by Calculated Risk on 5/03/2011 04:10:00 PM

Click on graph for larger image in graph gallery.

Based on an estimate from Autodata Corp, light vehicle sales were at a 13.17 million SAAR in April. That is up 17% from April 2010, and up 0.8% from the sales rate last month (March 2011).

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for April (red, light vehicle sales of 13.17 million SAAR from Autodata Corp).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

This was above the consensus estimate of 13.0 million SAAR.

Note: The Japanese supply chain disruptions will impact sales over the next several months and I expect sales to be below this level for the next 6 months or so.

by Calculated Risk on 5/03/2011 02:32:00 PM

Note: The FHA released the February Monthly Report. The report shows the FHA REO inventory was at 68,801 at the end of February, up 54.2% from February 2010! From economist Tom Lawler:

HUD finally got around to releasing the February Monthly Report to the FHA Commissioner, and while the report clearly continued to have “data reporting” problems, the REO section of the report – IF correct – suggests that FHA has some serious REO inventory management problems.

Here are data from various monthly reports on FHA-insured SF property “conveyances,” property sales, and SF REO properties.

FHA SF Property Sales, Conveyances, and REO Inventory
	Sales	Conveyances	REO Inventory
9-Dec	6,748	7,393	41,166
10-Jan	5,827	7,440	42,971
10-Feb	6,091	7,835	44,605
10-Mar	8,307	9,538	45,680
10-Apr	7,826	7,745	45,795
10-May	7,719	6,878	45,215
10-Jun	8,893	8,487	44,850
10-Jul	8,508	8,341	44,944
10-Aug	7,686	9,810	47,007
10-Sep	7,439	11,411	51,487
10-Oct	7,289	9,908	54,609
10-Nov	5,817	6,752	55,488
10-Dec	2,749	7,728	60,739
11-Jan	2,632	7,709	65,639
11-Feb	4,221	7,383	68,801

Recall that the above table does not appear to be stock/flow consistent, mainly because there are occasionally “adjustments,” which I am not showing.

According to this report, the pace of FHA property sales began to slow significantly last November, was virtually at a crawl in December and January, and remained shockingly low given the inventory levels in February. As a result, the reported inventory of FHA REO has exploded upward to 68,801 at the end of February from 54,609 at the end of October and 44,605 at the end of last February.

I can’t recall any time in recent history when the FHA has “let” REO inventories jump at the pace observed since last summer, and if the numbers in the commissioner report are correct, it suggests that there may be a FHA REO property management “issue.” Last August HUD announced that it was launching the third generation of its REO Management and Marketing program, with new contracts that would “streamline HUD's operations, capitalize on the expertise of its potential vendors, and provide flexibility to meet changing market conditions in the REO industry.” Under “M&M III” the functions of the maintenance of REO properties and the marketing of REO properties was separated. I have no idea if this change has been responsible for the alarmingly slow sales pace of FHA REO, but someone should look into this.

by Calculated Risk on 5/03/2011 11:00:00 AM

Note: The real key is the seasonally adjusted annual sales rate (SAAR) compared to the last few months, not the year-over-year comparison provided by the automakers.

From MarketWatch: General Motors U.S. April sales rise 26.4%

[GM] said Tuesday that U.S. April sales rose 26.4% to 232,538 vehicles from 183,997 in the year-ago period.

Once all the reports are released, I'll post a graph of the estimated total April light vehicle sales (SAAR) - usually around 4 PM ET.

Most estimates are for a decrease to 13.0 million SAAR in April from the 13.1 million SAAR in March. Sales in April 2010 were at a 11.25 million SAAR.

