RSS Feed by Calculated Risk on 12/17/2011 12:41:00 PM
Saturday, December 17, 2011
Schedule for Week of Dec 18th
Earlier:
• Summary for Week ending Dec 16th
There are three key housing reports that will be released this week: December homebuilder confidence on Monday, November existing home sales (and benchmark revisions) on Wednesday, and November new home sales on Friday.
Other key U.S. economic reports include the third estimate of Q3 GDP on Thursday, and the November Personal Income and Outlays report on Friday.
10 AM ET: The December NAHB homebuilder survey. The consensus is for a reading of 20, unchanged from November. Any number below 50 indicates that more builders view sales conditions as poor than good. This index has been below 25 for four years.
8:30 AM: Housing Starts for November. After collapsing following the housing bubble, single family housing starts have been moving sideways for almost three years. However multi-family starts have been increasing all year.
The consensus is for a slight increase in total housing starts to 630,000 (SAAR) from 628,000 (SAAR) in October. This consensus might be a little low based on the uptick in permits and the recent increases in the homebuilder confidence survey.
10:00 AM: Regional and State Employment and Unemployment (Monthly) for November 2011
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.
10:00 AM: Existing Home Sales for November from the National Association of Realtors (NAR). Important: This release will include the benchmark revisions for 2007 through 2011.The consensus is for a 2% increase in sales. This would be around 5.08 million based on the reported sales in October, but sales will be much lower after the downward revisions.
Economist Tom Lawler estimates the NAR will report a 1.8% increase in sales from October. He expects a downward revision of about 13%, so he expects the NAR to report sales of around 4.4 million SAAR in November.
Expected: The Moody's/REAL Commercial Property Price Index (commercial real estate price index) for October.
During the day: The AIA's Architecture Billings Index for November (a leading indicator for commercial real estate).
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an increase to 380,000 from 366,000 last week. Last week was the lowest level for the 4-week average of weekly claims since July 2008.
8:30 AM: Gross Domestic Product, 3rd quarter 2011 (third estimate). This is the third estimate from the BEA. The consensus is that real GDP increased 2.0% annualized in Q3, unchanged from the 2nd estimate.
8:30 AM ET: Chicago Fed National Activity Index (November). This is a composite index of other data.
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for December). The consensus is for a slight increase to 68.0 from the preliminary reading of 67.7.
10:00 AM: FHFA House Price Index for October 2011. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).
10:00 AM: Conference Board Leading Indicators for October. The consensus is for a 0.3% increase in this index.
8:30 AM: Durable Goods Orders for November from the Census Bureau. The consensus is for a 2.0% increase in durable goods orders. This might be a little stronger than consensus because of an increase in commercial aircraft orders.
8:30 AM: Personal Income and Outlays for November. The graph shows real Personal Consumption Expenditures (PCE) through October (2005 dollars). PCE increased 0.1% in October, and real PCE increased 0.1%. The price index for PCE decreased 0.1 percent in October.
The consensus is for a 0.2% increase in personal income in November, and a 0.3% increase in personal spending, and for the Core PCE price index to increase 0.1%.
10:00 AM ET: New Home Sales for November from the Census Bureau. This graph shows New Home Sales since 1963. The dashed line is the current sales rate.
The consensus is for a slight increase in sales to 313 thousand Seasonally Adjusted Annual Rate (SAAR) in November from 307 thousand in October. This consensus might be a little low based on the homebuilder confidence survey.
Summary for Week ending Dec 16th
by Calculated Risk on 12/17/2011 08:11:00 AM
If it wasn’t for Europe, the economic outlook might be improving a little. Unfortunately this was another tough week in Europe, and the European financial crisis is dragging down global economic growth.
The good news this week included a decline in initial weekly unemployment claims (the 4-week average is now at the lowest level since July 2008), and a pickup in the Empire State and Philly Fed manufacturing surveys. Also small business optimism increased in November. However industrial production and retail sales were a little weaker than expected.
Here is a summary of last week in graphs:
• Retail Sales increased 0.2% in November
Click on graph for larger image.
On a monthly basis, retail sales were up 0.2% from October to November (seasonally adjusted, after revisions), and sales were up 6.7% from November 2010. Retail sales excluding autos increased 0.2% in November.
This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).
Retail sales are up 20.0% from the bottom, and now 5.5% above the pre-recession peak (not inflation adjusted)
• Industrial Production decreased 0.2% in November, Capacity Utilization decreased
Industrial production decreased 0.2 percent in November. Capacity utilization for total industry decreased to 77.8 percent. This graph shows Capacity Utilization. This series is up 10.5 percentage points from the record low set in June 2009 (the series starts in 1967).
