Monday, August 31, 2015

Restaurant Performance Index increased in July

by Bill McBride on 8/31/2015 01:45:00 PM

Here is a minor indicator I follow from the National Restaurant Association: Stronger sales, traffic in July boost RPI

Driven by stronger same-store sales and customer traffic levels, the National Restaurant Association’s Restaurant Performance Index (RPI) posted a solid gain in July.

The RPI stood at 102.7 in July, up 0.7 percent from June and the first gain in three months. In addition, July represented the 29th consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“July’s RPI gain was fueled primarily by an improvement in the current situation indicators,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Although a solid majority of operators reported higher same-store sales and customer traffic levels in July, their outlook for both sales growth and the economy is more cautious compared to recent months.”
emphasis added
Restaurant Performance Index Click on graph for larger image.

The index increased to 102.7 in July, up from 102.0 in June. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month. Even with the decline in the index, this is a solid reading.

It appears restaurants are benefiting from lower gasoline prices.

Dallas Fed: "Texas Manufacturing Activity Holds Steady, but Outlooks Deteriorate"

by Bill McBride on 8/31/2015 10:46:00 AM

From the Dallas Fed: Texas Manufacturing Activity Holds Steady, but Outlooks Deteriorate

Texas factory activity was essentially flat in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, climbed to near zero (-0.8), suggesting output held steady after five months of declines.
Perceptions of broader business deteriorated markedly in August. The general business activity index dropped 11 points from -4.6 to -15.8, and the company outlook index also posted a double-digit decline, coming in at -10.3.
Labor market indicators reflected slight employment declines and stable workweek length. The August employment index was negative for a fourth month in a row but edged up to -1.4.
emphasis added
This was the last of the regional Fed surveys for August. Three of the five surveys indicated contraction in August, mostly due to weakness in oil producing areas.

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

It seems likely the ISM index will be weak in August, and will possibly decrease from the July level (although these regional surveys overemphasize oil producing areas).  The consensus is for an increase to 52.8 for the ISM index, from 52.7 in July.

Chicago PMI decreases slightly in August

by Bill McBride on 8/31/2015 09:57:00 AM

Chicago PMI: August Chicago Business Barometer Down 0.3 Point to 54.4

The Chicago Business Barometer held on to most of July’s gain, falling just a fraction to 54.4 in August from 54.7 in July. While below the highs seen towards the end of last year, it’s still consistent with a bounceback in activity in the third quarter following recent weaker growth.
Chief Economist of MNI Indicators Philip Uglow said, “It was pretty much steady as she goes in August with orders and output just about holding on to July‘s gains. While the slowdown earlier in the year looks temporary, we‘re still some way below the strong growth rates seen towards the end of 2014“
emphasis added
This was below the consensus forecast of 54.7.

Sunday, August 30, 2015

Sunday Night Futures

by Bill McBride on 8/30/2015 08:27:00 PM

A September rate hike is still on the table, from Jon Hilsenrath and Ben Leubsdorf at the WSJ: Fed Appears to Hold Line on Rate Plan

Federal Reserve officials emerged from a week of head-spinning financial turbulence largely sticking to their plan to raise U.S. interest rates before the end of the year.

During the Federal Reserve Bank of Kansas City’s annual economic symposium here, many policy makers signaled that stock-market volatility and China’s woes haven’t seriously dented their view that the U.S. job market is improving, and that domestic economic output is expanding at a steady, modest pace.
“There is good reason to believe that inflation will move higher as the forces holding inflation down—oil prices and import prices, particularly—dissipate further,” said Fed Vice Chairman Stanley Fischer in comments delivered to the conference, which ended Saturday.
Schedule for Week of August 30, 2015

• At 9:45 AM ET, the Chicago Purchasing Managers Index for August. The consensus is for a reading of 54.9, up from 54.7 in July.

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

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are down 18 and DOW futures are down 140 (fair value).

Oil prices were up over the last week with WTI futures at $44.85 per barrel and Brent at $49.41 per barrel.  A year ago, WTI was at $98, and Brent was at $101 - so prices are down over 50% year-over-year.

Here is a graph from for nationwide gasoline prices. Nationally prices are at $2.47 per gallon (down almost $1.00 per gallon from a year ago).  Gasoline prices will probably continue to decline over the next month or more (follow oil prices down).

