Thursday, December 20, 2012

Misc: Philly Fed Mfg Shows Expansion, Q3 GDP Revised Up, FHFA House Prices increase

by Bill McBride on 12/20/2012 01:30:00 PM

Here are a few more releases from this morning:

• From the Philly Fed: December Manufacturing Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of ‑10.7 in November to 8.1 this month. This is the highest reading since April and is slightly above the reading before the post-storm decline in November.

Labor market conditions at the reporting firms improved marginally this month. The current employment index, at 3.6, registered its first positive reading in six months ...
The survey’s future indicators suggest improved optimism among the reporting manufacturers. The future general activity index increased from 20.0 to 30.9, its highest reading in three months. emphasis added
ISM PMI Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through December. The ISM and total Fed surveys are through November.

The average of the Empire State and Philly Fed surveys increased in December, but is just back to 0. This is the highest combined level since May, but still suggests another weak reading for the ISM manufacturing index.

• Earlier this morning the BEA reported Q3 GDP increased at a 3.1% annualized rate, higher than the 2.7% estimated earlier. The upward revision was due to increases in the estimate of personal consumption expenditures (PCE), trade, and state and local governments. Although the revision for state and local governments was small, it moved to a positive contribution for the first time since Q3 2009.

This graph shows the contribution to percent change in GDP for residential investment and state and local governments since 2005.

State and Local Government Residential Investment GDPThe blue bars are for residential investment (RI), and RI was a significant drag on GDP for several years. Now RI has added to GDP growth for the last 6 quarters (through Q3 2012).

The red bars are for state and local governments. Although not as large a negative as the worst of the housing bust (and much smaller spillover effects), this decline has been relentless and unprecedented. The good news is the drag appears to be ending.

I don't expect state and local governments will contribute much to GDP growth in 2013, but just stopping the drag will help.

• From the FHFA: FHFA House Price Index Up 0.5 Percent in October
U.S. house prices rose 0.5 percent on a seasonally adjusted basis from September to October, according to the Federal Housing Finance Agency’s monthly House Price Index (HPI). The previously reported 0.2 percent increase in September was revised downward to a 0.0 percent change. For the 12 months ending in October, U.S. prices rose 5.6 percent. The U.S. index is 15.7 percent below its April 2007 peak and is roughly the same as the July 2004 index level.

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