by Calculated Risk on 10/03/2011 11:19:00 AM

Catching up ... this morning from the Census Bureau reported that overall construction spending increased in August:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during August 2011 was estimated at a seasonally adjusted annual rate of $799.1 billion, 1.4 percent (±2.1%)* above the revised July estimate of $788.3 billion. The August figure is 0.9 percent (±1.9%)* above the August 2010 estimate of $791.7 billion.

Private construction spending increased in August:

Spending on private construction was at a seasonally adjusted annual rate of $511.0 billion, 0.4 percent (±1.3%)* above the revised July estimate of $508.9 billion. Residential construction was at a seasonally adjusted annual rate of $237.8 billion in August, 0.7 percent (±1.3%)* above the revised July estimate of $236.2 billion.

Click on graph for larger image in graph gallery.

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

Private residential spending is 64.8% below the peak in early 2006, and non-residential spending is 34% below the peak in January 2008.

Public construction spending is now 11% below the peak in March 2009.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, both private residential and non-residential construction spending have turned positive, but public spending is now falling as the stimulus spending ends. The improvements in private non-residential are mostly due to energy spending (power and electric).

Earlier:
• ISM Manufacturing index increases in September

Weekend:
• Summary for Week Ending Sept 30th
• Schedule for Week of Oct 2nd
• A few preliminary comments on the September Employment Report

by Calculated Risk on 10/03/2011 10:00:00 AM

PMI was at 51.6% in September, up from 50.6% in August. The employment index was at 53.8%, up from 51.8%, and new orders index was unchanged at 49.6%.

From the Institute for Supply Management: September 2011 Manufacturing ISM Report On Business®

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 51.6 percent, an increase of 1 percentage point from August, indicating expansion in the manufacturing sector for the 26th consecutive month, at a slightly higher rate. The Production Index registered 51.2 percent, indicating a return to growth after contracting in August for the first time since May of 2009. The New Orders Index remained unchanged from August at 49.6 percent, indicating contraction for the third consecutive month. The Backlog of Orders Index decreased 4.5 percentage points to 41.5 percent, contracting for the fourth consecutive month and reaching its lowest level since April 2009, when it registered 40.5 percent. Comments from respondents generally reflect concern over the sluggish economy, political and policy uncertainty in Washington, and forecasts of ongoing high unemployment that will continue to put pressure on demand for manufactured products."

Click on graph for larger image in new window.

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

This was above expectations of 50.5% and suggests manufacturing expanded at a slightly higher rate in September than in August. It appears manufacturing employment expanded in September with the employment index increasing to 53.8%, up from 51.8% in August.

by Calculated Risk on 10/03/2011 08:48:00 AM

From MarketWatch: Chrysler's U.S. Sept. sales rise 27%

Chrysler Group LLC's U.S. auto sales climbed 27% as the manufacturer posted its strongest September since 2007 and saw double-digit sales increases among its biggest brands.
...
Chrysler ... also estimated the industry's U.S. sales in September at a seasonally adjusted annualized rate of 13.2 million.

The key number for the economy is the seasonally adjusted annual sales rate (SAAR) compared to the last few months, not the year-over-year comparison provided by the automakers. Once all the reports are released, I'll post a graph of the estimated total September light vehicle sales (SAAR) - usually around 4 PM ET.

The consensus is for an increase to 12.6 million SAAR, from 12.1 million in August, however I think we will see a stronger increase based on recent manufacturer and dealer reports. This will probably be the strongest month for auto sales since April (13.13 million SAAR) - before the tsunami in Japan.

I'll add the reports from the other major auto companies as updates to this post.