Vehicle Sales Forecast for August: Over 17 Million Annual Rate Again

by Bill McBride on 8/30/2015 12:30:00 PM

The automakers will report August vehicle sales on Tuesday, Sept 1. Sales in July were at 17.5 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in August will be over 17 million SAAR again.

Note:  There were 26 selling days in August, down from 27 in August 2014 (Also note: Labor Day is not included in August this year).  Here is another forecast:

From WardsAuto: Forecast: LV SAAR Should Hold Steady in August

A new WardsAuto forecast calls for strong U.S. light-vehicle sales in August, extending a streak of light-vehicle SAARs that round to at least 17 million units.

The report calls for automakers to sell 1.53 million LVs in the U.S. this month, for a daily sales rate of 58,866 units (over 26 days), a 0.7% improvement over same-month year-ago (27 days). The modest increase actually represents a more meaningful year-over-year gain since last August’s official sales reports included Labor Day weekend sales, which lifted the daily sales rate for the entire month. This year, the heavily-incentivized holiday-weekend sales will fall entirely in September.

The forecasted seasonally adjusted rate of 17.3 million-units would make August the fourth consecutive month with an LV SAAR of at least 17 million and mark the longest such streak since a 12-month run ending in June 2002.

Saturday, August 29, 2015

August 2015: Unofficial Problem Bank list declines to 282 Institutions

by Bill McBride on 8/29/2015 04:01:00 PM

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

Here is the unofficial problem bank list for August 2015.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for August 2015. During the month, the list fell from 290 institutions to 282 after nine removals and one addition. Assets dropped by $1.2 billion to an aggregate $82.7 billion. The asset total was updated to reflect second quarter figures, which resulted in a small decline of $95 million. A year ago, the list held 439 institutions with assets of $139.97 billion. This week, we were anticipating for the FDIC to release second quarter industry results and an update on the Official Problem Bank List, but that will have to wait until next month's update.

Actions have been terminated against Bank of the Carolinas, Mocksville, NC ($363 million); Oxford Bank, Oxford, MI ($304 million Ticker: OXBC); Bank of the Rockies, National Association, White Sulphur Springs, MT ($131 million); Madison Bank, Richmond, KY ($123 million); and Bank of Monticello, Monticello, GA ($96 million).

Several banks merged to find their way off the problem bank list including First National Bank of Wauchula, Wauchula, FL ($76 million); Pineland State Bank, Metter, GA ($55 million); The Elkhart State Bank, Elkhart, TX ($43 million); and SouthBank, a Federal Savings Bank, Palm Beach Gardens, FL ($20 million).

Added this month was OSB Community Bank, Brooklyn, MI ($72 million). In addition, the Federal Reserve issued a Prompt Corrective Action order against Cecil Bank, Elkton, MD ($302 million).

Schedule for Week of August 30, 2015

by Bill McBride on 8/29/2015 08:31:00 AM

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

Other key indicators include the August ISM manufacturing index and August vehicle sales, both on Tuesday, and the July Trade Deficit on Thursday.

----- Monday, August 31st -----

9:45 AM: Chicago Purchasing Managers Index for August. The consensus is for a reading of 54.9, up from 54.7 in July.

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

----- Tuesday, September 1st -----

ISM PMI10:00 AM: ISM Manufacturing Index for August. The consensus is for the ISM to be at 52.8, up from 52.7 in July.

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

The ISM manufacturing index indicated expansion at 52.7% in July. The employment index was at 52.7%, and the new orders index was at 56.5%.

10:00 AM: Construction Spending for July. The consensus is for a 0.8% increase in construction spending.

Vehicle SalesAll day: Light vehicle sales for August. The consensus is for light vehicle sales to decrease to 173 million SAAR in August from 17.5 million in July (Seasonally Adjusted Annual Rate).

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

----- Wednesday, September 2nd -----

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

8:15 AM: The ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in August, up from 185,000 in July.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for July. The consensus is a 0.9% increase in orders.

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

----- Thursday, September 3rd -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 273 thousand initial claims, up from 271 thousand the previous week.

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

This graph shows the U.S. trade deficit, with and without petroleum, through June. 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 $42.9 billion in July from $42.8 billion in June.

