Saturday, March 25, 2017

Schedule for Week of Mar 26, 2017

by Bill McBride on 3/25/2017 08:11:00 AM

The key economic reports this week are the third estimate of Q4 GDP, Personal Income and Outlays for February, and the Case-Shiller house price index.

----- Monday, Mar 27th -----

10:30 AM: Dallas Fed Survey of Manufacturing Activity for March.

----- Tuesday, Mar 28th-----

Case-Shiller House Prices Indices 9:00 AM ET: S&P/Case-Shiller House Price Index for January. Although this is the January report, it is really a 3 month average of November, December and January prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the December 2016 report (the Composite 20 was started in January 2000).

The consensus is for a 5.7% year-over-year increase in the Comp 20 index for January.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for March. This is the last of the regional Fed surveys for March.

12:50 PM: Speech by Fed Chair Janet Yellen, Addressing Workforce Development Challenges in Low-Income Communities, At the National Community Reinvestment Coalition Annual Conference, Washington, D.C.

----- Wednesday, Mar 29th -----

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

10:00 AM: Pending Home Sales Index for February. The consensus is for a 1.8% increase in the index.

----- Thursday, Mar 30th -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 247 thousand initial claims, down from 258 thousand the previous week.

8:30 AM: Gross Domestic Product, 4th quarter 2016 (third estimate). The consensus is that real GDP increased 2.0% annualized in Q4, up from the second estimate of 1.9%.

----- Friday, Mar 31st -----

8:30 AM: Personal Income and Outlays for February. The consensus is for a 0.4% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:45 AM: Chicago Purchasing Managers Index for March. The consensus is for a reading of 57.1, down from 57.4 in February.

10:00 AM: University of Michigan's Consumer sentiment index (final for March). The consensus is for a reading of 97.6, unchanged from the preliminary reading 95.7.

Friday, March 24, 2017

Oil: "Incredible strength in rig additions"

by Bill McBride on 3/24/2017 07:08:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Mar 24, 2017:

• US oil rig count was up an eye-popping 21 this week to 652

• US horizontal oil rigs were up by 13 to 543
• Despite a major correction in oil prices, rig additions continue at a rapid pace.
Oil Rig CountClick on graph for larger image.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

CoreLogic: "Between 2007–2016, Nearly 7.8 Million Homes Lost to Foreclosure"

by Bill McBride on 3/24/2017 04:22:00 PM

Here is a report from CoreLogic: US Residential Foreclosure Crisis: 10 Years Later. There are several interesting graphs in the report, including foreclosures completed by year.

This graph for CoreLogic the Ten States with the highest peak foreclosure rate during the crisis, and the current foreclosure rate.

CoreLogic Foreclosure ReportSome states like Nevada and Florida have improved significantly. Other states, like New Jersey and New York, have only recovered slowly.

Here is a table based on data from the CoreLogic report showing completed foreclosure per year.

Completed foreclosure by Year
Source: CoreLogic
YearCompleted Foreclosures

Vehicle Sales Forecast: Sales Over 17 Million SAAR in March

by Bill McBride on 3/24/2017 02:20:00 PM

The automakers will report March vehicle sales on Tuesday, April 4th.

Note: There were 27 selling days in March 2017, unchanged from 27 in March 2016.

From WardsAuto: Forecast: U.S. March Sales to Reach 17-Year High

A WardsAuto forecast calls for U.S. automakers to deliver 1.61 million light vehicles in March, a 17-year high for the month. The forecasted daily sales rate of 59,776 over 27 days is a best-ever March result. This DSR represents a 2.6% improvement from like-2016 (also 27 days). March is anticipated to be the first month in 2017 to outpace prior-year.

The report puts the seasonally adjusted annual rate of sales for the month at 17.2 million units, below the 17.4 million SAAR from the first two months of 2017 combined, but well above the 16.6 million from same-month year-ago. ...
emphasis added
From J.D. Power: March U.S. auto sales seen up nearly 1.9 pct -JD Power and LMC
U.S. auto sales in March will increase almost 1.9 percent from a year earlier, even as consumer discounts continue to remain at record levels, industry consultants J.D. Power and LMC Automotive said on Friday.

March U.S. new vehicle sales will be about 1.62 million units, up about 1.9 percent from 1.59 million units a year earlier, the consultancies said. The forecast was based on the first 16 selling days of the month.

The seasonally adjusted annualized rate for the month will be 17.3 million vehicles, up from 16.8 million a year earlier.
Looks like another strong month for vehicle sales, but incentives are at record levels and inventories are high.

U.S. Heavy Truck Sales increasing following Oil Price Related Slump

by Bill McBride on 3/24/2017 11:52:00 AM

The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the February 2017 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 181 thousand in April and May 2009, on a seasonally adjusted annual rate basis (SAAR). Then sales increased more than 2 1/2 times, and hit 479 thousand SAAR in June 2015.

Heavy truck sales declined again - probably mostly due to the weakness in the oil sector - and bottomed at 352 thousand SAAR in October of last year.

Heavy Truck Sales
Click on graph for larger image.

With the increase in oil prices over the last year, heavy truck sales have been increasing too.

Heavy truck sales were at 400 thousand SAAR in February 2017.