Update: From MarketWatch: GM U.S. vehicle sales total 207,145 in Sept., up 20%

From MarketWatch: Ford Sept. U.S. sales rise 9%

Weekend:
• Summary for Week Ending Sept 30th
• Schedule for Week of Oct 2nd
• A few preliminary comments on the September Employment Report

by Calculated Risk on 10/03/2011 12:50:00 AM

• An overview on Europe from the NY Times: Toil and Trouble Over the Caldron That Is Greece

In the short term, Greece remains the central problem. ... Europe’s strategy, to the extent it can be discerned, is to put off restructuring Greece’s debt as long as possible and build up enough backing for a bailout fund so that banks with large exposure to the sovereign debt of Greece and other troubled euro-zone countries, like Portugal, Ireland, Italy and Spain, can survive an all-but-inevitable Greek default.
...
When speaking privately, officials concede that Greece’s debt ... is unsustainable and that lenders will probably have to write some of it off. A “haircut” of 50 percent, followed by a recapitalization of banks if necessary, is the outcome most commonly mentioned.

Germany and France are not prepared to consider doing that yet, though, in part because relieving the pressure on Greece would remove its incentive to overhaul its finances and make its economy more competitive. ... Equally important, Germany and France want to delay any Greek default, orderly or not, until they have bolstered the rescue fund and taken other steps to protect Italy, the biggest economy in southern Europe.

What a mess.

The Asian markets are red tonight with the Nikkei down 2.6%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 is down about 8 points, and Dow futures are down about 65 points.

Oil: WTI futures are down to $78 and Brent is down under $102 per barrel.

Yesterday:
• Summary for Week Ending Sept 30th
• Schedule for Week of Oct 2nd

by Calculated Risk on 10/02/2011 04:46:00 PM

From the Financial Times: Greek cabinet approves budget cuts

[Finance Minister] Venizelos has agreed to eliminate 30,000 public sector jobs by December ... About 23,000 workers nearing retirement will lose their positions. Another 7,000 will be made redundant after mergers and restructurings ... “Given that we’re taking such tough measures ... the sixth tranche is assured.” [said Venizelos]
excerpt with permission

Cutting jobs means putting workers into "reserve" and they are still paid 60% of their salary.

And from Deutche Welle: Greece misses EU and IMF deficit targets

Greece announced late Sunday that its budget deficit will reach 8.5 percent of gross domestic product (GDP) this year, below the initial target of 7.6 percent.

According to a statement issued by the Finance Ministry, Greece will manage to bring the budget deficit down to 6.8 per cent of GDP next year, but it will still miss the bailout target of 6.5 per cent of GDP.

"Because three critical months remain for the completion of the financial year 2011, and the final estimate of 8.5 per cent of GDP deficit can be achieved if the state mechanism and citizens respond accordingly," the finance ministry statement said.

The troika is still working on pay cuts for higher-paid officials.

Yesterday:
• Summary for Week Ending Sept 30th
• Schedule for Week of Oct 2nd

by Calculated Risk on 10/02/2011 12:32:00 PM

Yesterday:
• Summary for Week Ending Sept 30th
• Schedule for Week of Oct 2nd

The September employment report will be released on Friday and the consensus is for an increase of 65,000 non-farm payroll jobs in September, up from the zero jobs added in August. Goldman Sachs is forecasting an increase of 50,000 jobs in September.

A key point to remember is that the Verizon labor dispute subtracted 45,000 jobs from the August report and those jobs will be added back in the September report. So even if September was the same as August, we would see 45,000 more jobs added.

Note: The Verizon labor dispute didn't show up in the ADP employment report because the ADP counts employees on the payroll even if they aren't working.

Another key point is that the manufacturing surveys (a small percentage of overall employment) mostly suggested employment expansion in September - and an improvement from August (See table below). Also the Chicago PMI indicated stronger employment expansion in September than in August.

However weekly initial unemployment claims for the BLS reference week were higher in September than in August - suggesting more layoffs. Still - overall - it appears September was somewhat better than August.

Here is a table for the various employment components from several surveys in September starting in August 2007 (before the recession). Here is the spreadsheet in excel. Most of these surveys are just for manufacturing (Fed surveys), however the Chicago PMI includes both manufacturing and services.

Note: Above 50 is expansion for the Chicago PMI, above 0 is expansion for the Fed manufacturing surveys.