Capacity utilization at 77.8% is still 2.6 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.
• Empire State and Philly Fed Manufacturing Indexes show improvement in December
From the NY Fed: Empire State Manufacturing Survey "The general business conditions index rose nine points to 9.5" and from the Philly Fed: December 2011 Business Outlook Survey "the survey’s broadest measure of manufacturing conditions, remained positive for the third consecutive month and increased from 3.6 in November to 10.3" Both surveys indicated expansion in December, and at a faster pace than in November. Both indexes were above the consensus forecasts.
Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through December. The ISM and total Fed surveys are through November.
The average of the Empire State and Philly Fed surveys increased again in December and suggests the December ISM index will be in the mid 50s.
• Key Measures of Inflation mostly lower in November
This graph shows the year-over-year change for these three key measures of inflation (core CPI, median CPI, and trimmed-mean CPI). On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 2.5%, and core CPI rose 2.2%. These measures of inflation have stopped increasing, and are slightly above the Fed's target.
On a monthly basis, the rate of increase is mostly below the Fed's target. On a monthly basis, the median Consumer Price Index increased 1.1% at an annualized rate, the 16% trimmed-mean Consumer Price Index increased 1.0% annualized, and core CPI increased 2.1% annualized.
• Weekly Initial Unemployment Claims declined to 366,000
The DOL reported "In the week ending December 10, the advance figure for seasonally adjusted initial claims was 366,000, a decrease of 19,000 from the previous week's revised figure of 385,000. The 4-week moving average was 387,750, a decrease of 6,500 from the previous week's revised average of 394,250." The following 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 387,750.
This is the lowest level for weekly claims - and the lowest level for the 4-week average - since early 2008.
• BLS: Job Openings "essentially unchanged" in October
This 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 light 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.
Jobs openings declined slightly in October, but the number of job openings (yellow) has generally been trending up, and are up about 13% year-over-year compared to October 2010.
Quits declined in October, but have mostly been trending up - and quits are now up about 10% 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").
• NFIB: Small Business Optimism Index increases in November
From the National Federation of Independent Business (NFIB): Small-Business Confidence Rises for Third Consecutive Month: Is Hope for the Economy on the Horizon? Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.
This graph shows the small business optimism index since 1986. The index increased to 92.0 in November from 90.2 in October. This is the third increase in a row after declining for six consecutive months.
• Other Economic Stories ...
• From the WSJ: Realtors to Revise 2007-2011 Sales Data Lower
• Pulse of Commerce Index Increased 0.1 Percent in November
• FOMC Statement: Economy expanding "moderately", Global growth slowing
• Lawler on NAR Revisions for 2007 through 2011
• The Excess Vacant Housing Supply
Friday, December 16, 2011
Report: Deal reached on two month extension of Payroll Tax Cut
by Calculated Risk on 12/16/2011 09:35:00 PM
From the NY Times: Senate Leaders Agree on 2-Month Extension of Payroll Tax Cut
Senate leaders said on Friday night that they had reached a deal that would extend a payroll tax cut for two months ... The agreement would also speed the decision process for the construction of an oil pipeline from Canada to the Gulf Coast ...I expect these provisions - the payroll tax cut and the extension of the emergency unemployment insurance benefits - to eventually be extended for all of 2012.
The Senate agreement would also allow jobless workers to continue receiving unemployment insurance benefits as permitted by current law for two months. For the same period, there would be no cut or increase in fees paid to doctors for treating Medicare patients.
Earlier:
• Lawler: Early Read on Existing Home Sales: Given the Benchmark Revision, a “Challenge”
• Key Measures of Inflation mostly slow in November
Bank Failure #92 in 2011: Western National Bank, Phoenix, Arizona
by Calculated Risk on 12/16/2011 07:20:00 PM
From the FDIC: Washington Federal, Seattle, Washington, Assumes All of the Deposits of Western National Bank, Phoenix, Arizona
As of September 30, 2011, Western National Bank had approximately $162.9 million in total assets and $144.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $37.6 million. ... Western National Bank is the 92nd FDIC-insured institution to fail in the nation this year, and the third in Arizona.Two today so far ... this is probably the last closing day of the year.
Bank Failure #91 in 2011: Premier Community Bank of the Emerald Coast
by Calculated Risk on 12/16/2011 06:23:00 PM
Don't look behind the curtain!
