by Calculated Risk on 10/27/2011 01:14:00 PM

From HotelNewsNow.com: Miami reports strongest weekly RevPAR gain

Overall, the U.S. hotel industry’s occupancy rose 4% to 66.2%, average daily rate increased 4.4% to US$105.49, and RevPAR finished the week up 8.6% to US$69.88.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using a four week average for the occupancy rate.

Click on graph for larger image.

We are now in the fall business travel season. The 4-week average of the occupancy rate has increased again seasonally. In September, the 4-week average was back to the pre-recession median, but October fall business travel was less than normal - but still better than last year.

The second graph shows the 4-week average of the occupancy rate as a percent of the median since 2000. Note: Since this is a percent of the median, the number can be above 100%.

This shows the decline in the occupancy rate during and following the 2001 recession. The sharp decline in 2001 was related to 9/11, and the sharp increase towards the end of 2005 was due to Hurricane Katrina.

The occupancy rate really fell off a cliff in 2008. After briefly recovering to the median, this measure has declined over the last month.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 10/27/2011 10:37:00 AM

According to the Bureau of Economic Analysis (BEA), real GDP is finally just above the pre-recession peak. The estimate for real GDP in Q3 (2005 dollars) was $13,352.8 billion, 0.2% above the $13,326.0 billion in Q4 2007. Nominal GDP was reported as $15,198.6 billion in Q3 2011.

The following graph is constructed as a percent of the previous peak. This shows when GDP has bottomed - and when GDP has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

At the worst point, real GDP was off 5.1% from the 2007 peak. Since the most common definition of a depression is a 10%+ decline in real GDP, the 2007 recession was not a depression. Note: There is no formal definition of a depression. Some people use other definitions such as the duration below the previous peak. By that definition, using both GDP and employment, this seems like the "Lesser depression", but not by the common definition.

Click on graph for larger image.

This graph is for real GDP through Q3 2011 and shows real GDP is back to the the pre-recession peak.

Note: There are really two measures of GDP: 1) real GDP, and 2) real Gross Domestic Income (GDI). The BEA will release GDI with the 2nd GDP estimate for Q3. GDI was back to the pre-recession peak in Q2.

The following graph shows the rolling 4 quarter contribution to GDP from residential investment, equipment and software, and nonresidential structures. This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

For the following graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. The usual pattern - both into and out of recessions is - red, green, blue.

Residential Investment (RI) made a positive contribution to GDP in Q3 2011, and the four quarter rolling average finally turned positive in Q3.

Equipment and software investment has made a significant positive contribution to GDP for nine straight quarters (it is coincident).

The contribution from nonresidential investment in structures was positive in Q3. Nonresidential investment in structures typically lags the recovery, however investment in energy and power is masking weakness in office, mall and hotel investment (the underlying details will be released next week).

The key leading sector - residential investment - has lagged this recovery because of the huge overhang of existing inventory. Usually RI is a strong contributor to GDP growth and employment in the early stages of a recovery, but not this time - and this is a key reason why the recovery has been sluggish so far.

Although Residential Investment (RI) increased slightly in Q3, RI as a percent of GDP declined slightly - and RI as a percent of GDP is at a new record low.

I'll break down Residential Investment (RI) into components after the GDP details are released this coming week. Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

As expected, RI is increasing slowly in 2011 and it looks like RI will add to both GDP and employment growth - for the first time since 2005. It won't be much, but it will probably be positive.

The last graph shows non-residential investment in structures and equipment and software.

Equipment and software investment has been increasing sharply, however several tech companies have lowered their outlooks - so investment in equipment and software might slow in Q4.

Non-residential investment in structures increased in Q3. I'll add details for investment in offices, malls and hotels next week.

Earlier ...
• Advance Estimate: Real Annualized GDP Grew at 2.5% in Q3

by Calculated Risk on 10/27/2011 08:51:00 AM

The DOL reports:

In the week ending October 22, the advance figure for seasonally adjusted initial claims was 402,000, a decrease of 2,000 from the previous week's revised figure of 404,000. The 4-week moving average was 405,500, an increase of 1,750 from the previous week's revised average of 403,750.

The following graph shows the 4-week moving average of weekly claims since January 2000:


Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased this week to 405,500.

This is down from September, but still elevated - and still above the post-recession lows of earlier this year.

The next graph shows the 4-week average since 1971:

by Calculated Risk on 10/27/2011 08:30:00 AM

From the BEA:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter) according to the "advance" estimate released by the Bureau of Economic Analysis.

