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Wednesday, November 30, 2016

Thursday: ISM Mfg, Auto sales, Unemployment claims, Construction Spending

by Calculated Risk on 11/30/2016 07:20:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC:

"OPEC today struck what increasingly appears to be a historic deal, with both cuts and participation well in excess of earlier expectations.  Total OPEC cuts, compared to OPEC production as recorded by secondary sources for October 2016, are forecast at 1.2 mbpd.  To this is added 0.3 mbpd from Russia, and another, yet-to-be-confirmed 275 kpbd from Mexico, Oman and Kazakhstan.

In total, this would represent a cut of over 1.7 mbpd.  Compliance should be expected at 70% based on historical precedent, representing an effective cut of 1.2 mbpd compared to October 2016 levels.  This is a big deal, and may be enough to balance markets (which some think are already drawing in any event).  With these cuts, global excess crude and product inventories should be run off as soon as the end of Q2 2017, and not later than Q4 2017.

This implies that a robust recovery for the global oil sector is in store, with a strong H2 2017 in the outing."
Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 253 thousand initial claims, up from 251 thousand the previous week.

• At 10:00 AM, ISM Manufacturing Index for November. The consensus is for the ISM to be at 52.3, up from 51.9 in October. The ISM manufacturing index indicated expansion at 51.9% in October. The employment index was at 52.9%, and the new orders index was at 52.1%.

• Also at 10:00 AM, Construction Spending for October. The consensus is for a 0.6% increase in construction spending.

• All day, Light vehicle sales for November. The consensus is for light vehicle sales to decrease to 17.8 million SAAR in November, from 17.9 million in  October (Seasonally Adjusted Annual Rate).

Fannie Mae: Mortgage Serious Delinquency rate declined in October

by Calculated Risk on 11/30/2016 04:21:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined to 1.21% in October, down from 1.24% in September. The serious delinquency rate is down from 1.58% in October 2015.

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

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

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

The Fannie Mae serious delinquency rate has fallen 0.37 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% for about 7 more months.

Note: Freddie Mac reported yesterday.

Fed's Beige Book: Modest to moderate expansion, Tightening labor market

by Calculated Risk on 11/30/2016 02:33:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of Cleveland based on information collected on or before November 18, 2016."

Reports from the twelve Federal Reserve Districts indicate that the economy continued to expand across most regions from early October through mid-November. Activity in the Boston, Minneapolis, and San Francisco Districts grew at a moderate pace, while Atlanta, Chicago, St. Louis, and Dallas cited modest growth. Philadelphia, Cleveland, and Kansas City cited a slight pace of growth. Richmond characterized economic activity as mixed, and New York said activity has remained flat since the last report. Outlooks were mainly positive, with six Districts expecting moderate growth.
...
A tightening in labor market conditions was reported by seven Districts, with modest employment growth on balance. Districts noted slight upward pressure on overall prices..
emphasis added
And on real estate:
Residential real estate activity improved across Districts. Reports about existing- and new-home sales were mixed, but most Districts noted a slight to modest increase during the period. Residential construction was up in the Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and Dallas Districts. Home prices grew in many Districts, including Boston, Philadelphia, Cleveland, Atlanta, St. Louis, Kansas City, and San Francisco. Philadelphia reported that the strength of the single-family market is in high-end housing. In contrast, Kansas City reported that sales of low- and medium-priced homes continued to outpace sales of higher-priced homes. Dallas reported that the sales of lower-priced homes remained solid. Home inventories were generally reported to be low or declining and restraining sales growth. Boston, Philadelphia, Cleveland, Richmond, and Minneapolis reported low or decreasing inventories. Reports on inventory levels varied in Atlanta, while inventories held steady in Kansas City.

Commercial construction activity moved higher in the New York, Cleveland, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco Districts. In contrast, Minneapolis noted a slowing in commercial construction. The Boston, Richmond, Minneapolis, and San Francisco Districts reported increases in leasing activity, while Philadelphia noted a lull in nonresidential leasing growth compared with the prior period. Dallas reported leasing activity as mostly unchanged. Commercial sales activity continued to be robust in Minneapolis and grew modestly in Kansas City. Ongoing multifamily construction has been steady at a fairly high level in New York. Multifamily construction varied in the Atlanta District and slowed somewhat in Richmond, Minneapolis, and San Francisco.
Real estate is decent.

NY Fed: Household Debt Increased Slightly in Q3 2016, Mortgage Delinquency Rates Declined

by Calculated Risk on 11/30/2016 11:16:00 AM

The Q3 report was released today: Household Debt and Credit Report.

From the NY Fed: Total Household Debt Remains Sluggish Yet Non-Housing Debt Continues Expanding

The Federal Reserve Bank of New York today issued its Quarterly Report on Household Debt and Credit, which reported that total household debt increased modestly by $63 billion (a 0.5% increase) to $12.35 trillion during the third quarter of 2016. There were increases across every type of non-housing debt, with a 2.9% increase in auto loan balances, a 2.5% increase in credit card balances, and a 1.6% percent increase in student loan balances this quarter. This report is based on data from the New York Fed's Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.
...
Mortgage delinquencies continued to decline as seen since the financial crisis, while new foreclosure notations reached another new low for the 18-year history of this series.
...
Overall delinquency rates worsened slightly this quarter, while the rate of bankruptcy notations continued its overall trend of improving since the financial crisis.
emphasis added
Total Household Debt Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased in Q3.  Household debt peaked in 2008, and bottomed in Q2 2013.