Employment Surveys through Sept 2011 Above 50 is expansion for Chicago PMI, All others above zero
	Chicago PMI	NY Fed (Empire State)	Philly Fed	Richmond Fed	Kansas City Fed	Dallas Fed	Avg Fed Mfg Surveys
Aug-07	53.2	11.8	14.7	-1	0	1.6	5.4
Sep-07	51.8	19.2	4.3	0	-1	7.2	5.9
Oct-07	50.2	17.4	7.3	-3	-2	5.8	5.1
Nov-07	52.6	7.1	4.0	-2	-5	2.0	1.2
Dec-07	49.3	5.0	1.3	4	4	-3.3	2.2
Jan-08	47.0	2.4	1.5	-2	12	9.0	4.6
Feb-08	33.5	-2.1	6.2	-2	1	5.5	1.7
Mar-08	44.6	4.5	0.6	-7	-3	4.6	-0.1
Apr-08	35.3	0.0	-4.2	-14	0	2.0	-3.2
May-08	41.2	1.1	-1.9	-10	-2	-5.9	-3.7
Jun-08	46.7	1.2	-8.7	-14	-13	-4.4	-7.8
Jul-08	45.9	-6.3	-6.2	-4	1	7.1	-1.7
Aug-08	39.2	-4.5	-8.4	-19	-3	-5.3	-8.0
Sep-08	49.1	-4.6	-4.5	-21	-11	-5.1	-9.2
Oct-08	41.5	-3.7	-22.3	-22	-14	-11.5	-14.7
Nov-08	33.4	-28.9	-26.5	-25	-22	-20.1	-24.5
Dec-08	39.6	-23.4	-31.3	-34	-32	-21.0	-28.3
Jan-09	34.8	-26.1	-37.1	-29	-34	-28.2	-30.9
Feb-09	25.2	-39.1	-41.0	-33	-33	-40.1	-37.2
Mar-09	28.1	-38.2	-49.6	-29	-35	-50.3	-40.4
Apr-09	31.8	-28.1	-38.8	-28	-23	-39.7	-31.5
May-09	25.0	-23.9	-29.8	-17	-16	-34.1	-24.2
Jun-09	28.9	-21.8	-23.2	-13	-13	-27.8	-19.8
Jul-09	35.3	-20.8	-23.7	-14	-16	-23.4	-19.6
Aug-09	38.7	-7.5	-18.1	-12	-10	-15.4	-12.6
Sep-09	38.8	-8.3	-16.1	-4	-2	-8.9	-7.9
Oct-09	38.3	10.4	-10.4	-4	-4	-12.2	-4.0
Nov-09	41.9	1.3	-3.5	-10	-2	-15.8	-6.0
Dec-09	51.2	-5.3	3.7	2	-4	-3.8	-1.5
Jan-10	59.8	4.0	6.2	2	2	-3.7	2.1
Feb-10	53.0	5.6	8.0	7	-2	-4.2	2.9
Mar-10	53.1	12.4	9.3	8	2	4.5	7.2
Apr-10	57.2	20.3	7.4	19	5	11.6	12.7
May-10	49.2	22.4	3.4	7	2	13.8	9.7
Jun-10	54.2	12.4	-1.0	2	0	7.1	4.1
Jul-10	56.6	7.9	6.6	8	5	7.2	6.9
Aug-10	55.5	14.3	-3.9	3	-1	-3.3	1.8
Sep-10	53.4	14.9	1.4	-1	-2	3.7	3.4
Oct-10	54.6	21.7	1.4	5	0	-2.5	5.1
Nov-10	56.3	9.1	11.7	10	8	7.1	9.2
Dec-10	60.2	-3.4	4.3	15	11	16.1	8.6
Jan-11	64.1	8.4	17.6	14	8	9.3	11.5
Feb-11	59.8	3.6	23.6	15	23	10.5	15.1
Mar-11	65.6	9.1	18.2	16	25	11.6	16.0
Apr-11	63.7	23.1	12.3	12	17	13.4	15.6
May-11	60.8	24.7	22.1	16	9	11.6	16.7
Jun-11	58.7	10.2	4.1	14	17	5.3	10.1
Jul-11	51.5	1.1	8.9	4	4	12.1	6.0
Aug-11	52.1	3.3	-5.2	1	8	5.4	2.5
Sep-11	60.6	-5.4	5.8	7	12	13.4	6.6

by Calculated Risk on 10/02/2011 09:04:00 AM

From KFDM: Gasoline prices are plunging across Texas

The average price for a gallon of gasoline is plunging in Southeast Texas and across the state, according to a survey released Thursday by AAA Texas.

