Business Activity Improves With Supply Chains, Office Attendance Edges Higher, Mortgage Applications
Business Activity, Supply Chains Improve
U.S. business activity is showing improvement in the early weeks of 2023, aided in part by the easing of global supply chain disruptions that suppressed trade especially in the first year of the pandemic.
Citing nationwide surveys of purchasing managers, analysts at S&P Global said this week that U.S. manufacturing and service business activity rose from the prior month in February as cost pressures also eased somewhat. Service businesses in particular led a larger composite output index to a reading of 50.2, an eight-month high, with numbers above 50 generally signaling positive outlooks among survey respondents.
While inflation is curbing consumer spending and lessening new product orders across the private sector, analysts said the rate of decline in orders eased to the slowest pace since October “as companies noted only a marginal fall in new business.”
S&P analysts noted that a slowing in price hikes for raw materials used by manufacturers during February indicates that supply chain clogs are easing.
Another survey this month by research firm Capterra noted that small and medium-sized businesses are speeding up efforts to “nearshore” their operations to domestic locations and suppliers to avoid delivery snags caused by global logjams. Researchers said 88% of 300 corporate supply chain managers surveyed nationwide have plans to switch at least some of their suppliers to vendors closer to the U.S. within the next year, and 45% plan to switch all of them.
Office Attendance Edges Higher
Big-city office attendance rose slightly from the prior week, as regions in Kastle System’s 10-city “Back to Work Barometer” averaged 49.8% of pre-pandemic attendance for the week ended Feb. 15.
Citing anonymous keycard data from clients’ office properties, the security technology firm reported attendance rising slightly from the prior week’s average of 48.6%, edging closer to the pandemic high of 50.4% reached in the week ended Jan. 25.
But most of the latest increase was sparked by week-over-week gains in just three of the 10 barometer cities, led by a jump of 10 percentage points for Dallas, as seven saw slight weekly declines. Kastle researchers noted bad weather brought office attendance down for Dallas and Austin, Texas, in the prior two weeks of February.
Leading this week’s numbers were Austin at 65.3%, Houston at 60.4% and Dallas at 53.2%. They were followed by Chicago at 49.3%, Los Angeles at 48.1% and New York at 47.8%.
Mortgage Applications Decline
Rising home mortgage rates continued to depress mortgage applications, with application volume for the week ended Feb. 17 dropping 13.3% from the prior week, the Mortgage Bankers Association reported.
The trade group’s weekly survey of lenders showed refinance applications declined 2% from the previous week but were down 72% from the comparable week of 2022. Purchase applications dropped 18% for the week and declined 41% for the year.
“Mortgage rates increased across all loan types last week, with the 30-year fixed rate jumping 23 basis points to 6.62%, the highest rate since November 2022,” Joel Kan, the trade group’s deputy chief economist, said in a statement Wednesday. He noted mortgage purchase applications fell to their lowest level since 1995.
“This time of year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected,” Kan said. “The increase in mortgage rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.”
Those holding back on purchases include apartment renters waiting for more favorable buying conditions. Rising mortgage rates and other housing affordability challenges are helping to keep apartment demand and rents high in many U.S. regions.
Elgin Development Group
Lou Hirsh, CoStar News
- February 23, 2023