U.S. INDUSTRIAL PRODUCTION INCREASES: After moving down 0.2% in October, industrial production in the U.S. rose 0.6% in November. Manufacturing remained steady while the utility and mining sectors grew. Industrial production in the U.S. is now 26% above the recession low and 4% above the pre-recession peak.
FEAR ABOUT GLOBAL ECONOMIC GROWTH SETS MARKETS BACK: U.S. markets were set to have a positive week, and then Friday happened. The S&P 500 dropped nearly 2% on fears created by global economic data. On Friday, China reported that industrial production slowed in November. Automobile sales in November were 3.2% lower than a year earlier. Many other areas, including retail, saw sharp declines in the rate of growth, but were still growing. Despite the 90-day trade truce with the U.S., many expect trade issues with the U.S. to continue and negatively impact the Chinese economy. In Europe, violent protests in France and reports of weakening manufacturing in Germany rattled worldwide markets. Steady and/or strong data from the U.S. of late has not calmed the markets. Consumer spending, worker pay and industrial production numbers in the U.S. are robust, but current market activity is about fear of the future, not satisfaction with the present.
ANOTHER GREAT YEAR FOR HOTELS: Last year was a record year for hotels. One of the contributing factors to that great year was the boost from all those Houstonians who had to live in hotels while their homes dried out from the hurricane. So far, 2018 is tracking 2017 and may finish a tad ahead of that record year. This will be the fourth very strong year in a row for the U.S. hotel industry.
HOUSING MARKET HEADWINDS: In the U.S. average mortgage rates are about 1% higher now than a year ago, making homes less affordable. The industry also faces a shortage of homes after years of building fewer homes than population growth would seem to warrant. Finally, land, labor and materials prices are all rising. All this leads to lower affordability.
HOUSING PRICES: The average price for a home in the U.S. is 11% higher than the previous peak. However, if you take inflation into account, the average price for a home remains 9% below the previous peak.
FEAR ABOUT GLOBAL ECONOMIC GROWTH SETS MARKETS BACK: https://www.wsj.com/articles/chinas-economy-flashes-new-warning-signs-11544771116?mod=searchresults&page=1&pos=2; https://www.wsj.com/articles/new-data-from-china-and-europe-fan-economic-fears-11544803738?mod=searchresults&page=1&pos=2
U.S. INDUSTRIAL PRODUCTION INCREASES: https://www.calculatedriskblog.com/2018/12/industrial-production-increased-06-in.html
ANOTHER GREAT YEAR FOR HOTELS: https://www.calculatedriskblog.com/2018/12/hotels-occupancy-rate-decreased-year.html
HOUSING PRICES: https://www.calculatedriskblog.com/2018/12/a-comment-on-professor-shillers-housing.html
HOUSING MARKET HEADWINDS: https://www.bloomberg.com/opinion/articles/2018-12-14/u-s-housing-market-slump-is-more-likely-than-bust