by Calculated Risk on 1/13/2011 09:13:00 AM

The Department of Commerce reports:

[T]otal November exports of $159.6 billion and imports of $198.0 billion resulted in a goods and services deficit of $38.3 billion, down from $38.4 billion in October, revised. November exports were $1.2 billion more than October exports of $158.4 billion. November imports were $1.1 billion more than October imports of $196.8 billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through November 2010.

Imports have been mostly flat since May, and exports have started increasing again after the mid-year slowdown.

The second graph shows the U.S. trade deficit, with and without petroleum, through November.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The petroleum deficit increased in November as import prices continued to rise - averaging $76.81 in November. Prices will be even higher in December. The deficit with China increased to $25.634 billion from $25,517 in October. Once again oil and China deficits are essentially the entire trade deficit (or even more).

by Calculated Risk on 1/13/2011 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Jan. 8, the advance figure for seasonally adjusted initial claims was 445,000, an increase of 35,000 from the previous week's revised figure of 410,000. The 4-week moving average was 416,500, an increase of 5,500 from the previous week's revised average of 411,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims for the last 40 years. It is difficult to compare directly to the '70s and '80s because the labor force is larger now and other changes.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased this week by 5,500 to 416,500.

Although weekly claims increased sharply this week - to the highest level since October - the four week average is still much lower than a few months ago.

by Calculated Risk on 1/12/2011 08:32:00 PM

Here is an REO tour in San Diego from Jim the Realtor. Jim makes an interesting point that there were no postponements for some of these - and that appears to be a change in procedures.

The one at 6:22 is interesting. The owner paid $384,000 in 1988, and quitclaimed it to a relative in 2003 and the property was free and clear. Then "the refi parade started". The amount owed on the first was over $1.1 million - and there several other loans.

by Calculated Risk on 1/12/2011 05:13:00 PM

To put the following forecasts into prespective, there were around 474,000 single-family housing starts in 2010, and about 588,000 total housing starts (the final numbers are not available yet).

From MarketWatch: Home-building rebound in 2011 a small matter

Home building is set for a rebound in 2011, with single-family housing starts projected to climb 21% to 575,000 units, the [National Association of Home Builders chief economist David Crowe] said Wednesday.

I expect a rebound for housing starts, but that forecast seems overly optimistic. Economist Tom Lawler is forecasting single-family starts at 520,000 in 2011.

And here is an even lower forecast:

“We do not see any significant increase in starts occurring this year,” said Edward Sullivan, chief economist for the Portland Cement Association. ... Sullivan forecast single-family housing starts will hit 492,000 in 2011, a 3.4% increase from 2010.

Here is a long term graph of housing starts through November ...

Click on graph for larger image in graph gallery.

Even if single-family housing starts increased to 575,000 (the NAHB forecast) that would still leave starts below the bottom of the '90/'91 recession.

Hopefully housing starts will not rebound too much, and the excess vacant housing inventory will be reduced in 2011.

The Census Bureau will report December and 2011 housing starts next Wednesday, January 19th.

by Calculated Risk on 1/12/2011 02:00:00 PM

Fed's Beige Book:

Reports from the twelve Federal Reserve Districts suggest that economic activity continued to expand moderately from November through December.
...
Contacts in the manufacturing sector in all Districts reported that activity continued to recover, with the Richmond and Chicago Districts citing especially solid gains in orders. However, the Boston, Atlanta, and Dallas Districts noted that business remained weak for manufacturers selling into the construction sector. Retailers in all Districts indicated that sales appeared to be higher in this holiday season than in 2009 and, in some cases, better than expectations.

And on real estate:

Activity in residential real estate and new home construction remained slow across all Districts. A majority of the Districts, including Boston, New York, Cleveland, Atlanta, Chicago, Minneapolis, Dallas, and San Francisco characterized local housing markets as weak and sluggish with little change from the previous reporting period.
...
High levels of existing home inventories continued to damp the pace of new home construction in most Districts reporting on construction, although Boston, Richmond, Dallas, and San Francisco mentioned pick-ups in multifamily construction within their Districts. Home prices generally declined or held steady in the New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City, Minneapolis, and San Francisco Districts; the New York, Atlanta, Chicago, and San Francisco Districts mentioned distressed properties placing downward pressure on prices.
...
Commercial real estate markets displayed mixed results across the Districts again this reporting period, as leasing markets exhibited increasing signs of recovery and nonresidential construction remained weak.

This fits with other recent data. One of the keys is the pick-up in multifamily construction - I expect this sector to provide some boost to GDP and employment this year.

by Calculated Risk on 1/12/2011 11:19:00 AM

From the WSJ: Illinois House Passes Big Income-Tax Increase

Among the increases in the bill, the individual income-tax rate would jump to 5%, from 3%. ... The corporation tax would also rise to 7% from 4.8%.

It sounds like this will pass in the Illinois state senate and be signed into law.

This is a key theme for 2011: State and local spending cuts and tax hikes. Question #7 for 2011: State and Local Governments. This will be a drag on growth and employment as the states try to get their fiscal houses in order.

Also Meredith Whitney was on CNBC: Whitney Defends Muni Call, Sees 'Indiscriminate Selling'. Her key call was not the number of muni defaults, but the size of the defaults. On 60 Minutes Whitney said about this year: "You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults." As I noted in the State and Local government post, I think that level of defaults is unlikely.

by Calculated Risk on 1/12/2011 08:27:00 AM

Portugal sold €1.25bn of four-year and 10-year bonds and the auction was "successful" with the 10-year yield at 6.71%. There is plenty of skepticism (via the Financial Times):

Howard Wheeldon, senior strategist at BGC Partners, said: “Even though the government managed to get the latest bond auction away does not mean that this problem is in any way solved.”

Apparently the EU is considering a €60 billion aid package for Portugal: Portugal Aid, Buybacks, Debt Rules Weighed in EU Plan

European governments are considering aid for Portugal, debt buybacks, lower interest rates on rescue loans and guarantees against excessive debt as part of a package to quell the financial crisis, according to two people with direct knowledge of the talks.

The plan, which may include a loan to Portugal of about 60 billion euros ($78 billion) and purchases of outstanding Greek debt, would mark an attempt to contain a crisis ... Euro-area finance ministers will discuss elements of the package next week ... decisions may wait until a scheduled summit of political leaders on Feb. 4

Here are three stories on the Portugal bond auction:

• From the WSJ: Portugal's Auction Soothes Nerves

• From the NY Times: Portugal Bond Sale Succeeds Despite Budget Woes

• From the Financial Times: Lisbon succeeds with debt auction

Italy and Spain have auctions this week too.

by Calculated Risk on 1/12/2011 07:00:00 AM

The MBA reports: Mortgage Refinance Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 4.9 percent from the previous week. The seasonally adjusted Purchase Index decreased 3.7 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.78 percent from 4.82 percent, with points decreasing to 0.91 from 1.10 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

Although there was an increase in existing home sales in December, the four-week moving average of the purchase index suggests weak existing home sales through the first couple months of 2011.

by Calculated Risk on 1/11/2011 08:22:00 PM

The story remains the same - indicators are mixed, but mostly show gradual improvement - and ongoing problems in Europe and falling house prices ...

• NFIB: Small Business Optimism index declines slightly in December

Click on graph for larger image in graph gallery.

The first graph shows the small business optimism index since 1986. The index decreased slightly to 92.6 in December from 93.2 in November.

According to the NFIB: "This marks the 36th month of Index readings in the recession level". Here is the NFIB press release: NFIB Small Business Optimism Index Remains Weak

• Ceridian-UCLA: Diesel Fuel index increases in December

The Ceridian-UCLA Pulse of Commerce Index™ (PCI), a real-time measure of the flow of goods to U.S. factories, retailers and consumers, surged 2.4 percent in December and pushed the PCI above its previous 2010 peak established in May.

Here is the press release: Year-End Surge Reported in Latest Ceridian-UCLA PCI

• CoreLogic: House Prices declined 1.6% in November

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index is down 5.07% over the last year, and off 30.9% from the peak.

The index is only 1.2% above the low set in March 2009, and I expect to see a new post-bubble low for this index - possibly as early as next month.

• AAR: Rail Traffic increases in December.

The AAR reports carload traffic in December 2010 was up 9.4% compared to December 2009, and traffic is also above December 2008. Intermodal traffic (using intermodal or shipping containers) is up 13.3% over December 2009 and up over December 2008.

• BLS: Job Openings steady in November, Labor Turnover still Low

• Europe Update: Portugal Bond Auction Wednesday

by Calculated Risk on 1/11/2011 04:35:00 PM

• This is a key point from Landon Thomas at the NY Times: Foreigners Shun Europe’s Bonds, and Debt Piles Up

With its 10-year debt trading close to the historic high of 7 percent reached last week, Portugal will try Wednesday to sustain what many have come to see as nothing more than a form of bond market charades when it attempts to raise up to €1.25 billion, or $1.62 billion, in long-term financing — debt that is expected to come largely from the country’s already depleted banking system.

This has happened in other countries too (there was even story in El Mundo this morning that the Spanish government had contacted local banks about buying bonds without going through an auction process).

An excellent article about the "bond market charades".

• And from Marcus Walker and Stephen Fidler at the WSJ: EU Weighs Boosting Bailout Fund

Top civil servants from EU finance ministries discussed an overhaul of Europe's main bailout mechanism, the €440 billion ($568 billion) European Financial Stability Facility ...

Preparing for Spain?

• And from David Oakley, Lindsay Whipp and Peter Spiegel at the Financial Times: Japan pledges to buy eurozone bonds. At least there are buyers for the EFSF bonds.