The average is $3.22 a gallon in Beaumont, down 13 cents from last week. The average one year ago was $2.56. The record high was $4 a gallon in July, 2008.

The graph below shows indicates gasoline prices are down sharply over the last couple of weeks.

Note: This graph show oil prices for WTI; gasoline prices in most of the U.S. are impacted more by Brent prices.

Brent Crude is down to $102.76 and WTI is down to $79.20.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

Yesterday:
• Summary for Week Ending Sept 30th
• Schedule for Week of Oct 2nd

by Calculated Risk on 10/01/2011 07:43:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Sept 30, 2011.

Changes and comments from surferdude808:

The Unofficial Problem Bank List finished the month unchanged at 986 institutions with assets of $405.4 billion after six additions and six removals this week. A year-ago, there were 872 institutions with assets of $422.4 billion on the unofficial list.

For the month, there were 15 additions, five failures, four unassisted mergers, and eight action terminations resulting in a net decline of two institutions. The number of institutions on the list fell for the third consecutive month. After declines the previous two months, however, assets rose during the month by $2.1 billion.

Removals include the failed First International Bank, Plano, TX ($240 million). Actions were terminated against Peoples Independent Bank, Boaz, AL ($169 million); Home Savings Bank, Salt Lake City, UT ($118 million); Rock Canyon Bank, Orem, UT ($114 million); and Grand Rivers Community Bank, Grand Chain, IL ($18 million). Ventura County Business Bank, Oxnard, CA ($78 million Ticker: VCBB) was removed as it merged into Royal Business Bank, Los Angeles, CA.

The six additions this week are Amalgamated Bank, New York, NY ($4.4 billion); Community First Bank & Trust, Columbia, TN ($640 million); State Central Bank, Keokuk, IA ($220 million); RiverBank, Spokane, WA ($149 million); The Bank of Kaukauna, Kaukauna, WI ($93 million); and Hometown Community Bank, Cyrus, MN ($24 million).

Other changes include the FDIC issuing a Prompt Corrective Action order against Community Shores Bank, Muskegon, MI ($224 million).

There were a few banks on the Unofficial Problem Bank List that have changed their name during the year including Pacific Capital Bank, National Association, Santa Barbara, CA n/k/a Santa Barbara Bank & Trust, National Association; The First National Bank of Chatsworth, Chatsworth, GA n/k/a First National Community Bank; and Generations Bank, Overland Park, KS n/k/a The Federal Savings Bank.

With the quarter-end, next week we will update the transition matrix as the week should be relatively quiet with the FDIC and OCC only releasing information on a monthly basis.

Earlier:
• Summary for Week Ending Sept 30th
• Schedule for Week of Oct 2nd

by Calculated Risk on 10/01/2011 02:11:00 PM

Earlier:
• Summary for Week Ending Sept 30th

The key report this week will be the employment situation report for September on Friday. Also Fed Chairman Ben Bernanke's Congressional testimony on Tuesday will be closely watched.

Other key reports includes the September ISM manufacturing index on Monday, auto sales also on Monday - and for housing analysts - the release of the Census 2010 housing statistics on Thursday.

Note: Reis is expected to release their Q3 Office, Mall and Apartment vacancy rate reports this week. Last quarter Reis reported falling vacancy rates for apartments, rising vacancy rates for regional malls, and no change in the office vacancy rate.

----- Monday, Oct 3rd -----
10:00 AM ET: ISM Manufacturing Index for September.

The consensus is for a decrease to 50.5 from 50.6 in August.

10:00 AM: Construction Spending for August. The consensus is for a 0.2% decline in construction spending.

