by Calculated Risk on 11/12/2011 01:15:00 PM

Earlier:
• Summary for Week Ending Nov 11th

Two key housing reports will be released this week: November homebuilder confidence on Wednesday, and October housing starts on Thursday.

For manufacturing, the November NY Fed (Empire state) survey will be released on Tuesday, the November Philly Fed survey on Thursday, and the September Industrial Production and Capacity Utilization report on Wednesday.

On prices, the October Producer Price index (PPI) will be released Tuesday, and CPI will be released on Wednesday.

Several regional Fed presidents will be speaking this week: Chicago's Evans, St Louis' Bullard, San Francisco's Williams, and Dallas' Fischer all speak on Tuesday. On Wednesday, Richmond's Lacker and Boston's Rosengren, and on Thursday Cleveland's Pianalto and New York's Dudley.

----- Monday, Nov 14th -----
No releases scheduled.

----- Tuesday, Nov 15th -----
8:30 AM: Producer Price Index for October. The consensus is for a 0.2% decrease in producer prices (0.1% increase in core).

8:30 AM ET: NY Fed Empire Manufacturing Survey for November. The consensus is for a reading of -2.6, up from -8.48 in October (below zero is contraction).

8:30 AM: Retail Sales for October. After a strong September, the consensus is for retail sales to increase 0.2% in October, and for no change ex-auto.

10:00 AM: Manufacturing and Trade: Inventories and Sales for September. The consensus is for a 0.2% increase in inventories.

----- Wednesday, Nov 16th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been especially weak since early August, although this doesn't include cash buyers.

8:30 AM: Consumer Price Index for October. The consensus is for no change in prices. The consensus for core CPI is an increase of 0.1%.

9:15 AM ET: The Fed will release Industrial Production and Capacity Utilization for October. The consensus is for a 0.4% increase in Industrial Production in October, and an increase to 77.6% (from 77.4%) for Capacity Utilization.

10 AM ET: The November NAHB homebuilder survey. The consensus is for a reading of 16, down from 18 in October. Any number below 50 indicates that more builders view sales conditions as poor than good. This index has been below 25 for four years.

During the day: The AIA's Architecture Billings Index for October (a leading indicator for commercial real estate).

----- Thursday, Nov 17th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a slight increase to 395,000 from 390,000 last week. The 4-week average has declined recently to 400,000.

8:30 AM: Housing Starts for October. After collapsing following the housing bubble, housing starts have mostly been moving sideways for almost three years. The consensus is for a decrease to 605,000 (SAAR) from 658,000 (SAAR) in September.

10:00 AM: Philly Fed Survey for November. The consensus is for a reading of 9.0 (above zero indicates expansion, up slightly from 8.7 last month.


10:00 AM: Mortgage Bankers Association (MBA) 3rd Quarter 2011 National Delinquency Survey (NDS). The following graph shows the percent of loans delinquent by days past due for Q2. The MBA reported 8.44% of mortgage loans were delinquent at the end of Q2, seasonally adjusted, and another 4.43% were in the foreclosure process (total of 12.87%, essentially unchanged from Q1).

Click on graph for larger image.

This graph shows the percent of loans delinquent by days past due in Q2. Based on other data, the delinquency rate probably decreased slightly in Q3.

However the key problem is the large number of seriously delinquent loans (90+ days and in the foreclosure process). And there probably was little change in those percentages in Q3.

----- Friday, Nov 18th -----
10:00 AM: Conference Board Leading Indicators for October. The consensus is for a 0.5% increase in this index.

by Calculated Risk on 11/12/2011 08:11:00 AM

The drama in Europe continues to overshadow the U.S. economic situation and the European financial crisis continues to pose the greatest downside risk to the U.S. economy. See from the NY Times: Europe’s Woes Pose New Peril to Recovery in the U.S.

In the U.S., this was a light week for economic data. Initial weekly unemployment claims fell to 390,000, and the trade deficit was smaller than expected. Consumer sentiment improved, and the NFIB small business confidence index increased - although both are at very low levels.

With regards to the impact on the U.S. from the European financial crisis, the Fed’s October Senior Loan Officer Opinion Survey on Bank Lending Practices showed “considerable” tightening on lending to European banks, and some tightening to European firms, but the survey showed no tightening in the U.S. (so little spillover - at least so far).

Also the incoming data suggests Q3 GDP will be revised down a little (the trade deficit was lower than expected, but inventory growth was weaker).

