by Calculated Risk on 6/01/2013 03:28:00 PM

The Case-Shiller house price indexes for April will be released Tuesday, June 25th. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close. Note: Zillow makes a strong argument that the Case-Shiller index is currently overstating national house price appreciation.

Zillow: April Case-Shiller Composite To Show Annual Appreciation Above 12%

Buckle up, folks. If you thought the Case-Shiller numbers ... for March were eye-popping, just wait until next month. Our updated forecast indicates that the April 20-City Composite Case-Shiller Home Price Index (non-seasonally adjusted [NSA]) will rise 12.1 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will increase 11.4 percent from year-ago levels. The seasonally adjusted (SA) month-over-month change from March to April will be 1.7 percent for both the 20-City Composite and the 10-City Composite Home Price Indices (SA).
...
As we’ve described , the Case-Shiller indices are giving an inflated sense of national home value appreciation because they are biased toward the large, coastal metros currently seeing such enormous home value gains, and because they include foreclosure resales. The inclusion of foreclosure resales disproportionately boosts the index when these properties sell again for much higher prices — not just because of market improvements, but also because the sales are no longer distressed. In contrast, the ZHVI does not include foreclosure resales and shows home values for April 2013 up 5.2 percent from year-ago levels. We expect home value appreciation to continue to moderate in 2013, rising only 4 percent between April 2013 and April 2014. Further details on our forecast of home values can be found here, and more on Zillow’s full April 2013 report can be found here.

To forecast the Case-Shiller indices, we use the March Case-Shiller index level, as well as the April Zillow Home Value Index (ZHVI), which is available more than a month in advance of the Case-Shiller index, paired with April foreclosure resale numbers, which Zillow also publishes more than a month prior to the release of the Case-Shiller index. Together, these data points enable us to reliably forecast the Case-Shiller 10-City and 20-City Composite indices.

The following table shows the Zillow forecast for the April Case-Shiller index.

Zillow April Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	Apr 2012	148.44	151.51	135.98	138.90
Case-Shiller (last month)	Mar 2013	161.48	165.06	148.65	151.71
Zillow Forecast	YoY	11.4%	11.4%	12.1%	12.1%
	MoM	2.4%	1.7%	2.5%	1.7%
Zillow Forecasts1		165.4	168.3	152.4	155.0
Current Post Bubble Low		146.46	149.59	134.07	136.83
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Mar-12
Above Post Bubble Low		12.9%	12.5%	13.7%	13.3%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 6/01/2013 11:21:00 AM

The key report this week is the May employment report on Friday.

Other key reports include the ISM manufacturing index on Monday, auto sales also on Monday, the Trade Balance report on Tuesday, and the ISM service index on Wednesday.

Also, the Federal Reserve will release the Q1 Flow of Funds report on Thursday.

----- Monday, June 3rd -----
9:00 AM: The Markit US PMI Manufacturing Index for May. The consensus is for the index to be unchanged at 52.1.

10:00 AM ET: ISM Manufacturing Index for May. The consensus is for an increase to 51.0 from 50.7 in April.  Based on the regional surveys, a reading at or below 50 is possible.

Here is a long term graph of the ISM manufacturing index. The ISM manufacturing index indicated expansion in April at 50.7%. The employment index was at 50.2%, and the new orders index was at 52.3%.

10:00 AM: Construction Spending for April. The consensus is for a 1.0% increase in construction spending.

All day: Light vehicle sales for May. The consensus is for light vehicle sales to increase to 15.2 million SAAR in May (Seasonally Adjusted Annual Rate) from 14.9 million SAAR in April.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the April sales rate.


----- Tuesday, June 4th -----
8:30 AM: Trade Balance report for April from the Census Bureau.

Exports declined slightly in March, and imports declined even more, so the deficit declined.

The consensus is for the U.S. trade deficit to increase to $41.2 billion in April from $38.8 billion in March.

----- Wednesday, June 5th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for May. This report is for private payrolls only (no government). The consensus is for 171,000 payroll jobs added in May.  

10:00 AM: ISM non-Manufacturing Index for May. The consensus is for a reading of 53.8, up from 53.1 in April. Note: Above 50 indicates expansion, below 50 contraction.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for April. The consensus is for a 1.4% increase in orders.

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, June 6th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decrease to 345 thousand from 354 thousand last week.

10:00 AM: Trulia Price Rent Monitors for May. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

12:00 PM: Q1 Flow of Funds Accounts of the United States from the Federal Reserve.

----- Friday, June 7th -----
8:30 AM: Employment Report for May. The consensus is for an increase of 167,000 non-farm payroll jobs in May; the economy added 165,000 non-farm payroll jobs in April.

The consensus is for the unemployment rate to be unchanged at 7.5% in May.

The following graph shows the percentage of payroll jobs lost during post WWII recessions through April.

The economy has added 6.8 million private sector jobs since employment bottomed in February 2010 (6.2 million total jobs added including all the public sector layoffs).

There are still 2.0 million fewer private sector jobs now than when the recession started in 2007.

