Weekly Transportation Update: Real Consumer Spending Rises While Existing Home Sales Fall

Key Takeaways

• Consumer spending jumps 1.1% in January.
• Growth in goods spending is strongest in a year.
• Data revisions show healthier personal savings.
• Existing-home sales have fallen for a full year.
• Sales of new homes rise strongly in January.
• Mortgage rates rise again in the latest week.
• Diesel prices fall sharply for third straight week.
• Van spot rates continue falling in the latest week.
• Unadjusted trucking revenues fall in Q4.
• January’s rail job levels are worrisome.
• Rail carload volumes send mixed signals.
• DOT proposes potentially costly safety changes.

Overview

Economic indicators in the latest week were mixed. Consumer spending saw very strong seasonally adjusted growth in January, which was not surprising as we already knew that retail sales posted a big gain. Within the housing market, sales of new homes saw a strong gain but the much larger market for sales of existing homes declined.

Consumer spending

Real consumer spending jumped 2.2%, seasonally adjusted, in January for the strongest m/m increase since March 2021 when the final round of stimulus payments were disbursed.

As discussed last week in the context of retail sales, an uptick in income due to cost of living adjustments might have played a role. Personal in-come in current dollars rose 0.6%, although Janu-ary’s strong job growth likely was a factor as well.

In a rare development recently, spending on goods greatly outpaced spending on services. Real spending on services rose 0.6%, but real spending on goods jumped 2.2%, which is the strongest gain in a year. The increase in services also led to higher goods consumption, however, as the largest contributor was spending on food services, which obviously has a substantial goods component.

Real spending on durable goods surged 5.2%, led by motor vehicles and parts but reflecting a broad-based improvement. Real spending on non-durable goods ticked up 0.5%, which is not especially strong but is the first m/m increase since September.

Another reassuring development was an upward revision in the Bureau of Economic Analysis’ estimate of personal savings. Initial data had put the personal savings rate in late 2022 at nearly a record low. BEA had already revised the rate notably high-er, and the latest data revises it upward again.

According to BEA, the personal savings rate in January was 4.7%. Although that rate is still well below the 2015-2019 average of 7.6%, it is much healthier than the 2.2% rate that BEA had initially released for October 2022.

The housing market still has not hit a clear bottom as sales of existing single-family homes declined 0.8%, seasonally adjusted, in January for the 12th straight m/m decrease. The seasonally adjusted sales rate in January was the lowest since 2010.

The m/m decrease was the smallest of the 12-month streak, and the National Association of Real-tors said that indications are that sales are bottoming out. Indeed, single-family home sales were up modestly in the West and South, but sharp declines in the Northeast and Midwest offset those gains.

Median sales prices of existing single-family homes declined for the seventh straight month after hitting a record of $420,900 in June 2022. The median price of $363,100 in January was just 0.7% ahead of January 2022, but it was still 33% higher than the pre-pandemic month of February 2020.

Aside from more affordable prices, another reason to think that the market is bottoming out is continued tightness in the supply of homes on the market. The inventory of existing single-family homes for sale at the current sales rate remained 2.9 months. Although that figure is still relatively high for the pan-demic-era housing market, it is far below the 4.2-month average seen in 2015 through 2019.

Sales of new homes

Sales of new homes offer more evidence of a housing market that is bottoming out, although new homes currently account for less than 20% of all sin-gle-family sales. In January, sales of new single-family homes rose 7.2%, seasonally adjusted, matching the increase seen in December. The annualized rate of 670,00 sales is still quite low by pan-demic-era standards, but it is only 2.9% below Feb-ruary 2020 and the strongest since March of last year. The South accounted for all the sales growth month over month with a 17.1% increase.

As was the case with existing homes, new-home sales prices are falling sharply. The median sales price of a home sold in January fell 8.2%, which is the largest drop in a single month since September 2014. The median sales price is down 14% since October’s record level, but it is still nearly 29% higher than the median price in February 2020.

One difference between new homes and existing homes is that new-home inventories are not tight. Although they are down from levels in 2022Q3, they are still running at levels not seen since late in the Great Recession.

Mortgage rates

Mortgage rates rose significantly for the second straight week. The average rate on a 30-year fixed rate mortgage increased nearly two-tenths of a point to 6.5%, according to Freddie Mac. Mortgage rates are now the highest since late November.

Diesel and petroleum prices

The national average price of diesel fell 6.8 cents to $4.376 a gallon during the week ended February 20. Diesel prices have fallen in 13 of the past 17 weeks for a total decline of nearly 96 cents. Since hitting a record in June, the national average price has fallen by more than $1.43 a gallon. Diesel prices fell in all regions and are now below $5 a gallon everywhere on average except in California.

Diesel prices nationwide are about 32 cents a gallon higher than they were a year earlier. However, that comparison will look dramatically different after the current week. Diesel saw an unprecedented surge of $1.15 in the first two weeks of March 2022 in the wake of Russia’s invasion of Ukraine.

The prospects appear favorable for further price drops. Crude prices are stable at around $75 a bar-rel, and distillate inventories are strong. In the latest week, distillate stocks nationwide and on the East Coast, which have been especially stressed on occasion, are the highest since January 2022.