Here is a summary in graphs:

• Trade Deficit declines in September as Exports increase

The trade deficit was below the consensus forecast of $46.3 billion and the deficit for August was revised down.

Click on graph for larger image.

Exports increased in September, and imports have been mostly moving sideways for the last five months (seasonally adjusted). Exports are well above the pre-recession peak and up 16% compared to September 2010; imports have stalled recently and are up about 12% compared to September 2010.

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

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.

Oil averaged $101.02 per barrel in September, and import oil prices have been declining slowly from $108.70 per barrel in May. The trade deficit with China declined slightly to $28 billion.

Imports have been moving sideways for the last several months - partially due to slightly lower oil prices. However the trade deficit with China continues to be a significant issue. Exports are still trending up.

• CoreLogic: House Price Index declined 1.1% in September

From CoreLogic: CoreLogic® September Home Price Index Shows Second Consecutive Month-Over-Month and Year-Over-Year Decline "CoreLogic ... September Home Price Index (HPI®) which shows that home prices in the U.S. decreased 1.1 percent on a month-over-month basis, the second consecutive monthly decline."

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

The index was down 1.1% in September, and is down 4.1% over the last year, and off 31.2% from the peak - and up 3.6% from the March 2011 low.

Some of this decrease is seasonal (the CoreLogic index is NSA). Month-to-month prices changes will probably remain negative through February or March 2012 - the normal seasonal pattern. It is likely that there will be new post-bubble lows for this index late this year or early in 2012.

All House Price Graphs
• BLS: Job Openings increased in September

From the BLS: Job Openings and Labor Turnover Summary "The number of job openings in September was 3.4 million, up from 3.1 million in August."

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

Notice that hires (dark blue) and total separations (red and blue columns stacked) are pretty close each month. When the blue 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, the number of job openings (yellow) has been trending up, and are up about 22% year-over-year compared to September 2010.

Quits increased in September, and have been trending up - and quits are now up about 11% year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").

All current employment graphs
• Ceridian-UCLA: Diesel Fuel index increased 1.1% in October

This is the UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index Increased 1.1 Percent in October, Offsetting the 1.0 Percent Decline in September

This index declined sharply in late summer and this small rebound only offsets some of the recent decline.

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

All current Transportation graphs
• Weekly Initial Unemployment Claims decline to 390,000

The DOL reports: "In the week ending November 5, the advance figure for seasonally adjusted initial claims was 390,000, a decrease of 10,000 from the previous week's revised figure of 400,000. The 4-week moving average was 400,000, a decrease of 5,250 from the previous week's revised average of 405,250."

This graph shows the 4-week moving average of weekly claims since January 2000. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 400,000.

This is the lowest level for the 4 week average since April - although this is still elevated.

All current Employment Graphs
• NFIB: Small Business Optimism Index increases slightly in October

From the National Federation of Independent Business (NFIB): Small Business Confidence Has Minor Uptick"NFIB’s Small-Business Optimism Index gained 1.3 points, nudging the Index up to 90.2. This is below the year-to-date average of 91.1, only slightly better than the average since January 2009 of 89.1."

This graph shows the small business optimism index since 1986. The index increased to 90.2 in October from 88.9 in September. This is the second increase in a row after declining for six consecutive months.

The optimism index declined sharply in August due to the debt ceiling debate and only rebounded modestly in September and October. This index has been slow to recover - probably due to a combination of sluggish growth, and the high concentration of real estate related companies in the index.

• Consumer Sentiment increased in November

The preliminary November Reuters / University of Michigan consumer sentiment index increased to 64.2, up from the October reading of 60.9, and up from 55.7 in August.

However sentiment is still very weak, although above the consensus forecast of 61.5.

• Other Economic Stories ...
• The Federal Reserve October 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices
• From RealtyTrac: U.S. Foreclosure Activity Hits 7-Month High in October
• Lawler: SF REO Inventories at Fannie, Freddie, PLS, and a “Guess” at FHA
• Fannie, Freddie and FHA REO Inventory declines in Q3

by Calculated Risk on 11/11/2011 09:49:00 PM

Today NAR chief economist Lawrence Yun provided his annual overly optimistic forecast for next year, but more importantly he provided an update on the coming revisions:

NAR presently is benchmarking existing-home sales, and downward revisions are expected for totals in recent years, although there will be little change to previously reported comparisons based on percentage change. There will be will be no change to median prices or month’s supply of inventory. Publication of the improved measurement methodology is expected in the near future.