3:00 PM: Consumer Credit for April from the Federal Reserve. The consensus is for credit to increase $14.0 billion in April.

by Calculated Risk on 6/01/2013 08:04:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for May 31, 2013.

Changes and comments from surferdude808:

As expected, the FDIC released quarterly industry results for the first quarter on Wednesday and its enforcement action activity through April 2013 on Friday. Also, the FDIC closed a bank today. These actions contributed to many changes to the Unofficial Problem Bank List. In all, there were eight removals and two additions, which leave the list with 761 institutions with assets of $277.3 billion. A year ago, the list held 927 institutions with assets of $355.7 billion.

After the changes this week, assets declined by $6.5 billion. However, $4.9 billion of the decline came from asset shrinkage during the first quarter. For the month of May, the list declined by 14 institutions and assets by $8.0 billion. The month included five additions, four failures, four unassisted mergers, and 11 action terminations. Since March 2012, the 11 action terminations match the lowest total posted in October 2012. Along with industry quarterly results, the FDIC released the Official Problem Bank count of 612 institutions with assets of $213.3 billion. We anticipated the difference between the two lists to come in at 150 institutions, which was close to the actual difference of 149. The difference peaked at 185 in the second quarter of 2012.

Removals include the failed Banks of Wisconsin, Kenosha, WI ($134 million). The FDIC terminated actions against First Mariner Bank, Baltimore, MD ($1.3 billion Ticker: FMAR); Cornerstone Community Bank, Saint Petersburg, FL ($230 million); BANKWEST, Rockford, MN ($105 million); Bank of South Texas, McAllen, TX ($78 million); Metro Phoenix Bank, Phoenix, AZ ($76 million); Midwest Community Bank, Plainville, KS ($72 million); and First State Bank, Wilmot, SD ($38 million).

The two additions this week were Enterprise Bank of South Carolina, Ehrhardt, SC ($404 million) and North Milwaukee State Bank, Milwaukee, WI ($90 million).

There is nothing new to report on the status of Capitol Bancorp's banking subsidiaries, particularly 1st Commerce Bank, North Las Vegas ($24 million), which is subject to a sealed hearing on the ability of the Nevada Department of Business and Industry's Financial Institutions Division to terminate its banking charter. We will continue to monitor the status next week.

by Calculated Risk on 5/31/2013 10:10:00 PM

With a huge hat tip to Tanta, here is a video she posted years ago.

Hmmm ... "Top ramen tastes a lot better when you eat it off a granite counter top" ...

by Calculated Risk on 5/31/2013 06:37:00 PM

From the FDIC: North Shore Bank, FSB, Brookfield, Wisconsin, Assumes All of the Deposits of Banks of Wisconsin, Kenosha, Wisconsin

As of March 31, 2012, Banks of Wisconsin had approximately $134.0 million in total assets and $127.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $26.3 million. ... Banks of Wisconsin is the 14th FDIC-insured institution to fail in the nation this year, and the first in Wisconsin.

The FDIC has slowed down on closing banks, but they are still on pace to close 30+ banks this year.

by Calculated Risk on 5/31/2013 03:18:00 PM

From the National Restaurant Association: Restaurant Performance Index Hits 10-Month High as Operators’ Business Expectations Improve

Driven by higher same-store sales and an improving outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) hit a 10-month high in April. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.0 in April, up 0.4 percent from a level of 100.6 in March. In addition, April represented the third time in the last four months that the RPI topped the 100 level, which signifies expansion in the index of key industry indicators.

“Growth in the Restaurant Performance Index was due largely to restaurant operators’ healthier outlook for the business environment in the coming months,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In particular, there was a dropoff in the proportion of operators who expect conditions to worsen in the months ahead, which suggests a broadening of the perspective that the expansion is firmly entrenched.”
...
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.1 in April – up 0.3 percent from a level of 99.8 in March. April represented the first time in eight months that the Current Situation Index rose above 100, which signifies expansion in the current situation indicators.

Click on graph for larger image.

The index increased to 101.0 in April from 100.6 in March. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month. 

by Calculated Risk on 5/31/2013 12:35:00 PM

Here is the summary of the 2013 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.  And a brief excerpt:

What is the Outlook for Future Social Security and Medicare Costs in Relation to GDP? One instructive way to view the projected costs of Social Security and Medicare is to compare the costs of scheduled benefits for the two programs with the gross domestic product (GDP), the most frequently used measure of the total output of the U.S. economy (Chart A). Under the intermediate assumptions employed in the reports and throughout this Summary, costs for both programs increase substantially through 2035 when measured this way because: (1) the number of beneficiaries rises rapidly as the baby-boom generation retires; and (2) the lower birth rates that have persisted since the baby boom cause slower growth of the labor force and GDP. Social Security’s projected annual cost increases to about 6.2 percent of GDP by 2035, declines to 6.0 percent by 2050, and remains between 6.0 and 6.2 percent of GDP through 2087. Under current law, projected Medicare cost rises to 5.6 percent of GDP by 2035, largely due to the rapid growth in the number of beneficiaries, and then to 6.5 percent in 2087, with growth in health care cost per beneficiary becoming the larger factor later in the valuation period.


