Tuesday, September 02, 2014

Wednesday: Auto Sales, Fed's Beige Book

by Bill McBride on 9/02/2014 05:30:00 PM

• All day, Light vehicle sales for August. The consensus is for light vehicle sales to increase to 16.5 million SAAR in August from 16.4 million in July (Seasonally Adjusted Annual Rate).

• 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for July. The consensus is for a 10.5% increase in July orders.

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

Oil prices were down sharply today with Brent October futures down to $100.58 per barrel according to Bloomberg.  A year ago Brent was at $115 per barrel - so this is a significant year-over-year decline.

The recent decline in prices could give a little boost to consumer spending on other items. This decline will also hold down the annual cost-of-living-adjustment (COLA) for this year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.43 per gallon (down about a 15 cents per gallon from a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

CoreLogic: House Prices up 7.4% Year-over-year in July

by Bill McBride on 9/02/2014 12:03:00 PM

Notes: This CoreLogic House Price Index report is for July. The recent Case-Shiller index release was for June. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports Home Prices Rose by 7.4 Percent Year Over Year in July

Home prices nationwide, including distressed sales, increased 7.4 percent in July 2014 compared to July 2013. This change represents 29 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased 1.2 percent in July 2014 compared to June 2014.
Excluding distressed sales, home prices nationally increased 6.8 percent in July 2014 compared to July 2013 and 1.1 percent month over month compared to June 2014. ...

“While home prices have clearly moderated nationwide since the spring, the geographic drivers of price increases are shifting,” said Sam Khater, deputy chief economist for CoreLogic. “Entering this year, price increases were led by western and southern states, but over the last few months northeastern and midwestern states are migrating to the forefront of home price rankings.”
emphasis added
CoreLogic House Price Index Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 1.2 in July, and is up 7.4% over the last year.

This index is not seasonally adjusted, so a solid month-to-month gain was expected for July.

CoreLogic YoY House Price IndexThe second graph is from CoreLogic. The year-over-year comparison has been positive for twenty nine consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

The YoY increase was slightly higher in July than in June (revised), however I expect the year-over-year increases to continue to slow.

Construction Spending increased 1.8% in July

by Bill McBride on 9/02/2014 10:47:00 AM

Earlier the Census Bureau reported that overall construction spending increased in July:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2014 was estimated at a seasonally adjusted annual rate of $981.3 billion, 1.8 percent above the revised June estimate of $963.7 billion. The July figure is 8.2 percent above the July 2013 estimate of $906.6 billion.
Both private and public spending increased in July:
Spending on private construction was at a seasonally adjusted annual rate of $701.7 billion, 1.4 percent above the revised June estimate of $692.2 billion. Residential construction was at a seasonally adjusted annual rate of $358.1 billion in July, 0.7 percent above the revised June estimate of $355.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $343.6 billion in July, 2.1 percent above the revised June estimate of $336.6 billion. ...

In July, the estimated seasonally adjusted annual rate of public construction spending was $279.6 billion, 3.0 percent above the revised June estimate of $271.5 billion.
emphasis added
Private Construction Spending Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending has flattened recently and is 47% below the peak in early 2006 - but up 57% from the post-bubble low.

Non-residential spending is 17% below the peak in January 2008, and up about 52% from the recent low.

Public construction spending is now 14% below the peak in March 2009 and about 7% above the post-recession low.

Private Construction SpendingThe second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 8%. Non-residential spending is up 14% year-over-year. Public spending is up 2% year-over-year.

Looking forward, all categories of construction spending should increase in 2014. Residential spending is still very low, non-residential is starting to pickup, and public spending has probably hit bottom after several years of austerity.

This was a strong report, especially considering the upward revisions to spending in May and June.

ISM Manufacturing index increases to 59.0 in August

by Bill McBride on 9/02/2014 10:06:00 AM

The ISM manufacturing index suggests faster expansion in August than in July. The PMI was at 59.0% in August, up from 57.1% in July. The employment index was at 58.1%, down slightly from 58.2% in July, and the new orders index was at 66.7%, up from 63.4% in July.

From the Institute for Supply Management: August 2014 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in August for the 15th consecutive month, and the overall economy grew for the 63rd consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The August PMI® registered 59 percent, an increase of 1.9 percentage points from July's reading of 57.1 percent, indicating continued expansion in manufacturing. This month's PMI® reflects the highest reading since March 2011 when the index registered 59.1 percent. The New Orders Index registered 66.7 percent, an increase of 3.3 percentage points from the 63.4 percent reading in July, indicating growth in new orders for the 15th consecutive month. The Production Index registered 64.5 percent, 3.3 percentage points above the July reading of 61.2 percent. The Employment Index grew for the 14th consecutive month, registering 58.1 percent, a slight decrease of 0.1 percentage point below the July reading of 58.2 percent. Inventories of raw materials registered 52 percent, an increase of 3.5 percentage points from the July reading of 48.5 percent, indicating growth in inventories following one month of contraction. The August PMI® is led by the highest recorded New Orders Index since April 2004 when it registered 67.1 percent. At the same time, comments from the panel reflect a positive outlook mixed with caution over global geopolitical unrest.
emphasis added
ISM PMIClick on graph for larger image.

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

This was solidly above expectations of 56.8%.  The employment index was strong - and the new orders index was at the highest level since April 2004.

Very strong report.

Black Knight releases Mortgage Monitor for July

by Bill McBride on 9/02/2014 12:40:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for July today. According to BKFS, 5.64% of mortgages were delinquent in July, down from 5.70% in June. BKFS reports that 1.85% of mortgages were in the foreclosure process, down from 2.82% in July 2013.

This gives a total of 7.49% delinquent or in foreclosure. It breaks down as:

• 1,713,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,136,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 935,000 loans in foreclosure process.

For a total of ​​3,785,000 loans delinquent or in foreclosure in June. This is down from 4,599,000 in July 2013.

Delinquency Rate Click on graph for larger image.

This graph from BKFS shows percent of loans delinquent and in the foreclosure process over time.

Delinquencies and foreclosures are moving down - and might be back to normal levels in a couple of years. 

Delinquency RateThe second graph from BKFS shows the percent of new problem loans.

From Black Knight:

July’s data also showed continued improvement in new problem loans, which, at 0.6% of active loans, are now firmly back to 2005-2006 levels. Likewise, “roll rates” (the number of loans that shift from current into progressively more delinquent statuses) have been improving over the long term across all categories. Black Knight has observed roll rates increasing on loans shifting from 60 to 90 days delinquent and from 90 days to foreclosure over the last four months. It should be noted, however, that nearly 75 percent of 90-day defaults and almost 80 percent of foreclosure starts are from loans originated in 2008 and earlier.
emphasis added
There is much more in the mortgage monitor.

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