Update: From MarketWatch: Ford U.S. April sales increase by 16.4%

I'll add the reports from the other major auto companies as updates to this post. Even if sales in April were solid, the next several months will probably see weaker sales due to supply disruption issues related to the events in Japan.

by Calculated Risk on 5/03/2011 08:50:00 AM

First some details from Bloomberg: Geithner Extends Debt-Ceiling Deadline to August

The U.S. can borrow until Aug. 2 after reaching the $14.29 trillion limit because of “stronger-than-expected tax receipts” and by taking “extraordinary measures” such as suspending the sale of bonds to finance state and local infrastructure projects, Geithner said in a letter to congressional leaders yesterday. He previously said the deadline would be July 8. Without such measures, the legal limit will be reached May 16 ...

Ezra Klein writes: The debt-ceiling drama begins

[T]here’s always the chance that the spectacle of Congress bickering towards a default will cause the market to freak out even though we technically have a couple of weeks left. This is the Clint Eastwood theory of money management, in which Congress needs to ask itself, day after day, week after week, whether it feels lucky. And it’s totally reckless and unnecessary.

There is very little drama; the debt ceiling will be raised. I suppose this is entertaining for anyone who enjoys watching politicians preen, posture and generally make fools of themselves.

Udpate: from Stan Collender Debt Ceiling Questions in the House

[G]iven recent polls that show seven of 10 Americans do not want the debt ceiling raised, will most or all House Members have to vote against the bill at least once so they can show their constituents that they were against it before they were for it? Will Wall Street — especially foreign investors — get spooked if a debt ceiling increase bill goes down in the House, or will it recognize that an initial “no” vote is needed to make it easier for a bill to be enacted?

Expect a "no" vote before a "yes" vote. Oh, the drama :-)

by Calculated Risk on 5/02/2011 08:26:00 PM

From Reuters: ECB official open to extending Greek debt maturities

European Central Bank policymaker Nout Wellink said on Monday that he was open to the idea of extending maturities on Greek debt ...

Wellinck said: “Restructuring is essentially saying: 'Send me the bill. We feel sorry for you.' You shouldn't do that. Paying the bill hurts.

“It may sometimes take longer than expected. It can sometimes lead to a restructuring - but not in the way some advocate it to be - that ... leads to a longer maturity of debt.”

This isn't the official position, but some sort of restructuring seems priced in with the yield on Greece ten year bonds at 15.7% today and the two year yield up to 25.9%.

Earlier:
• ISM Manufacturing Index at 60.4 in April
• Construction Spending increased in March

Weekend:
• Summary for Week ending April 29th
• Schedule for Week of May 1st

by Calculated Risk on 5/02/2011 04:19:00 PM

From Bloomberg: New Households Forming at Fastest Rate Since ’07

Millions of young adults like Webb are starting to leave their parents’ homes, creating households at the fastest rate since 2007.
...
Between 750,000 and 1 million new households will be created in 2011, predict UBS Securities LLC’s Maury Harris and IHS Global Insight’s Patrick Newport. That compares with just 357,000 added in the year ended March 2010, the lowest on record, according to the Census Bureau.

First, the 357,000 number is probably based on the Census Bureau's HVS (or perhaps the ACS) and those surveys are not designed to track household formation in real time. However I agree that household formation will probably increase sharply this year.

“On the personal ego thing, you don’t want to be 24 and living in your parents’ house,” said [Jesse Hipp, 24, who graduated from the University of Arkansas in 2009, still lives with his parents in Fayetteville, Arkansas]
...
“Most guys who live at home beyond some young age walk around with a great big L on their forehead. It is just not acceptable. As soon as these young adults get a job and keep it for some reasonable period, they are gone. As more young people feel they will be able to keep a job, bingo, they are gone.” [said demographic-trends analyst Peter Francese].

Many people doubled up or moved in to their parents' basements during the recession, and this is pent up demand for housing - well, once these people find jobs. Note: housing includes both apartments and owner occupied units, and most of these people will rent will they move out.

This reminds us that what we would like to know is 1) the number of excess housing units, 2) the rate of household formation, and 3) the net number of housing units being added to the stock.

As I mentioned on Saturday, we will get a better feel for the number of excess household units this month as the Census bureau releases more Census 2010 data (as of April 1, 2010). We already know the net number of housing units added to the stock will be at or near a record low this year. With a million new households formed this year, the excess supply of vacant housing units will be reduced significantly (but will still be high).

by Calculated Risk on 5/02/2011 02:25:00 PM

From the Fed April 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices:

The April survey indicated that, on net, bank lending standards and terms generally had eased somewhat further during the first quarter of this year, and that the demand for commercial and industrial loans (C&I) and for commercial mortgages increased, while that for residential mortgages continued to decrease.
...
Regarding changes in standards and terms on loans to households, several large banks eased lending policies on credit card and auto loans, and the net fraction of banks that reported having become more willing to make consumer installment loans rose to its highest level since the first half of 1994. Moderate net fractions of banks reported a net easing of the spreads of auto loan rates over their own cost of funds, and roughly similar fractions of large banks also eased several other terms on such loans.

Standards are still tight, but banks are more willing to make consumer loans - and C&I loan demand continues to increase.

by Calculated Risk on 5/02/2011 11:39:00 AM

The Census Bureau reported this morning that overall construction spending increased in March compared to February (seasonally adjusted).

[C]onstruction spending during March 2011 was estimated at a seasonally adjusted annual rate of $768.9 billion, 1.4 percent (±1.6%)* above the revised February estimate of $758.6 billion. The March figure is 6.7 percent (±1.8%) below the March 2010 estimate of $824.0 billion.

Private construction spending also increased in March:

Spending on private construction was at a seasonally adjusted annual rate of $476.1 billion, 2.2 percent (±1.4%) above the revised February estimate of $466.0 billion. Residential construction was at a seasonally adjusted annual rate of $229.1 billion in March, 2.6 percent (±1.3%) above the revised February estimate of $223.2 billion. Nonresidential construction was at a seasonally adjusted annual rate of $247.0 billion in March, 1.8 percent (±1.4%) above the revised February estimate of $242.7 billion.

Click on graph for larger image in graph gallery.

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

Residential spending is 66% below the peak in early 2006, and non-residential spending is 40% below the peak in January 2008.

I expect residential spending to pick up a little this year (mostly multifamily) - and residential will probably be above non-residential spending by the end of the year.

by Calculated Risk on 5/02/2011 10:00:00 AM

PMI at 60.4% in April, down from 61.2% in March. The employment index was at 62.7 and new orders at 61.7. All slightly slower than in March, but still very strong.

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

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The recent trend of rapid growth in the manufacturing sector continued in April as the PMI registered above 60 percent for the fourth consecutive month. The New Orders and Production Indexes continue to drive the PMI, as they have both exceeded 60 percent for five consecutive months. Manufacturing employment appears to have developed significant momentum, as the Employment Index readings for the first four months of 2011 are the highest readings in the last 38 years. Inventory growth also took place in April after two months of destocking; however, the inventory restocking would appear to be necessitated by the strong performance in new orders. While the manufacturing sector is definitely performing above most expectations so far in 2011, manufacturers are experiencing significant cost pressures from commodities and other inputs."

Click on graph for larger image in new window.

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

This was a strong report and above expectations of 59.5%.

by Calculated Risk on 5/02/2011 08:40:00 AM

From the NY Times: Survey Says Small-Business Lending Is Surging (ht Sebastian)

In the third quarter of 2010, five percent of the small companies surveyed [by Greenwich Associates] applied for a loan, a share that tripled in the last three months of the year. In the first three months of 2011, the figure leaped to 29 percent. Loan demand is typically highest at the end of the year, according to Marc Bernstein, the head of small-business banking for Wells Fargo. That would make the jump in applicants in the first months of 2011 especially notable.

The Federal Reserve is expected to release the April 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices later today. The January survey indicated some slight easing of standards and more demand for commercial and industrial (C&I), but not for other businesses. It will be interesting to see if the Fed survey for April saw any increase in demand from small firms.

Weekend:
• Summary for Week ending April 29th
• Goldman estimates 3.5 million Excess Vacant Housing Units.
• Schedule for Week of May 1st