BLS: Unemployment Rates "significantly lower in February in 10 states", Arkansas and Oregon at New Lows

by Bill McBride on 3/24/2017 10:11:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were significantly lower in February in 10 states, higher in 1 state, and stable in 39 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Nine states had notable jobless rate decreases from a year earlier, and 41 states and the District had no significant change. The national unemployment rate, at 4.7 percent, was little changed from January but 0.2 percentage point lower than in February 2016.
New Hampshire had the lowest unemployment rate in February, 2.7 percent, closely followed by Hawaii and South Dakota, 2.8 percent each, and Colorado and North Dakota, 2.9 percent each. The rates in both Arkansas (3.7 percent) and Oregon (4.0 percent) set new series lows. ... New Mexico had the highest jobless rate, 6.8 percent, followed by Alaska and Alabama, 6.4 percent and 6.2 percent, respectively.
emphasis added
State Unemployment Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement.   The yellow squares are the lowest unemployment rate per state since 1976.

The states are ranked by the highest current unemployment rate. New Mexico, at 6.8%, had the highest state unemployment rate.

State UnemploymentThe second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently no state has an unemployment rate at or above 7% (light blue); Only three states are at or above 6% (dark blue). The states are New Mexico (6.8%), Alaska (6.4%), and Alabama (6.2%).

Thursday, March 23, 2017

A few Comments on February New Home Sales

by Bill McBride on 3/23/2017 12:51:00 PM

New home sales for February were reported at 592,000 on a seasonally adjusted annual rate basis (SAAR).  This was well above the consensus forecast, however the three previous months combined were revised down slightly.  Overall this was a solid report.

Note: February 2017 was warmer than normal in most of the country, and since new home sales are counted when the contract is signed, the nice weather might have had a positive impact on sales in February.

Sales were up 12.8% year-over-year in February.  However, January and February were the weakest months last year on a seasonally adjusted annual rate basis - so this was an easy comparison.

It will take several months of data to see the impact of higher mortgage rates - and this is the seasonally weak period - so we might have to wait for the March and April data to see if there was any impact.

Earlier: New Home Sales increase to 592,000 Annual Rate in February.

New Home Sales 2015 2016Click on graph for larger image.

This graph shows new home sales for 2016 and 2017 by month (Seasonally Adjusted Annual Rate).  Sales were up 12.8% year-over-year in January.

For the first two months of 2017, new home sales are up 7.1% compared to the same period in 2016.

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 several years.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through February 2017. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.   The gap has persisted even though distressed sales are down significantly, since new home builders focused on more expensive homes.

I expect existing home sales to move more sideways, 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. If not, then the gap will persist.

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.

Kansas City Fed: Regional Manufacturing Activity "Strengthened Further" in March

by Bill McBride on 3/23/2017 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Strengthened Further

The Federal Reserve Bank of Kansas City released the March Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity strengthened further with strong expectations for future activity.

Our composite index accelerated again, and has only been higher one time in the last 15 years,” said Wilkerson.  “The future employment index was the strongest in the 23-year history of the survey."
The month-over-month composite index was 20 in March, its highest reading since March 2011, up from 14 in February and 9 in March.  The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.  Activity in both durable and nondurable goods plants increased, particularly for metals, computer, electronic, and aircraft products.  Most month-over-month indexes rose further in March.  The production and shipments indexes increased considerably, while the new orders and order backlog indexes rose more moderately but remained high.  The employment index moderated slightly from 17 to 13, and the new orders for exports index also eased.  Both inventory indexes increased for the second straight month.
emphasis added
The Kansas City region was hit hard by the decline in oil prices, but activity is expanding solidly again. The regional Fed surveys released so far suggest another strong reading for the ISM manufacturing index for March.

New Home Sales increase to 592,000 Annual Rate in February

by Bill McBride on 3/23/2017 10:12:00 AM

The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 592 thousand.

The previous three months combined were revised down slightly.

"Sales of new single-family houses in February 2017 were at a seasonally adjusted annual rate of 592,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.1 percent above the revised January rate of 558,000 and is 12.8 percent above the February 2016 estimate of 525,000."
emphasis added
New Home SalesClick on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the last several years, new home sales are still fairly low historically.

The second graph shows New Home Months of Supply.

New Home Sales, Months of SupplyThe months of supply declined in February to 5.4 months.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).
"The seasonally-adjusted estimate of new houses for sale at the end of February was 266,000. This represents a supply of 5.4 months at the current sales rate."
New Home Sales, InventoryOn inventory, according to the Census Bureau:
"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."
Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

New Home Sales, NSAThe last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In February 2017 (red column), 49 thousand new homes were sold (NSA). Last year, 45 thousand homes were sold in February.

The all time high for February was 109 thousand in 2005, and the all time low for February was 22 thousand in 2011.

This was above expectations of 565,000 sales SAAR.   I'll have more later today.

Weekly Initial Unemployment Claims increase to 258,000

by Bill McBride on 3/23/2017 08:39:00 AM

The DOL reported:

In the week ending March 18, the advance figure for seasonally adjusted initial claims was 258,000, an increase of 15,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 241,000 to 243,000. The 4-week moving average was 240,000, an increase of 1,000 from the previous week's revised average. The previous week's average was revised up by 1,750 from 237,250 to 239,000.
emphasis added
The previous week was revised up.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 240,000.

This was above the consensus forecast.

The low level of claims suggests relatively few layoffs.