tied with taxes, with 16% reporting them as their most important problem, the lowest reporting percentage for inflation since October 2021. In February, 38% of small business owners reported jobs they could not fill, up 3 percentage points from January. The challenge of filling open positions remains acute particularly in manufacturing, retail and construction.

A net 33% of small business owners reported raising compensation, the same as January. Profitability remained under pressure, with a net negative 24% reporting positive profit trends, 1 point worse than in January. Of those reporting lower profits, 40% claimed weaker sales, while 13% cited ordinary seasonal adjustments. A net 29% of small business owners planned price hikes in February, up 3 percentage points from January and the highest reading in 11 months. On the other hand, just 2% reported their last loan was harder to get than previous attempts, the lowest since February 2022, while a net 4% of owners reported paying a higher rate on their most recent loan.

The outlook for general business conditions fell 10 points to 37. The share of firms saying it is a good time to expand fell 5 percentage points to 12%. Uncertainty is high and weighing on small business optimism. Although small business owners still remain broadly optimistic, confidence that the economy will continue to grow is fading.

The Producer Price Index for final demand (also known as wholesale prices) stayed the same in February, after rising 0.6% in January. Over the year, producer prices moved up 3.2%, coming in lower than expectations. Prices for final demand excluding foods, energy and trade services rose 0.2%, after increasing 0.3% in January. Prices for these goods advanced 3.3% from February 2024.

In February, prices for final demand services declined 0.2%, which was offset by prices for final demand goods growing 0.3%. Two-thirds of the increase in the final demand goods index can be attributed to prices for chicken eggs, which soared 53.6%. Meanwhile, prices for gasoline fell 4.7% over the month. The index for final demand goods, excluding foods and energy, rose 0.4%, up from 0.2% in January.

Processed goods for intermediate demand rose 0.5% in February, down from the 1.0% jump in January. More than 40% of the increase could be attributed to a 0.3% rise in the index for processed materials less foods and energy. Prices for processed foods and feeds and for processed energy goods also advanced, 2.0% and 0.5%, respectively. Over the year, the index rose 0.3%, down from the 0.9% increase in January.

Meanwhile, prices for unprocessed goods for intermediate demand rose 1.3% in February, the third consecutive monthly increase. The rise was driven by a 5.1% boost in prices for unprocessed foodstuffs and feedstuffs. Unprocessed nonfood materials less energy rose 2.2%. Prices for unprocessed goods for intermediate demand surged 10.5% from February 2024, the largest increase since December 2022.

Consumer prices increased 0.2% over the month and 2.8% over the year in February, slowing from the 3.0% over-the-year rise in January and coming in lower than expectations. Core CPI, which excludes more volatile energy and food prices, edged up to a 3.1% over-the-year increase and rose 0.2% over the month, down from 0.4% in January.

Shelter rose 0.3% over the month, accounting for nearly half of the monthly increase of the all-items index, and 4.2% over the year. Energy costs grew 0.2% over the month in February, with utility gas service leading the increase, rising 2.5%. Meanwhile, prices for gasoline fell 1.0%, while electricity prices grew 1.0% from January. Although prices for transportation services edged down 0.8% over the month, they were still up 6.0% over the year, with motor vehicle insurance leading the increase, surging 11.1% over the year.

Food prices continue inching up, rising 0.2% over the month and 2.6% over the year in February. The food at home index stayed the same over the month, but the indexes for meats, poultry, fish and eggs rose 1.6% in February. Driven by the bird flu outbreak, the index for eggs alone increased 10.4% over the month and 58.8% over the year. Food away from home rose 0.4% in February and was up 3.7% over the year.

As the over-the-year headline inflation rate remains elevated, markets are anticipating that the Federal Open Market Committee will keep rates steady at its meeting this week. This expectation was confirmed further in Federal Reserve Chairman Jerome Powell’s recent comments at an economic forum in New York where he said that the Fed is in no hurry to reduce its interest rate target.