by Calculated Risk on 2/27/2015 11:18:00 AM

Click on graph for larger image.

The final Reuters / University of Michigan consumer sentiment index for February was at 95.4, up from the preliminary reading of 93.6, and down from 98.1 in January.

This was above the consensus forecast of 94.0. Sentiment has been generally improving, and then surged last year at gasoline prices declined - and the economy improved.  The decline in February was probably related to higher gasoline prices.

Chicago PMI February 2015: Chicago Business Barometer At 5½-Year Low

The Chicago Business Barometer plunged 13.6 points to 45.8 in February, the lowest level since July 2009 and the first time in contraction since April 2013. The sharp fall in business activity in February came as Production, New Orders, Order Backlogs and Employment all suffered double digit losses, leaving them below the 50 level which separates contraction from expansion.

The West Coast port strike and the harsh winter probably had a negative impact in February, although it is difficult to gauge the magnitude.
emphasis added

This was well below the consensus forecast of 58.3.  This is just one month, and the decline could be related to special factors - such as the port strike - and we need to see what happens in March.

by Calculated Risk on 2/27/2015 10:05:00 AM

From the NAR: Pending Home Sales Rise in January to Highest Level in 18 Months

The Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 1.7 percent to 104.2 in January from an upwardly revised 102.5 in December and is now 8.4 percent above January 2014 (96.1). This marks the fifth consecutive month of year-over-year gains with each month accelerating the previous month's gain.
...
The PHSI in the Northeast inched 0.1 percent to 84.9 in January, and is now 6.9 percent above a year ago. In the Midwest the index decreased 0.7 percent to 99.3 in January, but is 4.2 percent above January 2014.

Pending home sales experienced the largest increase in the South, up 3.2 percent to an index of 121.9 in January (highest since April 2010) and are 9.7 percent above last January. The index in the West rose 2.2 percent in January to 96.4 and is 11.4 percent above a year ago.

Total existing-homes sales in 2015 are forecast to be around 5.26 million, an increase of 6.4 percent from 2014.

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in February and March. I'll take the "under" on the NAR forecast for 2015 sales!

by Calculated Risk on 2/27/2015 08:37:00 AM

From the BEA: Gross Domestic Product: Fourth Quarter 2014 (Second Estimate)

Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.2 percent in the fourth quarter of 2014, according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 5.0 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.6 percent. With the second estimate for the fourth quarter, private inventory investment increased less than previously estimated, while nonresidential fixed investment increased more.

The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, state and local government spending, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the fourth quarter primarily reflected an upturn in imports, a downturn in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by an acceleration in PCE, an upturn in private inventory investment, and an acceleration in state and local government spending.

Here is a Comparison of Second and Advance Estimates.  PCE was revised down from 4.3% to 4.2% - still solid.  Overall about as expected.

by Calculated Risk on 2/26/2015 08:13:00 PM

The following important older post on inflation from Professor Krugman explains why I follow various measures of underlying inflation: Core Logic

[T]he idea of core inflation. Why do we need such a concept, and how should it be measured?

So: core inflation is usually measured by taking food and energy out of the price index; but there are alternative measures, like trimmed-mean and median inflation, which are getting increasing attention.
...
And people who say things like “That’s a stupid concept — people have to spend money on food and gas, so they should be in your inflation measures” are missing the point. Core inflation isn’t supposed to measure the cost of living, it’s supposed to measure something else: inflation inertia.

Think about it this way. Some prices in the economy fluctuate all the time in the face of supply and demand; food and fuel are the obvious examples. Many prices, however, don’t fluctuate this way — they’re set by oligopolistic firms, or negotiated in long-term contracts, so they’re only revised at intervals ranging from months to years. Many wages are set the same way.

The key thing about these less flexible prices — the insight that got Ned Phelps his Nobel — is that because they aren’t revised very often, they’re set with future inflation in mind. Suppose that I’m setting my price for the next year, and that I expect the overall level of prices — including things like the average price of competing goods — to rise 10 percent over the course of the year. Then I’m probably going to set my price about 5 percent higher than I would if I were only taking current conditions into account.

And that’s not the whole story: because temporarily fixed prices are only revised at intervals, their resets often involve catchup. ...

The standard measure tries to do this by excluding the obviously non-inertial prices: food and energy. But are they the whole story? Of course not ... Hence the growing preference among many economists for measures like medians and trimmed means, which exclude prices that move by a lot in any given month, presumably therefore isolating the prices that move sluggishly, which is what we want.
emphasis added

Friday:
• At 8:30 AM ET, Gross Domestic Product, 4th quarter 2014 (second estimate). The consensus is that real GDP increased 2.1% annualized in Q4, down from the advance estimate of 2.6%.

• Also at 9:45 AM, the Chicago Purchasing Managers Index for February. The consensus is for a reading of 58.3, down from 59.4 in January.

• At 10:00 AM: University of Michigan's Consumer sentiment index (final for February). The consensus is for a reading of 94.0, up from the preliminary reading of 93.6, but down from the December reading of 98.1.

• Also at 10:00 AM, the Pending Home Sales Index for January. The consensus is for a 2.0% increase in the index.

• At 1:30 PM: Speech, Fed Vice Chairman Stanley Fischer, Conducting Monetary Policy with a Large Balance Sheet, At the 2015 U.S. Monetary Policy Forum, New York, New York

by Calculated Risk on 2/26/2015 05:41:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in January to 1.86%, down from 1.88% in December. Freddie's rate is down from 2.34% in January 2014, and the rate in January was the lowest level since December 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 January next week.

Click on graph for larger image

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

The serious delinquency rate has fallen 0.48 percentage points over the last year - and the rate of improvement has slowed recently - but at that rate of improvement, the serious delinquency rate will not be below 1% until late 2016.

Note: Very few seriously delinquent loans cure with the owner making up back payments - most of the reduction in the serious delinquency rate is from foreclosures, short sales, and modifications. 

So even though distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales for 2+ more years (mostly in judicial foreclosure states).