The acceleration in real GDP in the third quarter primarily reflected accelerations in PCE and in nonresidential fixed investment and a smaller decrease in state and local government spending that were partly offset by a larger decrease in private inventory investment.

The following graph shows the quarterly GDP growth (at an annual rate) for the last 30 years. The dashed line is the current growth rate. Growth in Q2 at 2.5% annualized was below trend growth (around 3%) - and very weak for a recovery, especially with all the slack in the system.

Click on graph for larger image.

A few key numbers:
• Real personal consumption expenditures increased 2.4 percent in the second quarter, compared with an increase of 0.7 percent in the second.

• Change in private inventories subtracted 1.08 percentage point.

• Investment: "Real nonresidential fixed investment increased 16.3 percent in the third quarter, compared with an increase of 10.3 percent in the second. Nonresidential structures increased 13.3 percent, compared with an increase of 22.6 percent. Equipment and software increased 17.4 percent, compared with an increase of 6.2 percent. Real residential fixed investment increased 2.4 percent, compared with an increase of 4.2 percent.."

I'll have much more later today ...

by Calculated Risk on 10/26/2011 10:49:00 PM

EURO SUMMIT STATEMENT. Excerpts:

The Private Sector Involvement (PSI) has a vital role in establishing the sustainability of the Greek debt. Therefore we welcome the current discussion between Greece and its private investors to find a solution for a deeper PSI. Together with an ambitious reform programme for the Greek economy, the PSI should secure the decline of the Greek debt to GDP ratio with an objective of reaching 120% by 2020. To this end we invite Greece, private investors and all parties concerned to develop a voluntary bond exchange with a nominal discount of 50% on notional Greek debt held by private investors. The Euro zone Member States would contribute to the PSI package up to 30 bn euro. On that basis, the official sector stands ready to provide additional programme financing of up to 100 bn euro until 2014, including the required recapitalisation of Greek banks. The new programme should be agreed by the end of 2011 and the exchange of bonds should be implemented at the beginning of 2012. We call on the IMF to continue to contribute to the financing of the new Greek programme.

On EFSF:

We agree that the capacity of the extended EFSF shall be used with a view to maximizing the available resources in the following framework:
• the objective is to support market access for euro area Member States faced with market pressures and to ensure the proper functioning of the euro area sovereign debt market, while fully preserving the high credit standing of the EFSF. These measures are needed to ensure financial stability and provide sufficient ringfencing to fight contagion;
• this will be done without extending the guarantees underpinning the facility and within the rules of the Treaty and the terms and conditions of the current framework agreement, operating in the context of the agreed instruments, and entailing appropriate conditionality and surveillance.

19. We agree on two basic options to leverage the resources of the EFSF:
• providing credit enhancement to new debt issued by Member States, thus reducing the funding cost. Purchasing this risk insurance would be offered to private investors as an option when buying bonds in the primary market;
• maximising the funding arrangements of the EFSF with a combination of resources from private and public financial institutions and investors, which can be arranged through Special Purpose Vehicles. This will enlarge the amount of resources available to extend loans, for bank recapitalization and for buying bonds in the primary and secondary markets.

20. The EFSF will have the flexibility to use these two options simultaneously, deploying them depending on the specific objective pursued and on market circumstances. The leverage effect of each option will vary, depending on their specific features and market conditions, but could be up to four or five.

UPDATE: IIF Statement: (ht Brian)

Institute of International Finance

October 27, 2011 – Brussels, Belgium:

The following statement was issued by Mr. Charles Dallara, Managing Director
of the Institute of International Finance:

We welcome the announcement by the leaders of the Euro Area of a
comprehensive package of measures to stabilize Europe, to strengthen the
European banking system and to support Greece's reform effort. On behalf of
the private investor community, the IIF agrees to work with Greece, Euro
Area authorities and the IMF to develop a concrete voluntary agreement on
the firm basis of a nominal discount of 50% on notional Greek debt held by
private investors with the support of a 30 billion Euro official PSI
package. This should set the basis for the decline of the Greek debt to GDP
ratio with an objective of reaching 120% by 2020.

The specific terms and conditions of the voluntary PSI will be agreed by all
relevant parties in the coming period and implemented with immediacy and
force. The structure of the new Greek claims will need to be based on terms
and conditions that ensure an NPV loss for investors fully consistent with a
voluntary agreement.

by Calculated Risk on 10/26/2011 10:12:00 PM

via twitter: "Agreement on a comprehensive package reached at today's #Eurosummit."

