by Calculated Risk on 5/13/2011 01:31:00 PM

Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.2 percent before seasonal adjustment.
...
The index for all items less food and energy rose 0.2 percent in April after increasing 0.1 percent in March. The shelter index, and its rent and owners' equivalent rent components, all repeated their March increases of 0.1 percent.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.8% annualized rate) in April. The 16% trimmed-mean Consumer Price Index increased 0.3% (3.3% annualized rate) during the month.

Over the last 12 months, core CPI has increased 1.3%, median CPI has increased 1.4%, and trimmed-mean CPI increased 1.7%.

Note: The Cleveland Fed has a discussion of a number of measures of inflation: Measuring Inflation

Click on graph for larger image in graph gallery.

This graph shows these three measure of inflation on a year-over-year basis.

These measures all show that year-over-year inflation is still low, but increasing lately.

Note: You can see the median CPI details for April here.

Although the year-over-year increases are below the Fed's inflation target, the annualized rates were above the target in April. Core CPI increased at an annualized rate of 2.2%, median CPI 2.8% annualized, and trimmed-mean CPI increased 3.3% annualized.

However, with the slack in the system, I expect the year-over-year core measures to stay below 2% this year.

by Calculated Risk on 5/13/2011 12:47:00 PM

The preliminary May Reuters / University of Michigan consumer sentiment index increased to 72.4 from 69.8 in April.

Click on graph for larger image in graphic gallery.

This was slightly above the consensus forecast of 70.0.

In general consumer sentiment is a coincident indicator and is usually impacted by employment (and the unemployment rate) and gasoline prices.

This is still a low reading, but sentiment will probably improve later this month if gasoline prices fall.

by Calculated Risk on 5/13/2011 12:37:00 PM

A quick note ... Google's blogger has been down since yesterday afternoon.

I'll have some posts up shortly. The posts from yesterday are apparently being restored. (Yahoo mail was down too, but is back up now). The wonders of technology. Best to all

by Calculated Risk on 5/12/2011 03:54:00 PM

Mostly I focus on the housing numbers: inventory of homes for sale, homes sold, house prices, foreclosures, mortgage delinquencies, price-to-rent and price-to-income ratios and more.

Recently I've noticed a shift in sentiment - what I've been calling "hate for housing". I saw this change in sentiment during previous housing busts too, and although it doesn't mean prices have bottomed, it suggests we are getting close (the "hate" can last for a few years).

Here are two earlier posts on this shift in sentiment: Housing: Feeling the Hate and More "Hate" for Housing

And here are a couple more articles:

• From Bloomberg: Apartment Rents and Occupancies Are Poised to Rise in U.S., Economists Say

The decrease in [house] prices has turned homeownership from a source of financial security to a burden for many people, said speakers at [a conference in Vancouver].

“Now it’s the source of risk,” said Karl Case, professor emeritus of economics at Wellesley College and co-creator of the Standard & Poor’s/Case-Shiller home-price indexes.

And from David Leonhardt at the NY Times Economix: Building Wealth Through Renting

You have probably heard a version of the idea that renting a house is tantamount to flushing money down the toilet, while buying a home is building equity for your future. Well, it’s wrong, at least much of the time.

You don’t have to listen only to me on this point. Here is Jordan Rappaport, a senior economist at the Federal Reserve Bank of Kansas City, in a paper published last year:

Conventional wisdom has long suggested that homeownership is an effective way to build household wealth. Consistent with this belief, homeownership is often considered to be a key part of the American Dream ...

[Yet the] analysis in this article shows that while homeownership often builds more household wealth than renting and investing the saved cash flow, it also often does not. More specifically, for most ten-year occupancies beginning during the 1970s and 1990s, homeownership unambiguously built more wealth. In contrast, for most occupancies beginning during the 1980s, renting and investing unambiguously built more wealth. Renting and investing is also likely to build more wealth than homeownership for many of the occupancies that started in 2000 through 2009. These results suggest that either homeownership or renting and investing can be reasonable strategies for building household wealth.

In other words, the conventional wisdom that homeownership is usually the better strategy is probably too strong. For many households in many years, renting and investing the saved cash flow has built more wealth than homeownership ...

[Emphasis added.]

by Calculated Risk on 5/11/2011 04:23:00 PM

Victor Calanog, VP Research & Economics at Reis, Inc presented their quarterly briefing on commercial property sectors today. A few highlights:

• Apartments: Vacancy rates are falling and rents rising (see: Reis: Apartment Vacancy Rates fell sharply in Q1, Lowest in almost three years). Calanog expects rents to increase 4%+ in 2011 and 2012, and for the apartment vacancy rate to fall to 5.5% this year (the lowest since 2001). Note that the Reis survey is just for large cities, but this decline in vacancy rates is happening just about everywhere.

• Offices: Vacancy rates are falling and rents rising, but the recovery will be more gradual for offices than apartment. Calanog is expecting rents to rise slightly this year, and about 2.5% in 2012. He expects the vacancy rate to fall to 17.1% this year from the 17.5% in Q1 (see: Reis: Office Vacancy Rate declines slightly in Q1)

• Malls: Malls are still under pressure and Calanog expects vacancy rates at neighborhood and community shopping centers to rise slightly and rents to fall slightly this year. (see: Reis: Mall Vacancy rates increase in Q1). Reis reported that malls are seeing an echo effect from the loss of anchor tenants earlier in the cycle as smaller tenants leave malls with no anchor tenant (either by contract or when their lease expires).

by Calculated Risk on 5/11/2011 12:02:00 PM

This is the new UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index^TM

Click on graph for larger image in graph gallery.

This graph shows the index since January 2000.