Mortgage debt decreased in Q3, from the NY Fed:
Mortgage balances, the largest component of household debt saw a 0.1% decline during the quarter. Mortgage balances shown on consumer credit reports on September 30 stood at $8.35 trillion, a $12 billion drop from the second quarter of 2016. Balances on home equity lines of credit (HELOC) declined by $6 billion, to $472 billion. By contrast, balances on every type of non-housing debt grew in the second quarter, boosting up the total.
Delinquency Status The second graph shows the percent of debt in delinquency. The percent of delinquent debt is generally declining, although there was a slight increase in short term delinquencies in Q3.  There is still a larger than normal percent of debt 90+ days delinquent (Yellow, orange and red).

The overall delinquency rate increased slightly in Q3 to 4.9%.  From the NY Fed:
Overall delinquency rates worsened slightly in 2016Q3, reflecting an uptick in early delinquencies. As of September 30, 4.9% of outstanding debt was in some stage of delinquency. Of the $609 billion of debt that is delinquent, $400 billion is seriously delinquent (at least 90 days late or “severely derogatory”).

NAR: Pending Home Sales Index increased 0.1% in October, up 1.8% year-over-year

by Calculated Risk on 11/30/2016 10:02:00 AM

From the NAR: Pending Home Sales Crawl Forward in October

Pending home sales were mostly unchanged in October, but did squeak out a meager gain for the second consecutive month, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, inched up 0.1 percent to 110.0 in October from a slight downward revision of 109.9 in September. With last month's small increase, the index is now 1.8 percent higher than last October (108.1).
...
The PHSI in the Northeast nudged forward 0.4 percent to 96.9 in October, and is now 3.9 percent above a year ago. In the Midwest the index rose 1.6 percent to 106.3 in October, and is now 1.2 percent higher than October 2015.

Pending home sales in the South declined 1.3 percent to an index of 120.1 in October but are still 0.8 percent higher than last October. The index in the West climbed 0.7 percent in October to 108.3, and is now 2.5 percent above a year ago.
emphasis added
This was below expectations of a 0.8% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in November and December.

Personal Income increased 0.6% in October, Spending increased 0.3%

by Calculated Risk on 11/30/2016 08:37:00 AM

The BEA released the Personal Income and Outlays report for October:

Personal income increased $98.6 billion (0.6 percent) in October according to estimates released today by the Bureau of Economic Analysis. ... personal consumption expenditures (PCE) increased $38.1 billion (0.3 percent).
...
Real PCE increased 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.
The October PCE price index increased 1.4 percent year-over-year (compared to 1.2 percent YoY in September) and the October PCE price index, excluding food and energy, increased 1.7 percent year-over-year (same as in September).

The following graph shows real Personal Consumption Expenditures (PCE) through October 2016 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was above consensus, and the increase in PCE was at consensus expectations.

A solid increase in personal income.

ADP: Private Employment increased 216,000 in November

by Calculated Risk on 11/30/2016 08:19:00 AM

From ADP:

Private sector employment increased by 216,000 jobs from October to November according to the November ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “Businesses hired aggressively in November and there is little evidence that the uncertainty surrounding the presidential election dampened hiring. In addition, because of the tightening labor market, retailers may be accelerating seasonal hiring to secure an adequate workforce to meet holiday demand, although total expected seasonal hiring may be no higher than last year’s.”
This was well abvoe the consensus forecast for 160,000 private sector jobs added in the ADP report. 

The BLS report for November will be released Friday, and the consensus is for 170,000 non-farm payroll jobs added in November.

MBA: Mortgage Refinance Activity Declines 16 Percent in Latest Weekly Survey

by Calculated Risk on 11/30/2016 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 9.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 25, 2016. This week’s results included an adjustment for the Thanksgiving holiday.

... The Refinance Index decreased 16 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 34 percent compared with the previous week and was 3 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since July 2015, 4.23 percent, from 4.16 percent, with points increasing to 0.41 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance Index Click on graph for larger image.


The first graph shows the refinance index since 1990.

With the current level of mortgage rates, refinance activity will probably decline further.


Mortgage Purchase Index The second graph shows the MBA mortgage purchase index.

The purchase index was "3 percent higher than the same week one year ago".

Tuesday, November 29, 2016

Wednesday: ADP Employment, Personal Income and Outlays, Pending Home Sales, Beige Book, and More

by Calculated Risk on 11/29/2016 08:32:00 PM

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

• At 8:15 AM, The ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 160,000 payroll jobs added in November, up from 147,000 added in October.

• At 8:30 AM, Personal Income and Outlays for October. The consensus is for a 0.4% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 9:45 AM, Chicago Purchasing Managers Index for November. The consensus is for a reading of 52.0, up from 50.6 in October.

• At 10:00 AM, Pending Home Sales Index for October. The consensus is for a 0.8% increase in the index.

• At 11:00 AM, The New York Fed will release their Q3 2016 Household Debt and Credit Report

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

Freddie Mac: Mortgage Serious Delinquency rate increased slightly in October

by Calculated Risk on 11/29/2016 05:29:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate increased in October to 1.03%, up from 1.02% in September.  Freddie's rate is down from 1.38% in October 2015.

This was the first month-to-month increase since January of this year, but the trend is still down.

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". 

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

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

The Freddie Mac serious delinquency rate has fallen 0.35 percentage points over the last year, and at that rate of improvement, the serious delinquency rate could be below 1% in November or December.

Note: Fannie Mae will probably report tomorrow.