Sales will be revised down for the last few years, and inventory will also be revised down, with no change to months-of-supply. I expect sales for 2011 will be down around 10% to 15% (less for earlier years), and inventory by the same amount.

by Calculated Risk on 11/11/2011 08:01:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Nov 11, 2011. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

Another quiet week for the Unofficial Problem Bank List. The list includes 981 institutions with assets of $405.9 billion after two removals. Removals include First Home Savings Bank, Mountain Grove, MO ($209 million Ticker: FBSI) and Service1st Bank of Nevada, Las Vegas, NV ($172 million Ticker: WLBC), which had their respective formal enforcement actions replaced by less stringent Memorandums of Understanding. The failure this week in Georgia -- Community Bank of Rockmart -- was not subject to an enforcement action. The other change this week was the FDIC issuing a Prompt Corrective Action Order against Tennessee Commerce Bank, Franklin, TN ($1.5 billion Ticker: TNCC).

Best wishes to all!

by Calculated Risk on 11/11/2011 04:19:00 PM

CR Note: In a short note on D.R. Horton today, economist Tom Lawler included a table of some selected home builders (below). This shows some increase in Q3 for these builders compared to last year, but last year was the worst year ever. And net home orders in Q3 were still 20.9% below Q3 2009, and that was a horrible year!

From Tom Lawler:

D.R. Horton, the nation’s largest home builder, reported that net home orders totaled 4,241 in the quarter ended September 30th, up 6.5% from the comparable quarter of 2010, though down 15.3% from the comparable quarter of 2009. The company’s sales cancellation rate, expressed as a % of gross orders, was 29%, down from 31% a year ago. Home deliveries totaled 4,987 last quarter, up 16.5% from the comparable quarter of last year. The company’s order backlog at the end of September was 4,854, up 17.5% from last September. The company’s margins fell a little south of “consensus,” apparently reflecting rising input costs that can’t be passed through in today’s “challenging conditions.”

Net Home Orders, Select Publicly-Traded Builders
Quarter Ended:	9/30/2011	9/30/2010	9/30/2009
D.R. Horton	4,241	3,979	5,008
PulteGroup	3,564	3,566	5,403
NVR	2,218	2,151	2,255
The Ryland Group	1,008	799	1,270
Meritage Homes	906	706	1,098
MDC Holdings	595	796	1,016
Standard Pacific	764	555	893
M/I Homes	587	489	619
Total	13,883	13,041	17,562
	2011 vs 2010	2011 vs. 2009
	6.5%	-20.9%

by Calculated Risk on 11/11/2011 01:41:00 PM

Yesterday I commented that I thought Europe was probably already in a recession. Since then I have received a number of questions about this comment, especially asking about a recession in the U.S.

First, I do not follow Europe nearly as closely as the U.S., and I was just reacting to the European Commission report that the “recovery in Europe has come to a standstill”. My recession comment was just a guess based on stories out of Europe, and my level of confidence is not very high. So take my comment for what it is worth - very little!

Second, my best guess is the U.S. stays out of recession even if Europe is currently in a recession. Of course there are significant downside risks, especially if there is a disorderly end to the euro.

If we look at the channels of contagion, it seems the impact from Europe – barring a blow-up – will be fairly small. Of course, with sluggish growth, the U.S. is very susceptible to economic shocks, and it also appears that the U.S. is moving to more austerity in 2012 – and that is an additional concern (If Congress does nothing, taxes will increase on working Americans, and more).

What are the channels of contagion from Europe? First, the trade channel – the impact on U.S. exports – is pretty small. Although Europe is a major trading partner, exports only make up a small portion of U.S. GDP. Some of the impact from trade would probably be offset by lower oil prices – and of course lower interest rates as investors seek safety (the European crisis is a key reason the U.S. 10 year bond yield is around 2%).

A more significant channel would be tightening of U.S. credit conditions in response to the European crisis. That is why I looked so closely at the Fed’s October Senior Loan Officer Opinion Survey on Bank Lending Practices that was released on Monday. The survey showed “considerable” tightening on lending to European banks, and some tightening to European firms, but the survey showed no tightening in the U.S. (although lending standards are already pretty tight).

Another possible channel of contagion is less European lending to emerging markets and a slowdown in those economies – and then fewer exports from the U.S. to those emerging markets. This is possible, but we haven’t seen any evidence of this yet. And if emerging markets slowed sharply we’d probably see an offsetting sharp decline in oil prices (hasn't happened).

