by Calculated Risk on 9/13/2011 09:00:00 AM

This is the UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index Remains in Idle – Down 1.4 Percent in August

The Ceridian-UCLA Pulse of Commerce Index™ (PCI), issued today by the UCLA Anderson School of Management and Ceridian Corporation fell 1.4 percent in August on a seasonally and workday adjusted basis, following a 0.2 percent decline in July.

“The August number supports the pattern of sluggish economic growth coming out of a recession, which is something that we’ve seen in the past. What we’re experiencing is the ‘new normal,’ where the U.S. economy will continue to stumble forward until a new growth engine is identified. Essentially, the economy is in need of an innovation burst.” [said Ed Leamer, chief economist for the Ceridian-UCLA Pulse of Commerce Index and director of the UCLA Anderson Forecast.]

“The PCI continues to prove its value in providing insight into the U.S. economy. While previously being flat, recent, seven-day-average diesel volumes have dropped by 2 percent from July 23 to August 19, excluding the holiday impact. However, the last week of August suggests some improvement.”

Click on graph for larger image in graph gallery.

This graph shows the index since January 2000.

The weakness in the PCI over the last several months called for a zero percent change in the July Industrial Production – the initial release of 0.9% was stronger, although subject to revisions. Due to the continued weakness evident in the PCI, the forecast for August Industrial Production is a 0.26 percent decline when released on September 15.
...
The Ceridian-UCLA Pulse of Commerce Index™ is based on real-time diesel fuel consumption data for over the road trucking ...

This index has declined for two consecutive months after increasing slightly earlier in the year. The little bit of good news was the reported improvement during the last week of August.

Note: This index does appear to track Industrial Production over time (with plenty of noise).

by Calculated Risk on 9/13/2011 07:54:00 AM

From the National Federation of Independent Business (NFIB): Small Business Confidence Takes Huge Hit: Optimism Index Now in Decline for Six Months Running

Confidence in the economy among small-business owners tumbled in August, as NFIB’s monthly Small-Business Optimism Index dropped a whopping 1.8 points, settling at a disturbingly low 88.1. The Index has now been in decline for a full six months. Unlike previous months, August’s decline comes in the immediate aftermath of the debt ceiling debate ...

Sales remain the largest problem for small firms—a full quarter identifying “poor sales” as their top business problem.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Click on graph for larger image in graph gallery.

The first graph shows the small business optimism index since 1986. The index decreased to 88.1 in August from 89.9 in July.

Optimism has declined for six consecutive months now.

The second graph shows the net hiring plans for the next three months.

Hiring plans were still low in August, but positive and improving.

According to NFIB: “While the readings remain historically weak, we can find a grain of encouragement as we look at hiring prospects. Over the next three months, 11 percent plan to increase employment (up 1 point), and 12 percent plan to reduce their workforce (also up 1 point), yielding a seasonally adjusted net 5 percent of owners planning to create new jobs, which is a 3 point improvement over July."

Weak sales is still the top business problem with 25 percent of the owners reporting that weak sales continued to be their top business problem in August.

In good times, owners usually report taxes and regulation as their biggest problems.

The optimism index declined sharply in August due to the debt ceiling debate. This index has been generally slow to recover and has declined for six consecutive months - probably due to a combination of the recent economic weakness, and also the high concentration of real estate related companies in the index.

by Calculated Risk on 9/12/2011 11:22:00 PM

From the LA Times: Europe fears Greece is heading inexorably toward default

European politicians, who denied for months that bankruptcy was an option as Greece struggled to bring down an enormous budget deficit, are now beginning to acknowledge the possibility.

Nervous investors appear to increasingly believe default is just around the corner. They have withdrawn billions of dollars from Europe's stock markets over the last few weeks.
...
Banks in France and Germany scrambled to assure investors that they could survive their exposure to sovereign debt

And a discussion of the German views from Der Spiegel: Germany Plans for Possible Greek Default

The tougher talk is much more than show. The rest of Europe is losing patience with Athens. ...

The disappointment runs particularly deep in Berlin, where the government's crisis-management policy has clearly been going around in circles. In the beginning, the chancellor said that the Greeks ought to help themselves out of their own crisis. Then came the first and subsequently the second aid package. The new approach, the government said, was to rescue Greece so that the other debtor nations would be spared.