Press conference soon.

Council of the European Union (official releases)

EU Press Releases (no statement yet)

Earlier:
• New Home Sales increase in September to 313,000

by Calculated Risk on 10/26/2011 08:14:00 PM

UPDATE: AP reports an official said there is "broad agreement" on cutting Greek debt. Apparently this is a 50% cut ... no details.

Telegraph: Debt crisis: live

00.30 Jean-Claude Juncker's (head of the euro group) spokesman has told Bloomberg that Merkel and Sarkozy have met with bank representatives and are now relaying the outcome to the rest of the eurozone leaders.

Bottom line, Germany wants banks to accept they will lose between 50pc and 60pc of their Greek sovereign debt investments. The banks don't want this. Question is, where do they meet in the middle?

WSJ: Live Blog: European Debt-Crisis Summit

Talks on leveraging the EFSF could drag into November, says a source.

From the NY Times: Europe Agrees on Plan to Inject Capital Into Banks

European leaders agreed Wednesday on a plan to force the continent’s banks to raise new capital to insulate them against potential sovereign debt defaults, but disagreements over new financial aid to Greece threatened to derail efforts to devise a comprehensive solution ...

“There has been no agreement on any Greek deal or a specific ‘haircut,’ said Charles Dallara, the lead negotiator for the Institute for International Finance. “We remain open to a dialogue in search of a voluntary agreement. There is no agreement on any element of a deal.”

Financial Times.

Council of the European Union (official releases)

EU Press Releases (nothing yet as of 8:15 PM ET)

by Calculated Risk on 10/26/2011 06:56:00 PM

While we wait for a European announcement ...

Bloomberg reports: Sarkozy, Merkel, Lagarde, Van Rompuy Meeting Bankers’ Dallara. They are still working on the size of the haircut.

The Social Security Cost-of-Living adjustment is official: 3.6%.

The Contribution and benefit base will increase to $110,100 in 2012 from $106,800.

As I mentioned earlier, I'm making changes to graphs. If you click on a graph in a post, a larger graph will be displayed. If there are more than one graph in the post, then thumbnails will be displayed for the other graphs. This is very fast!

The galleries of current graphs is moving to http://www.crgraphs.com/. So far I've moved:

New Home Sales
Existing Home Sales
House Prices
Employment Graphs

Click on any graph and a large graph will be displayed with thumbnails along the bottom. Click on the "X" on the upper right to close.

by Calculated Risk on 10/26/2011 02:16:00 PM

This is a great resource from the Financial Times: Eurozone crisis: live blog The meeting starts at 7:15 PM Brussels time and will probably continue late into the night.

A few stories ...

From the Financial Times: EU bids to slash Greek debt by third

From the WSJ: Europe Still Split On Crisis Package

The euro zone and banks are working on a plan that will cut the Greek debt held by private investors by 50% ... According to the plan, banks will be asked to exchange existing bonds for new 30-year bonds, carrying a 6% coupon plus 15% in cash, the official said. ... "This will cut the face value of the entire €205 billion ($285.10 billion) debt in private hands by half."

From CNBC: Stocks Jump on Signs of EU Debt Talk Progress

The euro zone is planning on leveraging its EFSF bailout fund "several fold" with the finance ministers deciding the details in November, according to the draft euro zone summit statement attained by Reuters.

by Calculated Risk on 10/26/2011 12:23:00 PM

I'm making a few changes. Now when you left click on a graph, you will see the large image of the graph and thumbnails of all graphs in the post below it. Click on the thumbnails to scroll through the graphs. This is very fast - and doesn't use the scripts in the previous graph gallery. Click on the "X" in the upper right to return to the blog.

In addition, I will keep the most recent graphs in a new graph gallery http://www.crgraphs.com/. Here is the New Home sales gallery. It will take me a few weeks to add all the galleries to this new format.

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The following graph shows existing home sales (left axis) and new home sales (right axis) through September. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Then along came the housing bubble and bust, and the "distressing gap" appeared due mostly to distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties.

I expect this gap to close over the next few years once the number of distressed sales starts to decline.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different. Also the National Association of Realtors (NAR) is working on a benchmark revision for existing home sales numbers and I expect significant downward revisions to sales estimates for the last few years - perhaps as much as 10% to 15% for 2009, 2010 and 2011. Even with these revisions, most of the "distressing gap" will remain.

On September Home Sales:
• New Home Sales increase in September to 313,000
• Last week: Existing Home Sales in September: 4.91 million SAAR, 8.5 months of supply