by Calculated Risk on 11/22/2011 10:06:00 AM

From the Richmond Fed: Manufacturing Activity Steadied in November; Expectations Were Upbeat

Manufacturing activity in the central Atlantic region stabilized in November following four months of contraction, according to the Richmond Fed's latest survey ... In November, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — increased six points to 0 from October's reading of −6. Among the index's components, shipments gained seven points to 1, while new orders edged up three points to finish at −2 and the jobs index steadied, moving up seven points to 0.

Labor market conditions changed little at District plants in November. Both the manufacturing employment and average workweek indexes registered a reading of 0, moving up seven points and one point, respectively. Wage growth doubled, picking up five points to finish at 10.

In our November survey, our contacts were more bullish about their business prospects for the next six months. The index of expected shipments increased eight points to 36, and expected orders jumped twelve points to finish at 37. ...

District manufacturers' hiring plans were more upbeat in November. The expected manufacturing employment index gained nine points to 22, while the average workweek indicator held constant at 3. In addition, the index of expected wages moved up nine points to 28.

This was slightly above consensus.

Richmond and New York (Empire state) have been the two weakest regions, and both showed stabilization in November - but still not expansion.

by Calculated Risk on 11/22/2011 08:52:00 AM

From the BEA: Gross Domestic Product, Second Quarter 2011 (second estimate

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 2.0 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter) according to the "second" estimate released by the Bureau of Economic Analysis.

This was revised down from 2.5% and below the consensus of 2.4%.

The downward revisions was mostly due to a large decline in the "change in real private inventories " - this subtracted 1.55 percentage points from the third-quarter change in real GDP (second estimate) as opposed to 1.08 percentage points in the advance estimate. Final domestic demand was mostly unchanged (the inventories will probably reverse in Q4). Still sluggish growth ...

by Calculated Risk on 11/22/2011 12:35:00 AM

From the WSJ: BofA Warned to Get Stronger

Bank of America Corp.'s board has been told that the company could face a public enforcement action if regulators aren't satisfied with recent steps taken to strengthen the bank ... The nation's second-largest lender has been operating under a memorandum of understanding since May 2009 ... In recent months, regulators met with Bank of America's board and said they wanted to see more progress ... Otherwise the informal order could turn into a formal and public action ...

This would be a huge addition to the "Unofficial" problem bank list (We only include banks operating under a formal action on the list). A formal action would mean greater restrictions - and would bring more negative publicity to the bank.

Earlier:
• Existing Home Sales in October: 4.97 million SAAR, 8.0 months of supply
• Existing Home Sales: More on Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 11/21/2011 08:46:00 PM

Just a quick note - for anyone accessing Calculatedriskblog via an iPad, I'm trying out some new software with a customized tablet layout. I'll be adding smart phone software soon ...

Earlier:
• Existing Home Sales in October: 4.97 million SAAR, 8.0 months of supply
• Existing Home Sales: More on Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 11/21/2011 06:03:00 PM

From Dow Jones: Moody's: Commercial Real-Estate Prices Fell In September

U.S. commercial real-estate prices fell 1.4% in September, ending a four-month growth streak ... Moody's expects "multi-family and hotel properties to lead the price recovery," said Nick Levidy, Moody's managing director. "Office and retail will lag mostly because of a very high number of vacancies and the burn-off of above-market rent leases."

Below is a graph of the Moodys/REAL Commercial Property Price Index (CPPI) - Beware of the "Real" in the title - this index is not inflation adjusted.

Click on graph for larger image.

CRE prices only go back to December 2000.

According to Moody's, CRE prices are up 1.3% from a year ago, and down about 42% from the peak in 2007. This index is very volatile because there are relatively few transactions - but it does appear to be mostly moving sideways.
All current Commercial Real Estate graphs

Earlier:
• Existing Home Sales in October: 4.97 million SAAR, 8.0 months of supply
• Existing Home Sales: More on Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 11/21/2011 03:45:00 PM

The Department of Transportation (DOT) reported:

• Travel on all roads and streets changed by -1.5% (-3.7 billion vehicle miles) for September 2011 as compared with September 2010.

• Travel for the month is estimated to be 244.2 billion vehicle miles.

• Cumulative Travel for 2011 changed by -1.3% (-29.8 billion vehicle miles).

The following graph shows the rolling 12 month total vehicle miles driven.

Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 46 months - so this is a new record for longest period below the previous peak - and still counting! Talk about moving sideways ...

The second graph shows the year-over-year change from the same month in the previous year. The current decline is not as a severe as in 2008, but this is significant.

The year-over-year decline in September wasn't as severe as in July and August, but was still negative for the seventh straight month.

Earlier:
• Existing Home Sales in October: 4.97 million SAAR, 8.0 months of supply
• Existing Home Sales: More on Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 11/21/2011 12:56:00 PM

Yesterday I discussed the expected downward revisions to the NAR estimates for sales and inventory. The NAR didn't provide any update on the benchmark revision process in the release today. I expect sales and inventory estimates to be revised down by 10% to 15% for the current year - and less in earlier years - probably about 2% or so in 2006 or 2007.

The NAR reported inventory fell to 3.33 million in October, but if my guess is correct, inventory will be adjusted to something in the 2.85 to 3.0 million range after the benchmark revision. This is close to the same level as in October 2005 (with listed inventory at 2.87 million units).

