Friday, April 28, 2017

BEA: Real GDP increased at 0.7% Annualized Rate in Q1

by Bill McBride on 4/28/2017 08:34:00 AM

From the BEA: Gross Domestic Product: First Quarter 2017 (Advance Estimate)

Real gross domestic product (GDP) increased at an annual rate of 0.7 percent in the first quarter of 2017, according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2016, real GDP increased 2.1 percent.
The increase in real GDP in the first quarter reflected positive contributions from nonresidential fixed investment, exports, residential fixed investment, and personal consumption expenditures (PCE), that were offset by negative contributions from private inventory investment, state and local government spending, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased

The deceleration in real GDP in the first quarter reflected a deceleration in PCE and downturns in private inventory investment and in state and local government spending that were partly offset by an upturn in exports and accelerations in both nonresidential and residential fixed investment.
emphasis added
The advance Q1 GDP report, with 0.7% annualized growth, was below expectations of a 1.1% increase.

Personal consumption expenditures (PCE) only increased at a 0.3% annualized rate in Q1, down from 3.5% in Q4.   Residential investment (RI) increased at a 13.7% pace. Equipment investment increased at a 9.1% annualized rate, and investment in non-residential structures decreased at a 22.1% pace.

I'll have more later ...

Thursday, April 27, 2017

Friday: GDP, Chicago PMI

by Bill McBride on 4/27/2017 08:23:00 PM

From the Altanta Fed: GDPNow

The final GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.2 percent on April 27, down from 0.5 percent on April 18. The forecast of first-quarter real consumer spending growth fell from 0.3 percent to 0.1 percent after yesterday's annual retail trade revision by the U.S. Census Bureau. The forecast of the contribution of inventory investment to first-quarter growth declined from -0.76 percentage points to -1.11 percentage points after this morning's advance reports on durable manufacturing and wholesale and retail inventories from the Census Bureau. The forecast of real equipment investment growth increased from 5.5 percent to 6.6 percent after the durable manufacturing report and the incorporation of previously published data on light truck sales to businesses from the U.S. Bureau of Economic Analysis.
emphasis added
From the NY Fed Nowcasting Report
The FRBNY Staff Nowcast stands at 2.7% for 2017:Q1 and 2.1% for 2017:Q2.

Mixed news from this week's data releases left the nowcast for Q1 and Q2 essentially unchanged.
• At 8:30 AM ET, Gross Domestic Product, 1st quarter 2017 (Advance estimate). The consensus is that real GDP increased 1.1% annualized in Q1.

• At 9:45 AM, Chicago Purchasing Managers Index for April. The consensus is for a reading of 56.5, down from 57.7 in March.

• At 10:00 AM, <University of Michigan's Consumer sentiment index (final for April). The consensus is for a reading of 98.0, unchanged from the preliminary reading 98.0.

HVS: Q1 2017 Homeownership and Vacancy Rates

by Bill McBride on 4/27/2017 01:40:00 PM

The Census Bureau released the Residential Vacancies and Homeownership report for Q1 2017.

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.

Homeownership Rate Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate decreased to 63.6% in Q1, from 63.7% in Q4.

I'd put more weight on the decennial Census numbers - and given changing demographics, the homeownership rate is probably close to a bottom.

Homeowner Vacancy RateThe HVS homeowner vacancy declined to 1.7% in Q1. 

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

Rental Vacancy RateThe rental vacancy rate increased to 7.0% in Q1.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey.

Overall this suggests that vacancies have declined significantly, and my guess is the homeownership rate is probably close to the bottom.

Kansas City Fed: Regional Manufacturing Activity "Expanded at Slow Pace" in April

by Bill McBride on 4/27/2017 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Expanded at a Slower Pace

The Federal Reserve Bank of Kansas City released the April Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded at a slower pace with solid expectations for future activity.

“We came down a bit from the rapid growth rate of the past two months,” said Wilkerson.  “But firms still reported a good increase in activity and expected this to continue.”
The month-over-month composite index was 7 in April, down from the very strong readings of 20 in March and 14 in February.  The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.  Activity in both durable and nondurable goods plants eased slightly, particularly for metals, machinery, food, and plastic products.  Most month-over-month indexes expanded at a slower pace in April.  The production, shipments, and new orders indexes fell but remained positive, and the employment index edged lower from 13 to 9.  In contrast, the new orders for exports index increased from 2 to 4.  Both inventory indexes fell moderately after rising the past two months.
emphasis added
The Kansas City region was hit hard by the decline in oil prices, but activity is expanding again.