Hoped Emerald Coast Bank
by Soylent Green is People
From the FDIC: Summit Bank, National Association, Panama City, Florida, Assumes All of the Deposits of Premier Community Bank of the Emerald Coast, Crestview, Florida
As of September 30, 2011, Premier Community Bank of the Emerald Coast had approximately $126.0 million in total assets and $112.1 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $31.2 million. ... Premier Community Bank of the Emerald Coast is the 91st FDIC-insured institution to fail in the nation this year, and the thirteenth in Florida.Not so premier ...
Earlier:
• Lawler: Early Read on Existing Home Sales: Given the Benchmark Revision, a “Challenge”
• Key Measures of Inflation mostly slow in November
Lawler: Early Read on Existing Home Sales: Given the Benchmark Revision, a “Challenge”
by Calculated Risk on 12/16/2011 04:11:00 PM
CR Note: The NAR is scheduled to release November existing home sales on Wednesday, December 21st at 10:00 AM ET. The NAR will also release the benchmark downward revisions for 2007 through 2011 next Wednesday.
From economist Tom Lawler:
Based on my tracking of regional realtor/MLS reports, I estimate that existing home sales in November as measured by the National Association of Realtors ran at a seasonally adjusted annual rate that was about 1.8% higher than October’s pace, and about 9% higher than last November’s pace.
What that will mean for the NAR’s estimated sales number, however, is not clear, as the NAR announced that it is releasing updated (and lower) existing home sales estimates from 2007 to 2011. While I do NOT know what the revised sales estimates will be, based on various data sources I estimate that the NAR’s estimate of existing home sales for 2010 will be revised down by about 13% or so. As best as I can tell, 2011 sales data will be revised down by about the same amount as 2010 sales data.
As a result, I estimate that the NAR’s estimate for existing home sales for November will be a seasonally adjusted annual rate of around 4.40 million. If no benchmarking were done, I estimate the NAR’s existing home sales estimate would be a SAAR of around 5.06 million for November.
On the inventory side, the NAR said that its “months’ supply” measure will not be revised, implying that inventories will be revised down by the same percentage as sales. Various sources indicate that aggregate active listings fell considerably from October to November, with my tracking suggesting a monthly drop of about 5% -- though NAR inventory numbers don’t always “track” listings data. But if that drop were to happen, I’d estimate that the NAR will report an existing home inventory of about 2.753 million, down about 14.9% from last November.
The NAR has also said that it would not revise its median sales price data. Based on my tracking – which has an at best “so-so” track record in predicting the NAR number – I estimate that the median existing home sales price for November will be down about 4.2% from last November.
CR Note: Tom's estimate for inventory includes adjusting for the benchmark downward revision. This would put months-of-supply at around 7.5 months, and would put listed inventory at the lowest level since mid-2005.
Europe Update
by Calculated Risk on 12/16/2011 02:36:00 PM
European bond yields have fallen recently ...
The Italian 2 year yield is down to 5.29% - the lowest level since October, and the 10 year yield is at 6.59%.
The Spanish 2 year yield is down sharply to 3.46%, and the 10 year yield is down to 5.31%.
But there are plenty of negative headlines:
From the Financial Times: EFSF considers euro warning clause (ht Brian)
In the latest draft of the prospectus, seen by the Financial Times, a summary of the dangers to investors includes: “[R]isks arising from a Reference Sovereign ceasing to use the euro as its lawful currency . . . or the cessation of the euro as a lawful currency”.That would be quite a warning clause.
excerpt with permission
And here is some downbeat testimony from Deputy Assistant Treasury Secretary Mark Sobel today: What the Euro Crisis Means for Taxpayers and the U.S. Economy
The European Economic Outlook is WeakeningAnd there is some evidence of tightening. The TED spread is increasing and is now up to 56.8 (This hit 463 on Oct 10, 2008), and the two year swap spread is up to 49.5 (This spread peaked at near 165 in early October 2008). Still not too bad.
Over the past year, economic and financial stresses in Europe have spread to some of Europe’s largest economies, and the crisis now facing Europe is deeper and more entrenched. Sovereign bond yields have risen sharply in many countries. Many European financial institutions have faced difficulties in obtaining funding from markets and are de-leveraging in order to strengthen their capital adequacy. European equities have fallen by a quarter since April.
These developments have resulted in a sharp weakening in Europe’s current growth performance and significant markdowns in growth projections for 2012. Growth in the euro area is projected by most analysts to be negative this quarter and into early 2012, with weak growth persisting in 2012. For example, the OECD, which earlier this year had projected annual average European growth in 2012 of 2.0 percent, just revised its estimate to 0.2 percent. Many private forecasters are more pessimistic.
