by Calculated Risk on 7/17/2013 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 836,000. This is 9.9 percent below the revised May estimate of 928,000, but is 10.4 percent above the June 2012 rate of 757,000.

Single-family housing starts in June were at a rate of 591,000; this is 0.8 percent below the revised May figure of 596,000. The June rate for units in buildings with five units or more was 236,000.

Building Permits:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 911,000. This is 7.5 percent below the revised May rate of 985,000, but is 16.1 percent above the June 2012 estimate of 785,000.

Single-family authorizations in June were at a rate of 624,000; this is 0.6 percent above the revised May figure of 620,000. Authorizations of units in buildings with five units or more were at a rate of 261,000 in June.

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased in June (Multi-family is volatile month-to-month).

Single-family starts (blue) decreased slightly to 591,000 SAAR in June (Note: May was revised down from 599 thousand to 596 thousand).

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that housing starts have been generally increasing after moving sideways for about two years and a half years.

This was well below expectations of 951 thousand starts in June and the lowest level for starts since August 2012.  Total starts in June were up 10.4% from June 2012; single family starts were only up 11.5% year-over-year.  I'll have more later ...

by Calculated Risk on 7/17/2013 07:01:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 4 percent from the previous week and is at its lowest level since July 2011. The seasonally adjusted Purchase Index increased 1 percent from one week earlier.
...
The refinance share of mortgage activity decreased to 63 percent of total applications from 64 percent the previous week and is at its lowest level since April 2011.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) was unchanged at 4.68 percent, with points decreasing to 0.42 from 0.46 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the refinance index.

With 30 year mortgage rates above 4.5%, refinance activity has fallen sharply, decreasing in 9 of the last 10 weeks.

This index is down 55% over the last ten weeks.

The second graph shows the MBA mortgage purchase index.  The 4-week average of the purchase index has generally been trending up over the last year, and the 4-week average of the purchase index is up almost 10% from a year ago.

by Calculated Risk on 7/16/2013 08:45:00 PM

Oops ... from Mort Zuckerman writing in the WSJ:

That brings us to a stunning fact about the jobless recovery: The measure of those adults who can work and have jobs, known as the civilian workforce-participation rate, is currently 63.5%—a drop of 2.2% since the recession ended. Such a decline amid a supposedly expanding economy has never happened after previous recessions. Another statistic that underscores why this is such a dysfunctional labor market is that the number of people leaving the workforce during this economic recovery has actually outpaced the number of people finding a new job by a factor of nearly three.

I guess Mr. Zuckerman hasn't been following the discussion of current demographic trends. A significant portion of the recent decline in the participation rate is due to baby boomers retiring and other demographic trends (like more younger Americans staying in school). 

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for their weekly mortgage applications survey. Expect a further decline in refinance activity.

• At 8:30 AM, the Census Bureau will release Housing Starts for June. The consensus is for total housing starts to increase to 951 thousand (SAAR) in June from 914 thousand in May.

• At 10:00 AM, Testimony by Fed Chairman Ben Bernanke, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

• At 2:00 PM, the Federal Reserve Beige Book will be released. This is an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

by Calculated Risk on 7/16/2013 04:44:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for June since LA area ports handle about 40% of the nation's container port traffic.

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).

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 was up 1% in June, and outbound traffic down 3%, compared to the rolling 12 months ending in May.

In general, inbound traffic has been increasing slightly, and outbound traffic has been declining slightly.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).

This suggests an increase in the trade deficit with Asia for June. 

by Calculated Risk on 7/16/2013 12:29:00 PM

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 0.2% (2.1% annualized rate) in June. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.2% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.5% (5.9% annualized rate) in June. The CPI less food and energy increased 0.2% (2.0% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for June here. Motor fuel increased at a 104% annualized rate in June.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.1%, the trimmed-mean CPI rose 1.7%, the CPI rose 1.8%, and the CPI less food and energy rose 1.6%. Core PCE is for May and increased just 1.1% year-over-year.