All day: Light vehicle sales for September. Light vehicle sales are expected to increase to 12.6 million (Seasonally Adjusted Annual Rate), from 12.1 million in August.

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

Edmunds is forecasting 12.9 million:

An estimated 1,038,052 new cars will be sold in September for a projected Seasonally Adjusted Annual Rate (SAAR) of 12.9 million light vehicles, forecasts Edmunds.com ... The sales pace marks the highest monthly SAAR since the 13.2 million light vehicles reported in April. That was the last full month before supply disruptions stemming from the Japanese earthquake had a true impact on sales.

----- Tuesday, Oct 4th -----
9 AM ET: Speech by Fed Governor Sarah Bloom Raskin, "Policy Opportunities and Challenges in Crafting a Foreclosure Response", At the Maryland State Bar Association Advanced Real Property Institute, Columbia, Maryland

10 AM: Testimony by Fed Chairman Ben Bernanke, "Economic Outlook and Recent Monetary Policy Actions", Before the Joint Economic Committee, United States Congress, Washington, D.C.

10:00 AM ET: Manufacturers' Shipments, Inventories and Orders for August. The consensus is for a 0.3% decrease in orders.

----- Wednesday, Oct 5th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been especially weak over the last month.

8:15 AM: The ADP Employment Report for September. This report is for private payrolls only (no government). The consensus is for 90,000 payroll jobs added in September, down slightly from the 91,000 reported in August.

10:00 AM: ISM non-Manufacturing Index for September. The consensus is for a decrease to 52.9 in September.

The August ISM Non-manufacturing index was at 53.5%, up from 52.7% in July.

The employment index decreased in August to 51.6%, down from 52.5% in July.

Note: Above 50 indicates expansion, below 50 contraction.

----- Thursday, Oct 6th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an increase to 410,000 from 391,000 last week.

1:00 PM: Census 2010: Statistics on Nation’s Housing Characteristics. This includes details on the nation’s housing characteristics, including housing inventory, where homeowners and renters are located, and distribution and types of vacant units.

----- Friday, Oct 7th -----
8:30 AM: Employment Report for September.

The consensus is for an increase of 65,000 non-farm payroll jobs in September, up from the 0 jobs added in August.

This graph shows the net payroll jobs per month (excluding temporary Census jobs) since the beginning of the recession. The consensus forecast for September is in blue.

The consensus is for the unemployment rate to increase to 9.2% in September.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through August.

Through the first eight months of 2011, the economy added 872,000 total non-farm jobs or just 109 thousand per month. The economy has added 1,162,000 private sector jobs this year, or about 145 thousand per month.

Note: The Verizon labor dispute subtracted 45,000 payroll jobs in August. This dispute is over and these jobs will be added back in the September report.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for August.

3:00 PM: Consumer Credit for August. The consensus is for a $8 billion increase in consumer credit.

by Calculated Risk on 10/01/2011 08:15:00 AM

Once again the European financial crisis dominated the headlines last week. The new property tax proposal was approved in Greece, and the EU-IMF-ECB inspectors have returned.

There is meeting of EU Finance Ministers on Monday, October 3rd, but the vote on the next €8bn payment will be at an emergency meeting in two weeks after the inspectors complete their review. Greece is expected to run out of money mid-October, so this is going down to the wire. No payment means default in October.

Even if it is approved, the next installment is expected to last only until December, so this just buys a little time.

Also, on Thursday, the German Parliament voted to increase the European Financial Stability Facility (EFSF) per the agreement reached on July 21st. The voting of the various countries is almost complete.

As usual the story keeps changing out of Europe. Will there be a leveraged EFSF? Will there be forced bank recapitalization like with TARP in the U.S.? Will the EFSF be expanded or enhanced in some other way? Will the haircuts on Greek debt be increased (some say 50%)?

Europe appears to have the resources to resolve the crisis, but they lack the mechanisms and the political unity. The clock is ticking.

In the U.S., the September data was mostly better than in August. The Chicago Purchasing Manager’s Index surprised to the upside with positive comments about employment.

