by Calculated Risk on 4/16/2009 10:05:00 AM

Here is the Philadelphia Fed Index released today: Business Outlook Survey.

The region's manufacturing sector contracted less severely this month ... Indexes for general activity, new orders, and employment remained negative but improved somewhat from March. ... Most of the survey's broad indicators of future activity improved notably this month, suggesting that the region's manufacturing executives expect declines to bottom out over the next six months.

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -35.0 in March to -24.4 this month. Although clearly indicating continued overall decline, this reading is the highest since January. The index has been negative for 16 of the past 17 months, a span that corresponds to the current recession ...

Employment losses remained widespread this month, with over 45 percent of the firms reporting declines. The current employment index, though still negative at -44.9, increased seven points from its record low reading last month.
...
Broad indicators of future activity showed significant improvement this month. The future general activity index remained positive for the fourth consecutive month and increased markedly from 14.5 in March to 36.2, its highest reading in 18 months (Note:click here for Philly Fed chart of future activity index).

Click on graph for larger image in new window.

This graph shows the Philly index for the last 40 years.

"The index has been negative for 16 of the past 17 months, a period that corresponds to the current recession ."

by Calculated Risk on 4/16/2009 08:47:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending April 11, the advance figure for seasonally adjusted initial claims was 610,000, a decrease of 53,000 from the previous week's revised figure of 663,000. The 4-week moving average was 651,000, a decrease of 8,500 from the previous week's revised average of 659,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending April 4 was 6,022,000, an increase of 172,000 from the preceding week's revised level of 5,850,000.

Click on graph for larger image in new window.

This graph shows weekly claims and continued claims since 1971. This is not adjusted for changes in population (I'll add that graph next week).

The four week moving average is at 651,000.

Continued claims are now at 6.02 million - the all time record.

The decline to 610,000 initial claims this week is potentially good news, but this is just one week of data, and this series is very volatile. As I mentioned in End of Recessions and Unemployment Claims, the four-week average of initial weekly unemployment claims is a closely watched indicator of the possible end of a recession. However, we need to see the four-week average decline by 20,000 to 40,000 or more from the peak before we get excited - and so far the four-week average is only off 8,500 from the peak of 659,500 last week.

by Calculated Risk on 4/16/2009 08:30:00 AM

Click on graph for larger image in new window.

Total housing starts were at 510 thousand (SAAR) in March, just above the revised record low of 488 thousand in January (the lowest level since the Census Bureau began tracking housing starts in 1959).

Single-family starts were at 358 thousand in March; just above the revised record low in January (356 thousand).

Permits for single-family units were 361 thousand in March, suggesting single-family starts will remain at about the same level in April.

Here is the Census Bureau report on housing Permits, Starts and Completions.

Note that single-family completions of 550 thousand are still significantly higher than single-family starts (358 thousand). This is important because residential construction employment tends to follow completions, and completions will probably decline further.

Total starts and single family starts declined in March (compared to February), and are both just above the record low set in January. This is the second month in a row with starts slightly above the record low - this is just a slight increase in total starts and single family starts are essentially flat with the record low.

It is still too early to call the bottom in January, however I do expect housing starts to bottom sometime in 2009.

by Calculated Risk on 4/16/2009 08:13:00 AM

From the WSJ: Mall Titan Enters Chapter 11

Mall owner General Growth Properties Inc. sought bankruptcy protection early Thursday in one of the largest real-estate failures in U.S. history ...

The bankruptcy will have far-reaching implications for the mall industry, including putting pressure on already declining property values of U.S. malls ...

The Mall is Flattened ...

by Calculated Risk on 4/16/2009 12:58:00 AM

From MarketWatch: China's economy expands 6.1% in first quarter

Gross domestic product expanded 6.1% in the first quarter from a year earlier, after expanding 6.8% in the fourth quarter, government data showed Thursday.
...
The Chinese government said Thursday that recent economic data showed "positive changes with better performance than expected."

A spokesman for the National Bureau of Statistics in a statement Thursday cited improvement in agriculture and a steady increase in industrial production, despite falling profits.

However, the bureau also warned that problems remain, including a fall in demand for Chinese exports, reduced government revenue and increased difficulties on employment.

"The national economy is confronted with the pressure of slowdown," the spokesman said.

China reports GDP growth on a year-over-year basis, so this is the growth from Q1 2008 (as opposed to quarterly growth annualized like in the U.S.). Since growth was fairly robust early last year, this suggest GDP is probably slightly positive in the most recent quarter.

by Calculated Risk on 4/15/2009 09:43:00 PM

From CNNMoney: Obama launches mortgage rescue plan

The Treasury Department announced Wednesday the first six participants to sign up for President Obama's plan. They include three of the nation's largest banks: JPMorgan Chase (JPM, Fortune 500), which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo (WFC, Fortune 500), $2.9 billion; and Citigroup (C, Fortune 500), $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.
...
The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.