Europe’s problems are a serious risk for the U.S. outlook
In the United States, the pace of recovery has strengthened recently and most analysts expect continued moderate growth next year. But given Europe’s strong trade and financial linkages with the rest of the world, other regions could feel the impact as well. Indeed, Europe’s problems are a serious risk for the U.S. economic outlook.
• The European Union buys nearly 20 percent of U.S. goods exports ($242.6 billion in 2010) and over 30 percent of U.S. service exports ($170.2 billion). The European Union accounts for 63 percent of the stock of foreign direct investment (FDI) into the United States, at $1.5 trillion, and 56 percent of new investment in 2010. Therefore, when European growth slows, U.S. jobs, exports, and FDI inflows decline.
• Global financial markets are strongly interconnected. When European financial markets tighten, it can adversely impact U.S. banks’ confidence and their willingness to lend and invest. That, in turn, can hurt American businesses and jobs, particularly in smaller firms that depend on credit from their banks to grow and innovate.
• When EU stocks decline, U.S. equity markets often do as well, hitting the savings and wealth of Americans.
To make these linkages more concrete, for instance, exports to the European Union represent over 24, 20 and 18 percent, respectively, of merchandise exports from New York, North Carolina, and Illinois. In each of these states, over 150,000 jobs – and over 250,000 in Illinois – are export-related. A decline in exports to Europe will inevitably adversely impact America.
From the WSJ: Fitch Affirms France as AAA, Warns on Six Others
Fitch Ratings lowered its outlook on France's triple-A rating to "negative" from "stable," indicating there is a 50-50 chance the nation could lose its top investment-grade rating over the next two years.And there is a rumor of an S&P downgrade of France after the market today.
...
The ratings firm also put on downgrade watch several investment-grade-rated euro-zone nations that already had a negative outlook. In addition to Italy and Spain, that action snared Belgium, Slovenia, Ireland and Cyprus. Fitch said it expects to complete the review by the end of January. It said it would likely downgrade the ratings by one or two notches.
Key Measures of Inflation mostly slow in November
by Calculated Risk on 12/16/2011 11:55:00 AM
Earlier today the BLS reported:
The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis ... The index for all items less food and energy increased 0.2 percent in November following increases of 0.1 percent in each of the prior two months.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 0.1% (1.1% annualized rate) in November. The 16% trimmed-mean Consumer Price Index increased 0.1% (1.0% annualized rate) during the month.Note: The Cleveland Fed has a discussion of a number of measures of inflation: Measuring Inflation. You can see the median CPI details for November here.
...
The CPI less food and energy increased 0.2% (2.1% annualized rate) on a seasonally adjusted basis. ... Over the last 12 months, the median CPI rose 2.2%, the trimmed-mean CPI rose 2.5%, the CPI rose 3.4%, and the CPI less food and energy rose 2.2%.
On a year-over-year basis, these measures of inflation have stopped increasing, and are slightly above the Fed's target. On a monthly basis, the rate of increase is mostly below the Fed's target (Core is above, median and trimmed-mean are below).
Click on graph for larger image.This graph shows the year-over-year change for these three key measures of inflation. On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 2.5%, and core CPI rose 2.2%.
On a monthly basis, the median Consumer Price Index increased 1.1% at an annualized rate, the 16% trimmed-mean Consumer Price Index increased 1.0% annualized, and core CPI increased 2.1% annualized.
Both the median CPI and trimmed-mean CPI increased at a slower rate in November than in October.
LA area Port Traffic declines year-over-year in November
by Calculated Risk on 12/16/2011 09:41:00 AM
The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).
Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported - and possible hints about the trade report for November. LA area ports handle about 40% of the nation's container port traffic.
To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.
Click on graph for larger image.
On a rolling 12 month basis, inbound traffic is down 0.3% from October, and outbound traffic is down 0.2%.
Inbound traffic is "rolling over" and outbound traffic has stopped increasing.
The 2nd graph is the monthly data (with a strong seasonal pattern for imports).
For the month of November, loaded inbound traffic was down 4% compared to November 2010, and loaded outbound traffic was down 2% compared to November 2010.
Exports have been increasing, although bouncing around month-to-month. This is only the 2nd month with a year-over-year decline in exports since Sept 2009.
Imports have been soft - this is the sixth month in a row with a year-over-year decline in imports.
BLS: CPI Unchanged in November
by Calculated Risk on 12/16/2011 08:30:00 AM
From the BLS: CPI unchanged in November as energy declines offset increases in other categories
The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment.Later today I'll post a graph of several core measures of inflation.
The energy index declined for the second month in a row and offset increases in the indexes for food and all items less food and energy. ... The index for all items less food and energy increased 0.2 percent in November following increases of 0.1 percent in each of the prior two months.