So, right now, I’m sticking with my general forecast for sluggish GDP and employment growth in the U.S.

by Calculated Risk on 11/11/2011 09:55:00 AM

The preliminary November Reuters / University of Michigan consumer sentiment index increased to 64.2, up from the October reading of 60.9, and up from 55.7 in August.


Click on graph for larger image.

Consumer sentiment is usually impacted by employment (and the unemployment rate) and gasoline prices.

Gasoline prices have declined about 50 cents per gallon from the highs in early May, but prices are still well above the levels of early this year. And the unemployment rate is also very high at 9.0%. Both negatives for sentiment.

In addition, sentiment was probably negatively impacted by the debt ceiling debate in August. Back in August I looked at event driven declines in consumer sentiment. If this decline was "event driven", then we should have seen little impact on consumption (looks correct) and a bounce back fairly quickly, but only to the already low levels of June and July. It looks like we are seeing some bounce back.

However sentiment is still very weak, although above the consensus forecast of 61.5.

by Calculated Risk on 11/11/2011 08:42:00 AM

Below is a table for several European bond yields (links to Bloomberg).

From the WSJ: Italian Senate Approves Budget Bill

Italy's senate approved the 2012 budget law Friday, paving the way for parliament to vote on the bill this weekend and for Prime Minister Silvio Berlusconi to resign. ... The government has scheduled a final cabinet meeting Saturday at 1700 GMT, or as soon as the parliamentary vote is completed.

The speed of the cabinet meetings suggests Mr. Berlusconi is collaborating with the national plan, backed by the head of state, to try to install a new emergency government before markets open on Monday.

The Italian 10 year bond yield has declined to 6.59%.

The Spanish 10 year bond yield has increased to 5.89%. The Spanish 2 year yield is up to 4.74%.

The French 10 year bond yield has increased to 3.48%.

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 11/10/2011 08:36:00 PM

New temporary PMs for Italy and Greece, a new European economic forecast (that is too optimistic, I think Europe is already in a new recession), and S&P goofs ...

From the NY Times: A Shaken Italy Is Poised to Name a New Government

Italy pulled back from the brink on Thursday, as lawmakers seemed poised to usher out Prime Minister Silvio Berlusconi and replace his government with a cabinet of technocrats most likely led by a former European Commissioner, Mario Monti.
...
Mr. Berlusconi was hoping to buy himself more time in power. But now, with the Senate expected to approve the measures on Friday and the Lower House on Saturday, Mr. Berlusconi is expected to step down by Monday.

Asked what had sped up the process, Stefano Micossi, an economist and the director of Assonime, an Italian business research group, put it simply: “The view of the precipice.”

From the Athens News: Papademos confirmed as new PM

... the former ECB vice-president [Lucas Papademos] was confirmed as the country’s next prime minister.

The formalities of the resignation of outgoing ministers and swearing-in of the new government are expected to be completed on Friday, with a view to the holding of vote of confidence in parliament possibly as early Monday.

"The Greek economy is facing huge problems despite the efforts undertaken," Papademos said in his first public remarks. "The choices we will make will be decisive for the Greek people. The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence."

From the NY Times: Europe’s Growth Forecast Is Lowered

Europe’s economic outlook received a fresh dose of gloom Thursday, when the European Commission warned that the Continent’s economies were stalled and faced the risk of a double-dip recession.
...
“The recovery in the European Union has now come to a standstill, and there is a risk of a new recession,” Olli Rehn, the European commissioner for economic and monetary affairs, told reporters in Brussels.

“This forecast is in fact the last wake-up call,” he added.
...
Even Germany, the economic engine of Europe, is now expected to record just 0.8 percent growth in 2012 — more than a percentage point lower than the European Commission predicted in its spring forecast. And none of the euro zone’s other three biggest economies — France, Italy and Spain — are projected to achieve 1 percent growth in 2012.

I think Europe is already in recession.

And from Bloomberg: S&P’s Faux Pas on French Rating Roils Markets

Standard & Poor’s roiled global equity, bond, currency and commodity markets when it sent and then corrected an erroneous message to subscribers suggesting France’s top credit rating had been downgraded.

by Calculated Risk on 11/10/2011 05:16:00 PM

From the FDIC: Century Bank of Georgia, Cartersville, Georgia, Assumes All of the Deposits of Community Bank of Rockmart, Rockmart, Georgia

As of September 30, 2011, Community Bank of Rockmart had approximately $62.4 million in total assets and $55.9 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $14.5 million. ... Community Bank of Rockmart is the 88th FDIC-insured institution to fail in the nation this year, and the 23rd in Georgia.

It feels like Friday!