Click on graph for larger image in graph gallery.

This graph shows inventory by month since 2004. In 2004 (black line), inventory was fairly flat and declined at the end of the year. In 2005 (dark blue line), inventory kept rising all year - and that was a clear sign that the housing bubble was ending.

This year (dark red) inventory is at the lowest level since 2005. And with the coming revisions correcting the "drift" in the reported data (both sales and inventory were too high for the last few years), the red line will probably be close to the 2005 (blue) line. Inventory will still be elevated - especially with the much lower sales rate - but this will put less downward pressure on house prices (of course the level of distressed properties is still very high, and there is a significant shadow inventory).

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

The red columns are for 2011.

Sales NSA are above last October when sales declined sharply following the expiration of the tax credit in June 2010. Sales are close to the October 2008 level, but will be lower after the benchmark revision is released.

The level of sales is still elevated due to investor buying. The NAR noted:

All-cash sales accounted for 29 percent of purchases in October, little changed from 30 percent in September and 29 percent in October 2010; investors make up the bulk of cash transactions.

Investors purchased 18 percent of homes in October, compared with 19 percent in September and 19 percent in October 2010.

Earlier:
• Existing Home Sales in October: 4.97 million SAAR, 8.0 months of supply
• Existing Home Sales graphs

by Calculated Risk on 11/21/2011 10:00:00 AM

The NAR reports: October Existing-Home Sales Rise, Unsold Inventory Continues to Decline

Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 1.4 percent to a seasonally adjusted annual rate of 4.97 million in October from a downwardly revised 4.90 million in September, and are 13.5 percent above the 4.38 million unit level in October 2010.
...
Total housing inventory at the end of October fell 2.2 percent to 3.33 million existing homes available for sale, which represents an 8.0-month supply at the current sales pace, down from an 8.3-month supply in September. Inventories have been trending gradually down since setting a record of 4.58 million in July 2008.

Click on graph for larger image in graph gallery.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in October 2011 (4.97 million SAAR) were 1.4% higher than last month, and were 13.5% above the October 2010 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 3.33 million in October from 3.41 million in September.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 13.8% year-over-year in October from October 2010. This is the ninth consecutive month with a YoY decrease in inventory.

Months of supply decreased to 8.0 months in October, down from 8.3 months in September. This is still higher than normal. These sales numbers were just above the consensus.

All current Existing Home Sales graphs

by Calculated Risk on 11/21/2011 08:30:00 AM

This is a composite index from the Chicago Fed: Index shows economic activity up slightly in October

Led by improvements in production-related indicators, the Chicago Fed National Activity Index edged up to –0.13 in October from –0.20 in September. Two of the four broad categories of indicators that make up the index improved from September, and only the consumption and housing category remained negative in October.
...
The index’s three-month moving average, CFNAI-MA3, decreased to –0.27 in October from –0.16 in September. October’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. Likewise, the economic slack reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

This index suggests the economy was growing in October, but below trend.

Yesterday:
• Summary for Week Ending Nov 18th
• Schedule for Week of Nov 20th
• Lawler: Household Growth by Age Group: 2010 – 2015 “Conservative” Forecasts

by Calculated Risk on 11/20/2011 08:42:00 PM

From the Athens News: PM heads for Brussels to try to secure cash

New prime minister headed to Brussels on Sunday to fight for the aid Athens needs to avoid bankruptcy, even as one of his coalition backers refused to give a written pledge to support reforms and a public sector union geared up for strikes.

Lucas Papademos must convince the International Monetary Fund and the European Union to give Greece the 8 billion euros it needs to avoid a mid-December default ...

[D]uring the [troika] visit, New Democracy head Antonis Samaras refused to give a written guarantee that he would continue to do whatever it took to meet the terms of the bailout no matter who wins an election tentatively set for Feb. 19.

Most analysts think there will a compromise and Greece will receive the next aid tranche before mid-December.

From the WSJ: EU Paper Offers Options for Euro Bonds

The [European Commission] discussion paper suggests three options for issuing euro bonds. ...

The first option it discusses would be to substitute all national issues by governments with euro bonds carrying what it calls a "joint and several" guarantee, meaning that euro-zone states would pool the credit risk and each government would agree to guarantee the debt of every other government. ... The second option would be to partially substitute national issuance with euro bonds up to a limit, of say 60%, of a country's gross domestic product ... Those two options would require treaty changes ...

[The] third approach would have euro bonds replace some national bond issues—but the euro bonds would receive guarantees from each government only up to specific limits [and would not require a treaty change].

And from the BBC: Spain election: Rajoy's Popular Party declares victory

Mr Rajoy, who is expected to tackle the country's debts amid slow growth and high unemployment, said he was aware of the "magnitude of the task ahead".

He told supporters there would be "no miracle" to restore Spain to financial health ... The new government will have little time to show results and people are bracing themselves for a new wave of spending cuts, our correspondent adds.

Over the past week, borrowing rates have risen to the 7% level which is regarded as unsustainable. Unemployment stands at five million.

Miguel Arias, the Popular Party's campaign co-ordinator, said Spain was "going to make all the sacrifices".

"We have been living as a very rich country," he told BBC News.

More austerity ...

Yesterday:
• Summary for Week Ending Nov 18th
• Schedule for Week of Nov 20th
• Lawler: Household Growth by Age Group: 2010 – 2015 “Conservative” Forecasts