This was the last of the regional Fed surveys for April.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through April), and five Fed surveys are averaged (blue, through April) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

It seems likely the ISM manufacturing index will decline in April, but still show solid expansion (to be released next week).

NAR: Pending Home Sales Index decreased 0.8% in March, up 0.8% year-over-year

by Bill McBride on 4/27/2017 10:00:00 AM

From the NAR: Pending Home Sale Dip 0.8% in March

The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 0.8 percent to 111.4 in March from 112.3 in February. Despite last month's decrease, the index is 0.8 percent above a year ago.
The PHSI in the Northeast decreased 2.9 percent to 99.1 in March, but is still 1.8 percent above a year ago. In the Midwest the index declined 1.2 percent to 109.6 in March, and is now 2.4 percent lower than March 2016.

Pending home sales in the South rose 1.2 percent to an index of 129.4 in March and are now 3.9 percent above last March. The index in the West fell 2.9 percent in March to 94.5, and is now 2.7 percent below a year ago.
emphasis added
This was below expectations of a 0.4% decrease for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in April and May.

Weekly Initial Unemployment Claims increase to 257,000

by Bill McBride on 4/27/2017 08:33:00 AM

The DOL reported:

In the week ending April 22, the advance figure for seasonally adjusted initial claims was 257,000, an increase of 14,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 244,000 to 243,000. The 4-week moving average was 242,250, a decrease of 500 from the previous week's revised average. The previous week's average was revised down by 250 from 243,000 to 242,750.
emphasis added
The previous week was revised down.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 242,250.

This was above the consensus forecast.

The low level of claims suggests relatively few layoffs.

Wednesday, April 26, 2017

Thursday: Unemployment Claims, Durable Goods, Pending Home Sales

by Bill McBride on 4/26/2017 08:59:00 PM

• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 243 thousand initial claims, down from 244 thousand the previous week.

• Also at 8:30 AM, Durable Goods Orders for February from the Census Bureau. The consensus is for a 1.1% increase in durable goods orders.

• At 10:00 AM, Pending Home Sales Index for March. The consensus is for a 0.4% decrease in the index.

• Also at 10:00 AM, the Q1 2017 Housing Vacancies and Homeownership from the Census Bureau.

• At 11:00 AM, the Kansas City Fed manufacturing survey for April. This is the last of the regional Fed surveys for April.

Freddie Mac: Mortgage Serious Delinquency rate declined in March, Lowest since May 2008

by Bill McBride on 4/26/2017 05:14:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in March was at 0.92%, down from 0.98% in February.  Freddie's rate is down from 1.20% in March 2016.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

This is the lowest serious delinquency rate since May 2008.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is still declining, the rate of decline has slowed.

Maybe the rate will decline another 0.2 to 0.4 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Fannie Mae will report soon.

Philly Fed: State Coincident Indexes increased in 45 states in March

by Bill McBride on 4/26/2017 01:40:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for March 2017. Over the past three months, the indexes increased in 45 states, decreased in three, and remained stable in two, for a three-month diffusion index of 84. In the past month, the indexes increased in 45 states and decreased in five, for a one-month diffusion index of 80.
Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
Philly Fed Number of States with Increasing ActivityClick on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In March 45states had increasing activity (including minor increases).

The downturn in 2015 and 2016, in the number of states increasing, was mostly related to the decline in oil prices.

Philly Fed State Conincident Map Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and almost all green now.

Source: Philly Fed. Note: For complaints about red / green issues, please contact the Philly Fed.

New Home Prices

by Bill McBride on 4/26/2017 11:02:00 AM

As part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in March 2017 was $315,100. The average sales price was $388,200."

The following graph shows the median and average new home prices.

New Home PricesClick on graph for larger image.

During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.

The average price in March 2017 was $388,200, and the median price was $315,100.  Both are above the bubble high (this is due to both a change in mix and rising prices).

The second graph shows the percent of new homes sold by price.

New Home Sales by PriceAlmost 7% of new homes sold were under $150K in March 2017.  This is up from late last year, but down from 30% in 2002.  In general, the under $150K bracket is going away.   

The $400K+ bracket has increased significantly.  I'll break that bracket up in the future.

A majority of new home in the U.S. are in the $200K to $400K range.