10:00 AM: the ISM non-Manufacturing Index for August. The consensus is for index to decrease to 58.5 from 60.3 in July.

----- Friday, September 4th -----

8:30 AM: Employment Report for August. The consensus is for an increase of 223,000 non-farm payroll jobs added in August, up from the 215,000 non-farm payroll jobs added in July.

The consensus is for the unemployment rate to decrease to 5.2%.

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

In July, the year-over-year change was over 2.9 million jobs.

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

Friday, August 28, 2015

Fed's Vice Chair Fischer: “When the case is overwhelming, if you wait that long, then you’ve waited too long.”

by Bill McBride on 8/28/2015 08:43:00 PM

Note: Tomorrow, Saturday, at 12:25 PM ET, Fed Vice Chairman Stanley Fischer will speak at the Jackson Hole Symposium on "U.S. Inflation Developments"

A couple of quotes from earlier today ...

From Binyamin Appelbaum at the NY Times: Fed Official Fischer Leaves Door Open for September Rate Increase

Mr. Fischer said the Fed was preparing to raise interest rates soon because of the “impressive” growth of the domestic economy. He suggested that the recent volatility of global financial markets could cause the Fed to hesitate, but only if it persisted.

“We haven’t made a decision yet, and I don’t think we should,” Mr. Fischer said in an interview with the cable network CNBC. “We’ve got time to wait and see,” because the Fed’s policy-making committee does not meet until Sept. 16 and 17.
Mr. Fischer also emphasized Friday that the Fed would not wait until all of its questions were answered. Some amount of uncertainty is inevitable. “When the case is overwhelming, if you wait that long,” he said, “then you’ve waited too long.”
September is still possible, although many economists are now looking at December for the first rate hike.

Freddie Mac: Mortgage Serious Delinquency rate declined in July, Lowest since October 2008

by Bill McBride on 8/28/2015 03:04:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in July to 1.48%, down from 1.53% in June. Freddie's rate is down from 2.02% in July 2014, and the rate in July was the lowest level since October 2008.

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

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

Note: Fannie Mae will report their Single-Family Serious Delinquency rate for July next week.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is declining, the "normal" serious delinquency rate is under 1%. 

The serious delinquency rate has fallen 0.54 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until  mid-2016.

So even though delinquencies and distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

Vehicle Sales Forecasts for August: Over 17 Million Annual Rate Again

by Bill McBride on 8/28/2015 11:49:00 AM

The automakers will report August vehicle sales on Tuesday, Sept 1. Sales in July were at 17.5 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in August will be over 17 million SAAR again.

Note:  There were 26 selling days in August, down from 27 in August 2014 (Also note: Labor Day is not included in August this year).  Here are two forecasts:

From J.D. Power: Industry Strength Continues in August, Full-Month Volume Impacted by Calendar

For the first time since 2012, new-vehicle sales over the Labor Day weekend will be tallied as part of September’s sales rather than counted in August’s number. Even when the Labor Day holiday falls in early September, its sales are often part of the August total, but not this year when the holiday lands on Sept. 7.
New-vehicle retail sales are projected to hit 1.3 million units in August, a 1.2 percent decrease on a selling-day adjusted basis, compared with August 2014. ... [Total forecast 17.2 million SAAR]

On a year-over-year basis, August sales are going to appear weak, when in fact it’s really a variance in the numbers created by the calendar,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power.“There certainly is no cause for alarm. In fact, the daily selling rate month-to-date in August is trending 8 percent higher than the same period a year ago, although we do anticipate the absence of the holiday in August sales will diminish that rate by the end of the month.

“Our expectation is that with Labor Day falling in September, sales that would have occurred this month are being pushed into next month. If that happens, September will move sales back to the strong trend line we’ve been seeing throughout the year.”
emphasis added
From Kelley Blue Book: New-Car Sales To Drop 4 Percent In August 2015, According To Kelley Blue Book
New-vehicle sales are expected to decline 4 percent year-over-year to a total of 1.52 million units in August 2015, resulting in an estimated 17.2 million seasonally adjusted annual rate (SAAR), according to Kelley Blue Book
Another solid month for auto sales - although some reporting will ignore the calendar issues (Labor Day not included in August this year).