And look at these headlines for the September regional manufacturing surveys:
• From the Kansas City Fed: Growth in Manufacturing Activity Edged Higher
• From the Dallas Fed: Texas Manufacturing Activity Picks Up
• From the Richmond Fed: Manufacturing Activity Contracted at a Slightly Slower Pace in September, While Employment Grew and Expectations Improved

This is a key theme: August was very weak, but September was a little better.

For the August data, New Home sales declined slightly and continue to move sideways, real personal consumption expenditures (PCE) declined slightly, the trucking index declined, and the restaurant index declined too. Clearly the economic data in August was very weak and negatively impacted by the debt ceiling debate.

And because of the weak data, the talk of another U.S. recession continues to grow, with several people arguing the U.S. is already in recession. I think that is unlikely, but sluggish growth will seem like a recession to many people. And there are significant downside risks from the European crisis.

There will be more key data for September next week including auto sales and the employment report next Friday.

Here is a summary in graphs:

• New Home Sales declined slightly in August

The Census Bureau reported New Home Sales in August were at a seasonally adjusted annual rate (SAAR) of 295 thousand. This was down from a revised 302 thousand in July (revised up from 298 thousand).

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

Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale was at 60,000 units in August. The combined total of completed and under construction is at the lowest level since this series started. Months-of-supply was at 6.6 months; less than 6 months is normal.

The next graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In August 2011 (red column), 26 thousand new homes were sold (NSA). The record low for August was 23 thousand in 2010 (following the expiration of the homebuyer tax credit). The high for August was 110 thousand in 2005.

This was at the consensus forecast of 295 thousand, and was not far above the record low for the month of August set last year. New home sales have averaged only 300 thousand SAAR over the 16 months since the expiration of the tax credit ... still moving sideways at a very low level.

• Case Shiller: Home Prices increased Seasonally in July

S&P/Case-Shiller released the monthly Home Price Indices for July (actually a 3 month average of May, June and July).

The Composite 10 index is off 32% from the peak, and was down slightly in July (SA). The Composite 10 is 1.4% above the June 2009 post-bubble bottom (Seasonally adjusted).

The Composite 20 index is off 31.8% from the peak, and was up slightly in July (SA). The Composite 20 is slightly above the March 2011 post-bubble bottom seasonally adjusted.

On a Not Seasonally Adjusted (NSA) basis, both indexes were up 0.9% in July over June.

This graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices. Prices increased (SA) in 9 of the 20 Case-Shiller cities in July seasonally adjusted. Prices in Las Vegas are off 59.2% from the peak, and prices in Dallas only off 9.5% from the peak.

As S&P noted, prices increased in 17 of 20 cities not seasonally adjusted (NSA).

Most of this prices increase was mostly seasonal. As S&P's David Blitzer said: "This is still a seasonal period of stronger demand for houses, so monthly price increases are expected ... ". The question is what happens later this year.

• Real House Prices and House Price-to-Rent

Below are three graphs showing nominal prices (as reported), real prices and a price-to-rent ratio. Real prices are back to 1999/2000 levels, and the price-to-rent ratio is also back to 2000 levels.

Nominal House Prices

This shows the quarterly Case-Shiller National Index SA (through Q2 2011), and the monthly Case-Shiller Composite 20 SA (through July) and CoreLogic House Price Indexes (through July) in nominal terms (as reported).

In nominal terms, the Case-Shiller National index is back to Q4 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to June 2003 levels, and the CoreLogic index is back to July 2003.

Real House Prices

This graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q3 1999 levels, the Composite 20 index is back to August 2000, and the CoreLogic index back to July 2000.

In real terms, all appreciation in the last decade is gone.

Price-to-Rent

Here is a price-to-rent graph using the Case-Shiller Composite 20 and CoreLogic House Price Index and Owners' Equivalent Rent from the BLS.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Composite 20 index is back to September 2000 levels, and the CoreLogic index is back to July 2000.