Now the Germans have come full circle, and the prevailing emotion is fear of a never-ending debacle in Athens. "Enough is enough," says one senior government official ... With a mixture of resignation and fatalism, Merkel and Schäuble are facing up to the inevitable and thinking the previously unthinkable: Greece is going bankrupt, and not even its withdrawal from the monetary union can be ruled out anymore.
...
The planning for the day of reckoning is already underway, in departments at the Finance Ministry in Berlin as well as in task forces at the EU in Brussels. German Finance Ministry officials hope that a Greek bankruptcy would be manageable, as long as European politicians keep their cool and the bailout funds are increased as planned.

by Calculated Risk on 9/12/2011 07:37:00 PM

Note: I checked the BEA data (table Table 2.4.5U. Personal Consumption Expenditures by Type of Product), and the BEA shows U.S. consumers spent $377 billion in 2008 on "Gasoline and other motor fuel", and are on pace to spend $393 billion this year. So the headline number might be too high - also, as a percent of GDP, gasoline expenditures will be lower this year than in 2008.

From Ronald White at the LA Times: U.S. motorists may spend a record $491 billion for gasoline this year

Fuel prices have been high this year because of expensive oil and increased exports of gasoline and diesel to other countries. Gasoline prices may decline for a few weeks after the switch to winter blends, which are less costly to produce than summer blends. But gas price woes won't go away, experts said.

"The 30 days between now and mid-October will be the most hospitable days in the country for dropping prices," said Tom Kloza, chief oil analyst for the Oil Price Information Service. "But then the drumbeats will start about fears of a second Arab Spring [of political unrest]. Demand outside of Europe and the U.S. continues to rise. By spring, Americans will be wrestling with $4 gasoline in a lot of markets."
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Both the U.S. and California averages were well short of the all-time highs set in 2008 of $4.114 and $4.588, respectively. But overall, drivers have shelled out more for fuel this year than in 2008 because prices rose faster this time and have stayed high longer.

The 2008 average U.S. price was about $3.25 a gallon, said Kloza, who came up with the estimate of $491 billion in gasoline costs for 2011. This year, Kloza said, the average price is about $3.66 a gallon.

by Calculated Risk on 9/12/2011 04:16:00 PM

Europe was the focus again today with no U.S. economic releases. This will be a busy week for economic data, especially later in the week:
• Schedule for Week of Sept 11th


Click on graph for larger image in new window.

The first graph shows the S&P 500 since 1990 (this excludes dividends).

The dashed line is the closing price today. The S&P 500 was first at this level in July 1998; over 13 years ago.

The second graph (click on graph for larger image) from Doug Short shows the wild market swings over the last few weeks.

by Calculated Risk on 9/12/2011 12:00:00 PM

Back in early 2009, I wrote a couple of posts arguing there would be an increase in auto sales - Vehicle Sales (Jan 2009) and Looking for the Sun (Feb 2009). Here is an update to the U.S. fleet turnover graph.

This graph shows the total number of registered vehicles in the U.S. divided by the sales rate through August 2011 - and gives a turnover ratio for the U.S. fleet (this doesn't tell you the age or the composition of the fleet, registered vehicles estimated).

The wild swings in 2009 were due to the "cash for clunkers" program, and the increase in the ratio this summer was due to the supply chain issues related to the tsunami in Japan.

Click on graph for larger image in graph gallery.

The estimated ratio for August was just over 20 years - still very high, but well below the peak of 26 years.

The turnover ratio will probably decline to 15 or so eventually.

The second graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is current estimated sales rate.

The current sales rate is still near the bottom of the '90/'91 recession - when there were fewer registered drivers and a smaller population.

Light vehicle sales were at a 12.12 million seasonally adjusted annual rate (SAAR) in August. To bring the turnover ratio down to more normal levels, unit sales will have to rise to 14 or 15 million SAAR.

Of course cars are lasting longer - note the general uptrend in the first graph - so the turnover ratio probably will not decline to the previous level. Also this says nothing about the composition of the fleet (perhaps smaller cars). But I do expect vehicle sales to continue to increase over the next few years.

by Calculated Risk on 9/12/2011 08:42:00 AM

The Greek 2 year yield is at 64.3%. The Greek 1 year yield is at 112%. Ouch.

