by Bill McBride on 6/09/2012 08:01:00 AM
Saturday, June 09, 2012
Most of the news last week was about either Europe or the Fed, especially comments from Fed Chairman Bernanke. The Fed debate is on the possibility and timing of "QE3". The next FOMC meeting is on June 19th and 20th, just after the election in Greece.
This was a light week for US economic data. The trade deficit declined slightly - and will probably decline further in May with falling oil prices. However the weakness in the euro zone is showing up in the trade data as US exports to the euro area declined from $17.1 billion in April 2011 to $16.3 billion in April 2012.
Other data was a little more positive. Initial weekly unemployment claims declined slightly, and the ISM non-manufacturing index increased in May.
Also CoreLogic reported house prices were up year-over-year in April. This is the first year-over-year increase in prices since the bubble burst - except for a brief increase related to the tax credit.
Here is a summary of last week in graphs:
• Trade Deficit declines in April to $50.1 Billion
The first graph shows the monthly U.S. exports and imports in dollars through April 2012.
Click on graph for larger image.
Exports decreased in April. Imports decreased even more. Exports are 11% above the pre-recession peak and up 4% compared to April 2011; imports are 2% above the pre-recession peak, and up about 6% compared to April 2011.
The second graph shows the U.S. trade deficit, with and without petroleum, through April.
The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.
Oil averaged $109.94 per barrel in April, up from $107.95 in March. Import oil prices will probably start to decline in May. The trade deficit with China increased to $24.6 billion in April, up from $21.6 billion in April 2011. Once again most of the trade deficit is due to oil and China.
Exports to the euro area were $16.3 billion in April, down from $17.1 billion in April 2011, so the euro area recession appears to be a drag on US exports.
• ISM Non-Manufacturing Index indicates slightly faster expansion in May
The May ISM Non-manufacturing index was at 53.7%, up from 53.5% in April. The employment index decreased in May to 50.8%, down from 54.2% in April - the lowest level since November 2011. Note: Above 50 indicates expansion, below 50 contraction.
This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.
This was slightly above the consensus forecast of 53.5% and indicates faster expansion in May than in April.
• CoreLogic: House Price Index increases in April, Up 1.1% Year-over-year
This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.
The index was up 2.2% in April, and is up 1.1% over the last year.
The index is off 32% from the peak - and is just above the post-bubble low set two months ago.
Excluding the tax credit period, this is the first year-over-year increase since 2006 (March was revised up to a year-over-year increase too). This "stabilization" of house prices is a significant story.
• Fed's Q1 Flow of Funds: Household Real Estate Value increased in Q1
The Federal Reserve released the Q1 2012 Flow of Funds report this week: Flow of Funds.
The Fed estimated that the value of household real estate increased $372 billion to $16.05 trillion in Q1 2012. The value of household real estate has fallen $6.3 trillion from the peak.
This graph shows household real estate assets and mortgage debt as a percent of GDP.
Mortgage debt declined by $85 billion in Q1. Mortgage debt has now declined by $885 billion from the peak. Studies suggest most of the decline in debt has been because of foreclosures (or short sales), but some of the decline is from homeowners paying down debt (sometimes so they can refinance at better rates).
The value of real estate, as a percent of GDP, is near the lows of the last 30 years, however household mortgage debt, as a percent of GDP, is still historically very high, suggesting more deleveraging ahead for households.
• Weekly Initial Unemployment Claims decline to 377,000
This graph shows the 4-week moving average of weekly claims since January 2000.
The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 377,750.
The average has been between 363,000 and 384,000 all year, and this is the highest level since early May.
This was close to the consensus forecast of 379,000.
• Other Economic Stories ...
• Testimony by Chairman Bernanke on economic outlook and policy
• Fed's Beige Book: Economic activity increased at "moderate" pace, Residential real estate "activity improved"
• Comparing Housing Recoveries
• Housing: Dude, Where's my inventory?
• Trulia Reports Flat Asking Prices in May After Three Straight Months of Increases, as Foreclosure Prices Decline