In 2012, the combined cost of the Social Security and Medicare programs equaled 8.7 percent of GDP. The Trustees project an increase to 11.8 percent of GDP in 2035 and 12.7 percent of GDP in 2087. Although Medicare cost (3.6 percent of GDP) is smaller than Social Security cost (5.0 percent of GDP) in 2012, the gap closes gradually until 2056, when Medicare is projected to be the more costly program. During the final decade of the long-range projection period, Medicare cost is modestly larger than Social Security cost.

The increase in Social Security as a percent of GDP has always been expected.  The larger concern is the increase in Medicare.  According to the report, the OASI trust fund will be depleted in 2035 (then the program will either run a deficit or a pay the portion received in payroll taxes).  The current large trust fund was a result of payroll tax increases under President Reagan to have the baby boomers prepay their social security on the recommendation of the Greenspan commission.   The eventual depletion of the trust fund was expected. 

As the Columbia Journalism Review noted, any publication that says the fund is "bankrupt" or "on track for insolvency" gets an "F" for reporting (I've already seen a few).

by Calculated Risk on 5/31/2013 10:00:00 AM

Click on graph for larger image.

• The final Reuters / University of Michigan consumer sentiment index for May increased to 84.5 from the April reading of 76.4, and up from the preliminary reading of 83.7. This is the highest level since July 2007.

This was above the consensus forecast of 83.7. Sentiment has generally been improving following the recession - with plenty of ups and downs - and one big spike down when Congress threatened to "not pay the bills" in 2011.

• From the Chicago ISM:

May 2013:

The Chicago Purchasing Managers reported April's Chicago Business Barometer sprung 9.7 to 58.7, the highest since March 2012 and in sharp contrast to April's 3-1/2 year low. All Business Activity measures surged in May, reversing weakness seen in most categories in March and April.

PMI: Increased to 58.7 from 49.0. (Above 50 is expansion).

Employment increased to 56.9, up from 48.7.

New orders increased to 58.1 from 53.2.

This was well above the consensus estimate of 50.0.

by Calculated Risk on 5/31/2013 08:46:00 AM

The BEA released the Personal Income and Outlays report for April:

Personal income decreased $5.6 billion, or less than 0.1 percent ... in April, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $20.5 billion, or 0.2 percent. In March, personal income increased $36.2 billion, or 0.3 percent ... and PCE increased $14.2 billion, or 0.1 percent, based on revised estimates.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in April, compared with an increase of 0.2 percent in March. ... The price index for PCE decreased 0.3 percent in April, compared with a decrease of 0.1 percent in March. The PCE price index, excluding food and energy, increased less than 0.1 percent, compared with an increase of 0.1 percent.
...
Personal saving -- DPI less personal outlays -- was $306.9 billion in April, compared with $301.4 billion in March. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 2.5 percent in April, the same as in March.

The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

This graph shows real PCE by month for the last few years. The dashed red lines are the quarterly levels for real PCE.  

Some of the decline in spending is probably related to lower gasoline prices in April - and that is actually a positive (gasoline prices rebounded in May though).    Also PCE was revised up for January (slightly), February and March.

A key point is that the PCE price index was only up 0.7% year-over-year (1.1% for core PCE).   Core PCE increased at a 0.1% annualized rate in April keeping the pressure off the Fed to taper asset purchases.

by Calculated Risk on 5/30/2013 09:16:00 PM

The 2013 Social Security Trustees Report is expected tomorrow. If it is released, expect some terrible media coverage. Last year, the Columbia Journalism Review issued a Report Card on Social Security Trust Fund Coverage. They gave the media an "F" on headlines, and a "C-" on coverage.

With a few exceptions like USNews.com, the ABCNews blog, and Mark Miller, who noted on his Reuters blog “[Security Commissioner Michael] Astrue went out of his way to emphasize that the program is far from broke,” Astrue’s warning went unheeded.. Most press coverage ignored Astrue’s cautions and left the impression with the public that Social Security will not be there for them. “There won’t be much money left for you” after 2033, declared a reporter on WBEZ in Chicago.

Obviously any site that says "broke" or "bankrupt", is well, wrong. Unfortunately the coverage is typically more political than data driven. Be prepared to ridicule the coverage (The Columbia article has some great examples from last year).

Friday economic releases:
• At 8:30 AM ET, the BEA will release the Personal Income and Outlays for April. The consensus is for a 0.1% increase in personal income in April, and for no change in personal spending. Also for the Core PCE price index to increase 0.1%. Based on the second estimate of GDP, there will be an upward revision to outlays for Q1.

• At 9:45 AM, the Chicago Purchasing Managers Index for May will be released. The consensus is for an increase to 50.0, up from 49.0 in April.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (final for May). The consensus is for a reading of 83.7.

• Expected: The 2013 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds