Sunday, November 29, 2015

Monday: Chicago PMI, Pending Home Sales

by Bill McBride on 11/29/2015 07:18:00 PM

From the WSJ: Divergent Paths for U.S., European Central Banks

This break in rate policy, particularly between the Fed and the European Central Bank, could strengthen the dollar even further against the euro, crimping U.S. exporters while giving a leg up to European ones.

The divergent paths highlight how much more vigorous the U.S. recovery has been, particularly on the hiring front, a trend economists expect to see continue when the U.S. job numbers for November come out Friday.
US policymakers responded to the financial crisis quicker, and with better policy (although the US made a premature pivot to austerity on fiscal policy, fiscal policy in Europe was much worse).

• At 9:45 AM ET, the Chicago Purchasing Managers Index for November. The consensus is for a reading of 54.0, down from 56.2 in October.

• At 10:00 AM, Pending Home Sales Index for October. The consensus is for a 1.0% increase in the index.

• At 10:30 AM, Dallas Fed Manufacturing Survey for November.

Schedule for Week of November 29, 2015

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures and DOW futures are down slightly (fair value).

Oil prices were up slightly over the last week with WTI futures at $41.71 per barrel and Brent at $44.86 per barrel.  A year ago, WTI was at $66, and Brent was at $71 - so prices are down about 35% year-over-year (It was a year ago that prices were falling sharply).

Here is a graph from for nationwide gasoline prices. Nationally prices are at $2.04 per gallon (down about $0.75 per gallon from a year ago).

Hotels: Finishing Year Strong

by Bill McBride on 11/29/2015 10:56:00 AM

Looking back at historical data, the only time hotel occupancy was this strong in November was in 2005 - and the high occupancy rate in the Fall of 2005 was the result of people displaced from their homes due to the damage from Hurricane Katrina.

Here is an update on hotel occupancy from STR: US results for week ending 21 November

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 15-21 November 2015, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy increased 3.7% to 63.1%. Average daily rate for the week was up 3.8% to US$116.26. Revenue per available room increased 7.6% to finish the week at US$73.33.
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  Hotels are now in the Fall business travel season.

Hotel Occupancy RateThe red line is for 2015, dashed orange is 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

I added 2001 (yellow) to show the impact of 9/11/2001 on hotel occupancy.  Occupancy was already down in 2001 compared to 2000 due to the recession, and then really collapsed following 9/11.

For 2015, the 4-week average of the occupancy rate is above 2000 (best year for hotels), and 2015 will be the best year ever for hotels.

Occupancy Rate Year-to-date:
1) 2015 67.4%
2) 2000 66.5%
3) 2014 66.2%

Data Source: Smith Travel Research, Courtesy of

Saturday, November 28, 2015

Schedule for Week of November 29th

by Bill McBride on 11/28/2015 09:09:00 AM

The key report this week is the November employment report on Friday.

Other key indicators include November vehicle sales, the November ISM manufacturing and non-manufacturing indexes, and the October trade deficit.

Federal Reserve Chair Janet Yellen will speak on the Economic Outlook.

----- Monday, November 30th -----

9:45 AM: Chicago Purchasing Managers Index for November. The consensus is for a reading of 54.0, down from 56.2 in October.

10:00 AM: Pending Home Sales Index for October. The consensus is for a 1.0% increase in the index.

10:30 AM: Dallas Fed Manufacturing Survey for November.

----- Tuesday, December 1st -----

ISM PMI10:00 AM: ISM Manufacturing Index for November. The consensus is for the ISM to be at 50.5, up from 50.1 in October.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion at 50.1% in October. The employment index was at 47.6%, and the new orders index was at 52.9%.

10:00 AM: Construction Spending for October. The consensus is for a 0.6% increase in construction spending.

Vehicle SalesAll day: Light vehicle sales for November. The consensus is for light vehicle sales to decrease to 18.0 million SAAR in November from 18.1 million in October (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the October sales rate.

----- Wednesday, December 2nd -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 183,000 payroll jobs added in November, up from 182,000 in October.

12:25 PM: Speech by Fed Chair Janet Yellen, Economic Outlook, At the Economic Club of Washington, Washington, D.C.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, December 3rd -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 270 thousand initial claims, up from 260 thousand the previous week.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for October. The consensus is a 1.4% increase in orders.

10:00 AM: the ISM non-Manufacturing Index for October. The consensus is for index to decrease to 58.2 from 59.1 in October.

10:00 AM: Testimony by Fed Chair Janet Yellen, Economic Outlook, Before the Joint Economic Committee, U.S. Senate, Washington, D.C.

1:10 PM: Speech by Fed Vice Chairman Stanley Fischer, Financial Stability and Shadow Banks, At the Federal Reserve Bank of Cleveland Financial Stability Conference, Washington, D.C.

----- Friday, December 4th -----

8:30 AM: Employment Report for November. The consensus is for an increase of 190,000 non-farm payroll jobs added in November, down from the 271,000 non-farm payroll jobs added in October.

The consensus is for the unemployment rate to decrease to 5.0%.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In October, the year-over-year change was 2.81 million jobs.

A key will be the change in real wages - and as the unemployment rate falls, wage growth should pickup.

U.S. Trade Deficit8:30 AM: Trade Balance report for October from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through October. 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.

The consensus is for the U.S. trade deficit to be at $40.6 billion in October from $40.8 billion in September.

Friday, November 27, 2015

November 2015: Unofficial Problem Bank list declines to 255 Institutions

by Bill McBride on 11/27/2015 08:35:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for November 2015.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for November 2015. During the month, the list fell from 264 institutions to 255 after nine removals. Assets dropped by $2.2 billion to an aggregate $77.0 billion. The asset total was updated to reflect third quarter figures, which resulted in a small decline of $224 million. A year ago, the list held 408 institutions with assets of $124.7 billion. This past week, the FDIC released third quarter industry results and an update on the Official Problem Bank List. FDIC said the official list held 203 problem banks, a decline of 25 during the quarter. During the past three months, the unofficial list holds 27 fewer banks.

Actions have been terminated against CertusBank, National Association, Easley, SC ($877 million); First National Bank in Howell, Howell, MI ($355 million); United American Bank, San Mateo, CA ($303 million); Quontic Bank, Astoria, NY ($165 million); First Alliance Bank, Cordova, TN ($120 million); and Summit National Bank, Hulett, WY ($64 million).

Several banks merged to find their way off the problem bank list including Columbus Junction State Bank, Columbus Junction, IA ($47 million); Farmers State Bank, Lumpkin, GA ($45 million); and The State Bank of Blue Mound, Blue Mound, IL ($31 million).

One other change this month was a name change of The Farmers Bank to Persons Banking Company, Forsyth, GA ($328 million).

Zillow Forecast: Expect October Year-over-year Change for Case-Shiller Index Similar to September

by Bill McBride on 11/27/2015 04:05:00 PM

The Case-Shiller house price indexes for September were released on Tuesday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: Case-Shiller Forecast Calls for Similar Annual, Monthly Gains in October

The September S&P Case-Shiller (SPCS) data published [on Tuesday] showed home prices rising on a seasonally-adjusted monthly basis, with month-over-month rises of 0.6 percent for both the 10- and 20- city indices and 0.8 percent for the national index.

The October Case-Shiller forecast calls for similar monthly increases of 0.4 percent for the 10- and 20-City Indices in October from from September (seasonally adjusted). The national index is expected to gain another 0.8 percent in October from September. We expect the 10-City Index to grow 5 percent year-over-year, and the 20-City Index to grow 5.4 percent over the same period. The national Index looks set to gain 5.1 percent since October 2014.

All SPCS forecasts are shown in the table below. These forecasts are based on today’s September SPCS data release and the October 2015 Zillow Home Value Index (ZHVI), released November 20. The SPCS Composite Home Price Indices for October will not be officially released until Tuesday, December 29.
This suggests the year-over-year change for the October Case-Shiller National index will be about the same as in the September report.

Zillow Case-Shiller Forecast
Composite 10
Composite 20
Actual YoY

Vehicle Sales Forecast for November: Over 18 Million Annual Rate Again?

by Bill McBride on 11/27/2015 11:16:00 AM

The automakers will report November vehicle sales on Tuesday, December 1st. Sales in October were at 18.1 million on a seasonally adjusted annual rate basis (SAAR), and it possible sales in October will be over 18 million SAAR again.

Note:  There were 23 selling days in November, down from 25 in November 2014.  Here are two forecasts:

From WardsAuto: Forecast: U.S. Light Vehicle Sales on Track for Record Year

A WardsAuto forecast calls for U.S. light-vehicle sales to reach an 18.4 million-unit seasonally adjusted annual rate in November, leading to the first 3-month streak of 18 million-plus results. The forecasted SAAR would be the highest monthly outcome since July 2005’s 20.6-million.
From J.D. Power: U.S Auto Sales Projected to Increase 7% in November
otal and retail new light-vehicle sales in November are expected to increase 7% on a selling-day-adjusted basis, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive.

Despite a couple of calendar curveballs—November has only four selling weekends for the first time since 2012 and has the fewest selling days (23) of any month since September 2013—the industry continues to show strength, with retail light-vehicle sales approaching 1.1 million units and total light-vehicle sales nearing 1.3 million units this month. [17.7 million SAAR]
emphasis added
Another strong month for car sales.  The only question is if the sales rate will be over 18 million for three consecutive months - for the first time ever.

Thursday, November 26, 2015

Something I'm very thankful for ...

by Bill McBride on 11/26/2015 10:26:00 AM

A&E has a new reality show "illustrating the every day lives of individuals with Down Syndrome" that starts on December 9th.  The show is called Born This Way!

One of the cast members is Steven Clark, the son of my college roommate.

I'm biased but I think Steven will be the star of show. He is an awesome and loving young man.

For a preview of the show, see the clip below (Steven is shown several times including in the final shot).

I'm thankful for knowing Steven. I'm thankful he has such incredible parents. And I'm thankful that he has this opportunity on A&E.

Happy Thanksgiving to all!

Wednesday, November 25, 2015

2016: Updated Housing Forecasts

by Bill McBride on 11/25/2015 07:20:00 PM

Towards the end of each year I collect some housing forecasts for the following year, and it looks like analysts are optimistic for 2016 (many more forecasts will be added).

First a review of the previous three years ...

Here is a summary of forecasts for 2015. In 2015, new home sales will probably be just over 500 thousand, and total housing starts will be something over 1.1 million.  It is early, but CoreLogic, Zillow and the MBA were very close on New Home sales, and CoreLogic, MetroStudy, MBA and Zillow were all close on starts.

Here is a summary of forecasts for 2014. In 2014, new home sales were 437 thousand, and total housing starts were 1.003 million. No one was close on New Home sales (all way too optimistic), and Michelle Meyer (Merrill Lynch) and Fannie Mae were the closest on housing starts (about 10% too high). In 2014, many analysts underestimated the impact of higher mortgage rates and higher new home prices on new home sales and starts.

Here is a summary of forecasts for 2013. In 2013, new home sales were 429 thousand, and total housing starts were 925 thousand.  Barclays was the closest on New Home sales followed by David Crowe (NAHB).  Fannie Mae and the NAHB were the closest on housing starts.

The table below shows a few forecasts for 2016 (I'll add many more of the next several weeks).

From Fannie Mae: Housing Forecast: October 2015

From NAHB: Housing Recovery to Pick Up Steam in 2016, but Challenges Remain

UCLA Ziman Center.

Note: For comparison, new home sales in 2015 will probably be just over 500 thousand, and total housing starts over 1.1 million.

I haven't worked up a forecast yet for 2016, however I think the UCLA forecast for housing starts is too high.

Housing Forecasts for 2016
New Home Sales (000s)Single Family Starts (000s)Total Starts (000s)House Prices1
Fannie Mae5628271,2244.9%2
Merrill Lynch555
UCLA Ziman Center
1Case-Shiller unless indicated otherwise
2FHFA Purchase-Only Index

Philly Fed: State Coincident Indexes increased in 43 states in October

by Bill McBride on 11/25/2015 03:31:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2015. In the past month, the indexes increased in 43 states, decreased in six, and remained stable in one, for a one-month diffusion index of 74. Over the past three months, the indexes increased in 42 states, decreased in seven, and remained stable in one, for a three-month diffusion index of 70.
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 October, 44 states had increasing activity (including minor increases).

The worst performing states over the last 6 months are Wisconsin and North Dakota (oil).

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 is mostly green now.

Source: Philly Fed.

Comments on October New Home Sales

by Bill McBride on 11/25/2015 01:11:00 PM

The new home sales report for October was slightly below expectations, however sales for July, August and September were revised down. Sales were up 4.9% year-over-year in October (SA).

Earlier: New Home Sales increased to 495,000 Annual Rate in October.

Even though the October report was somewhat disappointing, sales are still up solidly year-to-date.  The Census Bureau reported that new home sales this year, through October, were 430,000, not seasonally adjusted (NSA). That is up 15.7% from 371,000 sales during the same period of 2014 (NSA). That is a strong year-over-year gain for 2015 through October.

New Home Sales 2013 2014Click on graph for larger image.

This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate).

The year-over-year gain was small in October, and I expect the year-over-year increases to be lower over the last two months of 2015 compared to earlier this year - but the overall year-over-year gain should be solid in 2015.

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next few years.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through October 2015. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to move sideways (distressed sales will continue to decline and be partially offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

However, this assumes that the builders will offer some smaller, less expensive homes.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.