This is the Making Home Affordable plan.

by Calculated Risk on 4/15/2009 05:46:00 PM

From Zach Fox at the North County Times: Mortgage defaults hit new high, spread to upscale neighborhoods

Mortgage delinquencies hit a new high in March ... according to a report released Tuesday.

The report also showed that notices of default, the first step in the foreclosure process, have spiked in the region's tonier neighborhoods ---- places that, until now, have avoided the mass foreclosures elsewhere ---- while appearing to have reached a plateau in lower-end regions, which have already been hammered.

In fact, areas such as Valley Center and Rancho Bernardo shot up to be among the leaders in North County for most foreclosure notices per 1,000 houses.
...
Default notices shot to new highs in areas of Carlsbad, Rancho Bernardo and Rancho Penasquitos. On the other hand, notices in foreclosure-prone neighborhoods such as Oceanside and Escondido were below peaks reached earlier.

In fact, one region of Rancho Bernardo saw more default notices in March per 1,000 homes than Oceanside's 92057 ZIP code ---- the most foreclosure-prone neighborhood in North County over the last two years.

Defaults: Movin' on up!

by Calculated Risk on 4/15/2009 04:01:00 PM

From Zero Hedge blog:

Some very ugly credit card charge-off data just out from Capital One. The February annualized rate of 8.06% has spiked by over 1% month-over-month to the current 9.33%, a very troubling deterioration ...

Allow me to add a graph ...

Click on graph for larger image in new window.

This graph shows the COF annualized credit card charge-off rate since January 2005.

Notice the spike in 2005 associated with a surge in bankruptcy filings ahead of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).

Credit card charge-offs in March (annualized) were almost as high as the peak in 2005 (9.33% in March compared to 9.75% in October 2005)

And a market graph too from Doug Short of dshort.com (financial planner): "Four Bad Bears".

This is the 2nd worst S&P 500 / DOW bear market in the U.S. in 100 years.

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 4/15/2009 02:56:00 PM

From Reuters: US to release bank stress data in May-White House

... "Early in May, you will see in a systematic and coordinated way the transparency of determining and showing to all involved some of the results of these stress tests," White House spokesman Robert Gibbs said.

The tests will assess how much of a "capital cushion" the banks are likely to need to stay healthy, given the current economic environment, he said.

"Our hope is that banks that are not healthy, or need help, will first and foremost seek that help privately, and then we'll take steps from there to assist them," Gibbs said.
...
U.S. regulators are preparing a guide to explain to the public the bank stress tests and how to interpret the results, sources have told Reuters.

"[T]he transparency of determining and showing"? What does that mean? "Some of the results"?

And a guide on how to interpret the results? We don't need no stinkin' guide! Just show us the data.

Update: The orginal "any stinkin' badges" from The Treasure of the Sierra Madre (ht Eli)

by Calculated Risk on 4/15/2009 02:04:00 PM

From the Fed: Beige Book

Reports from the Federal Reserve Banks indicate that overall economic activity contracted further or remained weak. However, five of the twelve Districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level.
emphasis added

On Real Estate and construction:

Housing markets remained depressed overall, but there were some signs that conditions may be stabilizing. Many Districts said factors such as homebuyer tax credits, low mortgage rates, and more affordable prices led to a rising number of potential buyers. The Richmond, Atlanta, Minneapolis, Kansas City, and San Francisco Districts noted a modest improvement in sales in some areas.

New home construction activity fell further, however, as inventories remained elevated. Nonetheless, several Districts, including Atlanta and Kansas City, said that inventories of unsold homes had turned down slightly.

Home prices continued to decline in most Districts, although a few reports noted that prices were unchanged or that the pace of decline had eased. Low mortgage rates were fueling refinancing activity. Outlooks for the housing sector were generally more optimistic than in earlier surveys, with respondents hopeful that increased buyer interest would lead to better sales.

Nonresidential real estate conditions continued to deteriorate over the past six weeks. Demand for office, industrial and retail space continued to fall, and there were reports of increases in sublease space. Rental concessions were rising. Property values moved lower as reality "set in." Construction activity continues to slow, and several Districts noted increased postponement of both private and public projects. Nonresidential construction is expected to decline through year-end, although there were some hopeful reports that the stimulus package may lead to some improvement.

Commercial real estate investment activity weakened further. Contacts said a decline in credit availability and markdowns on commercial property were keeping buyers and sellers on the sidelines.

It appears residential real estate is at or near a bottom in activity (but not in prices). However commercial real estate (CRE) is following residential off the cliff (this is the typical pattern - CRE follows residential). CRE will be crushed this year and into 2010.