• Personal Income decreased 0.1% in August, Spending increased 0.2%

The BEA released the Personal Income and Outlays report for August: "Personal income decreased $7.3 billion, or 0.1 percent ... in August ... Personal consumption expenditures (PCE) increased $22.7 billion, or 0.2 percent.
...
Real PCE -- PCE adjusted to remove price changes -- decreased less than 0.1 percent in August, in contrast to an increase of 0.4 percent in July. ... The price index for PCE increased 0.2 percent in August,compared with an increase of 0.4 percent in July. The PCE price index, excluding food and energy, increased 0.1 percent"

This graph shows real Personal Consumption Expenditures (PCE) through August (2005 dollars).

PCE increased 0.2 in August, and real PCE decreased slightly as the price index for PCE increased 0.2 percent in August.

Using the two month method to estimate Q3 PCE gives a 1.1% annualized rate (another weak quarter), however it appears PCE increased in September (auto sales are up) and June was especially weak in Q2 - so real PCE growth will probably be in the 1.5% range in Q3 (still weak).

• September Consumer Sentiment increases to 59.4

The final September Reuters / University of Michigan consumer sentiment index increased to 59.4 from 55.7 in August.

In general consumer sentiment is a coincident indicator and is usually impacted by employment (and the unemployment rate) and gasoline prices. In August, sentiment was probably negatively impacted by the debt ceiling debate.

Note: It usually takes 2 to 4 months to bounce back from an event driven decline in sentiment (if the August decline was event driven) - and any bounce back from the debt ceiling debate would be to an already weak reading.

This was still very weak, but above the consensus forecast of 57.8.

• CoreLogic: Existing Home Shadow Inventory Declines to 1.6 million units

From CoreLogic: CoreLogic® Reports Shadow Inventory Continues to Decline. "CoreLogic ... reported today that the current residential shadow inventory as of July 2011 declined slightly to 1.6 million units ... This is down from 1.9 million units, a supply of 6 months, from a year ago, and follows a decline from April 2011 when shadow inventory stood at 1.7 million units."

This graph from CoreLogic shows the breakdown of "shadow inventory" by category. For this report, CoreLogic estimates the number of 90+ day delinquencies, foreclosures and REOs not currently listed for sale. Obviously if a house is listed for sale, it is already included in the "visible supply" and cannot be counted as shadow inventory.

So the key number in this report is that as of July, there were 1.6 million homes seriously delinquent, in the foreclosure process or REO that are not currently listed for sale.

• Regional Manufacturing Surveys show less weakness

Three more regional manufacturing surveys were released last week.

From the Kansas City Fed: Growth in Manufacturing Activity Edged Higher

From the Dallas Fed: Texas Manufacturing Activity Picks Up

From the Richmond Fed: Manufacturing Activity Contracted at a Slightly Slower Pace in September, While Employment Grew and Expectations Improved

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index.

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

The ISM index for September will be released Monday, Oct 3rd and this suggests another weak reading in September.

• Weekly Initial Unemployment Claims decline sharply to 391,000

The DOL reported: "In the week ending September 24, the advance figure for seasonally adjusted initial claims was 391,000, a decrease of 37,000 from the previous week's revised figure of 428,000."

This graph shows the 4-week moving average of weekly claims since January 2000 (there is a longer term graph in graph gallery).

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined this week to 417,000.

This is the lowest level for weekly claims since early April, although the 4-week average is still elevated.

• Other Economic Stories ...
• The Chicago PMI Chicago Business Barometer™ Rebounded: The overall index increased to 60.4 from 56.5 in August.
• From the NAR: Pending Home Sales Decline in August
• The BEA reported that GDP increased at a 1.3% real annual rate in Q2 (third estimate), revised up from the previously reported 1.0% increase.
• Restaurant Performance Index declined in August
• Fannie Mae and Freddie Mac Serious Delinquency Rates decline in August
• Hotels: Occupancy Rate increased 4.1 percent compared to same week in 2010
• ATA Trucking Index decreased slightly in August
• Existing Home Inventory continues to decline year-over-year in September
• The BLS released the preliminary annual benchmark revision of +192,000 payroll jobs as of March 2011.