Press Release: Pulse of Commerce Index Falls 0.5 percent in April

The Ceridian-UCLA Pulse of Commerce Index™ (PCI), issued today by the UCLA Anderson School of Management and Ceridian Corporation fell 0.5 percent on a seasonally and workday adjusted basis in April, marking a continuation of the see-saw economic performance experienced over the past twelve months.

“Though down in April, the decline offset only a fraction of the exceptional 2.7 percent gain posted in March, which was sufficient to drive continued growth in the three month moving average of the PCI,” said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. “However, the disappointing 1.8 percent growth of real GDP in the first quarter remained consistent with the pattern of modest, fitful economic growth reflected by the PCI since the first quarter of 2010. The most recent report reinforces our long held cautious, below consensus outlook for growth in GDP and employment.”

“Until we see acceleration in the PCI, we expect monthly employment gains to remain range bound between 150,000 and 200,000 new jobs,” Leamer continued.
...
“Over time, the PCI has shown a substantial correlation with industrial production,” explained Craig Manson, senior vice president and Index expert for Ceridian. “... Based on the relatively weak April result, the PCI is calling for growth of 0.25 percent in industrial production when the government reports its number on May 17.”
...
The Ceridian-UCLA Pulse of Commerce Index™ is based on real-time diesel fuel consumption data for over the road trucking ...

This index was useful in tracking the slowdown last summer.

Note: This index does appear to track Industrial Production over time (with plenty of noise) and this suggests a weaker reading for April. Industrial Production for April will be released on May 17th.

by Calculated Risk on 5/11/2011 10:20:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings in March was 3.1 million, up from 3.0 million in February. This marks the first time since November 2008 that job openings have been at or above 3.0 million for two consecutive months. The job openings level has trended up since the end of the recession in June 2009 (as designated by the National Bureau of Economic Research) but remains well below the 4.4 million openings when the recession began in December 2007.

The following graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Unfortunately this is a new series and only started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for March, the most recent employment report was for April.

Click on graph for larger image in graph gallery.

Notice that hires (purple) and total separations (red and blue columns stacked) are pretty close each month. When the purple line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

In general job openings (yellow) has been trending up - and are up 16% from March 2010. However the overall turnover remains low.

by Calculated Risk on 5/11/2011 08:40:00 AM

The Department of Commerce reports:

[T]otal March exports of $172.7 billion and imports of $220.8 billion resulted in a goods and services deficit of $48.2 billion, up from $45.4 billion in February, revised. March exports were $7.7 billion more than February exports of $165.0 billion. March imports were $10.4 billion more than February imports of $210.4 billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through March 2011.

Both imports and exports increased in March (seasonally adjusted). Exports are well above the pre-recession peak, but imports are now increasing at a faster rate - mostly because of oil prices.

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

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 sharply in March as both the quantity and price increased - prices averaged $93.76 per barrel in March, up from $87.17 in February. Prices will be even higher in April.

The trade deficit was larger than the expected $47 billion.

by Calculated Risk on 5/11/2011 07:18:00 AM

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

The Refinance Index increased 9.0 percent from the previous week, and is at its highest level since the week ending March 18, 2011. The seasonally adjusted Purchase Index increased 6.7 percent from one week earlier.
...
"The 30-year fixed mortgage rate is now 46 basis points below its 2011 peak, and has decreased for four straight weeks by a total of 31 basis points,” said Michael Fratantoni, MBA’s Vice President of Research. “Over this four week span, the refinance index has increased by about 18 percent. Despite the recent increases however, refinance application volumes remain more than 50 percent below levels seen last fall.”
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.67 percent from 4.76 percent, with points increasing to 1.10 from 0.75 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 30-year rate is at its lowest since December 2010.

Click on graph for larger image in graph gallery.

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

Refinance activity increased as mortgage rates fell to the lowest level since December 2010.

The four week average of purchase activity is at about 1997 levels, although this doesn't include the very high percentage of cash buyers. This suggests weak existing home sales through June (not counting cash buyers).

by Calculated Risk on 5/10/2011 11:25:00 PM

From David Leonhardt at the NY Times: Rent or Buy, a Matter of Lifestyle

...Mortgage rates are near record lows and will probably rise in coming years. Home prices may not be done falling, but they probably don’t have much further to go in most places either. Rents, on the other hand, seem set to increase, thanks to low vacancy rates.
...
[Y]ou can make just as strong a case in many places for renting. For starters, neither mortgage rates nor rents are likely to rise rapidly. Even more important, house prices, relative to rents, remain higher than their long-term average, especially in much of California, the Pacific Northwest and the New York region. In these places, among others, renting is often cheaper than buying — still.

I’ve made a near-annual habit in this column of looking at the rent-versus-buy decision, and The Times has built an online calculator so that readers can make their own comparisons. The idea isn’t only to help potential buyers but also to figure out whether and where house prices are overvalued. ....

As this year’s spring buying season nears its peak, the relative merits of renting and buying are closer than they have been since the housing bubble began inflating almost a decade ago.

The rent vs. buy decision is getting closer, but nationally the price-to-rent index is still a little high. Earlier today I updated the price-to-rent index using the CoreLogic House price index. The index has fallen to 1999 levels and is now only about 10% above the lows of the '90s. Of course there are also local supply-and-demand issues (many areas are seeing a high level of distressed properties coming on the market again), but with house prices still falling - and rents rising - this measure is getting close to normal levels.

Earlier:
• NFIB: Small Business Optimism Index declined in April
• CoreLogic: House Prices declined 1.5% in March, Prices now 4.6% below 2009 Lows
• Real CoreLogic House Price Index, and Price-to-Rent Ratio, back to 1999 Levels