The Portuguese 2 year yield is up to 16.2% (after falling below 12% in August). Also the Irish 2 year yield is at 9.5%.

The European markets are down with the DAX off almost 4%, and the FTSE 100 off close to 3%.

Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year

by Calculated Risk on 9/11/2011 10:30:00 PM

Once again the focus is on Europe ...
• From the NY Times: Investors Brace as Europe Crisis Flares Up Again

Despite repeated pledges by Chancellor Angela Merkel to keep Europe together, the cacophony of dissent within Germany has been rising. That is creating fresh doubt — justified or not — about the nation’s commitment to the euro.

• From the WSJ: Woes at French Banks Signal a Broader Crisis

Moody's Investors Service Inc. is expected to cut the ratings of BNP Paribas SA, Société Générale SA and Crédit Agricole SA because of the banks' holdings of Greek government debt ... Political brinksmanship over Greece, coupled with the darkening economic outlook across the Continent, has fueled a selloff in European bank shares in recent weeks

• From the LA Times: Greece unveils more austerity measures

Under intense pressure from international lenders, Greece on Sunday announced a new set of austerity measures to meet deficit reduction targets ... The measures, which include a two-year property tax, are intended to make up for revenue shortfalls that come to about $3 billion this year alone.

• From the WSJ: French Minister: Won't Lend To Greece If Efforts Insufficient

"The [bailout] plan has two aspects; aid to Greece with the guarantees, but also a Greek recovery plan. They have a privatization program, a spending-cut program, a program for taxing revenues. Greece must make efforts, otherwise we won't lend to them," [French budget minister and government spokeswoman Valerie Pecresse] said in an interview

The Asian markets are red tonight with the Nikkei down 2%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 is down about 12 points, and Dow futures are down about 100 points.

Oil: WTI futures are down to $86 and Brent is down under $112.

Yesterday:
• Schedule for Week of Sept 11th
• Summary for Week ending September 9th

by Calculated Risk on 9/11/2011 03:22:00 PM

I've been following the Sacramento market to see the change in mix over time (conventional, REOs, and short sales) in a distressed area. The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

As I've written before: "I'm not sure what I'm looking for, but I'll know it when I see it!" (hopefully) At some point, the number (and percent) of distressed sales should start to decline without market distortions.

The percent of distressed sales in Sacramento increased in August compared to July. In August 2011, 62% of all resales (single family homes and condos) were distressed sales. This is up from 61.3% in July, and down from 64.0% in August 2010.

Here are the statistics.

Click on graph for larger image in graph gallery.

This graph shows the percent of REO, short sales and conventional sales. There is a seasonal pattern for conventional sales (strong in the spring and summer), and distressed sales happen all year - so the percentage of distressed sales decreases every summer and the increases in the fall and winter.

Total sales were up 14.8% over August 2010 (sales fell last July after the tax credit expired, so a year-over-year increase was expected). Sales were up 11% compared to August 2009.

Active Listing Inventory is down 22.6% from last August - we are seeing a sharp decline in inventory in many areas - something to watch. Once the foreclosure delays end, this data might be helpful in determining when the market is improving.

Yesterday:
• Schedule for Week of Sept 11th
• Summary for Week ending September 9th

by Calculated Risk on 9/11/2011 12:20:00 PM

From Reuters: Greece opts for property levy to boost budget revenue

Greece on Sunday announced a new tax on real estate ... "It is a special levy on property which will be collected through electricity bills," Finance Minister Evangelos Venizelos [said].

The tax is €4 per square meter (about $0.50 per sq. feet). The government is projecting this levy will make up for the revenue shortfall due to the sharper than expected contraction in the Greek economy.

The Greek 2 year yield is at 57%. The Portuguese 2 year yield is up to 15.7% (after falling below 12% in August). Also the Irish 2 year yield is at 9.3% (below 8% in August).

The next few weeks are "make or break" for the next Greek bailout.

Yesterday:
• Schedule for Week of Sept 11th
• Summary for Week ending September 9th