On a monthly basis, median CPI was at 2.0% annualized, trimmed-mean CPI was at 1.6% annualized, and core CPI increased 2.0% annualized. Also core PCE for May increased 1.3% annualized.

Inflation is mostly below the Fed's target, although the Fed expects inflation to pick up a little in the 2nd half of 2013. 

by Calculated Risk on 7/16/2013 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) increased 6 points in July to 57. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Rises Six Points in July

Builder confidence in the market for newly built, single-family homes rose six points to 57 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, released today. This is the index’s third consecutive monthly gain and its strongest reading since January of 2006.

“Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten,” noted NAHB Chief Economist David Crowe. “Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften.”
...
All three HMI components posted gains in July. The component gauging current sales conditions rose five points to 60 – its highest level since early 2006. Meanwhile, the component gauging sales expectations in the next six months gained seven points to 67 and the component gauging traffic of prospective buyers rose five points to 45 – marking the strongest readings for each since late 2005.

All four regions also posted gains in their HMI scores’ three-month moving averages. The Northeast showed a four-point gain to 40 while the Midwest reported an eight-point gain to 54, the South posted a five-point gain to 50 and the West measured a three-point gain to 51.
emphasis added

Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the July release for the HMI and the May data for starts (June housing starts will be released tomorrow). This was well above the consensus estimate of a reading of 52.

by Calculated Risk on 7/16/2013 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.3 percent in June after having been unchanged in May. For the second quarter as a whole, industrial production moved up at an annual rate of 0.6 percent. In June, manufacturing production rose 0.3 percent following an increase of 0.2 percent in May. The output at mines advanced 0.8 percent in June, while the output of utilities decreased 0.1 percent. At 99.1 percent of its 2007 average, total industrial production was 2.0 percent above its year-earlier level. The rate of capacity utilization for total industry edged up 0.1 percentage point to 77.8 percent, a rate that was 0.1 percentage point above its level of a year earlier but 2.4 percentage points below its long-run (1972–2012) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 10.9 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 77.8% is still 2.4 percentage points below its average from 1972 to 2010 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increase 0.3% in June to 99.1 . This is 18.2% above the recession low, but still 1.8% below the pre-recession peak.

The monthly change for both Industrial Production and Capacity Utilization were slightly above expectations. The consensus was for a 0.2% increase in Industrial Production in June, and for Capacity Utilization to increases to 77.7%.

by Calculated Risk on 7/16/2013 08:40:00 AM

From the Bureau of Labor Statistics (BLS): Consumer Price Index - June 2013

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment. The gasoline index rose sharply in June and accounted for about two thirds of the seasonally adjusted all items change.
...
The index for all items less food and energy increased 0.2 percent in June, the same increase as in May.
emphasis added

On a year-over-year basis, CPI is up 1.8 percent, and core CPI is up also up 1.6 percent.  Both are below the Fed's target. This was close to the consensus forecast of a 0.4% increase for CPI (due to gasoline prices), and a 0.2% increase in core CPI.

Note: CPI-W (used for cost of living adjustment, COLA) is also up 1.8% year-over-year in June.  The COLA is calculated using the average Q3 data (July, August, and September).

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 7/15/2013 08:57:00 PM

And the Q2 GDP forecasts are lowered again following the weaker than expected retail sales report ...

Via the WSJ:

RBS lowered its forecast for the nation's economic growth rate in the second quarter to a weak 0.5% from 0.8%

Steve Lisman via CNBC:

[W]e just calculated using about eight estimates that have been changed today. The current GDP forecast for the second quarter, it's now below 1% ... 0.9%. it should actually be a bit lower in there because one guy in there, UBS, up there 1.12%, that's the prior, and that is now down below 1, with the low being 0.3%

Tuesday:
• At 8:30 AM ET, the Consumer Price Index for June will be released. The consensus is for a 0.4% increase in CPI in June and for core CPI to increase 0.2%.

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for June. The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 77.7%.

• At 10:00 AM, the July NAHB homebuilder survey will be released. The consensus is for a reading of 52, the same as in June. Any number above 50 indicates that more builders view sales conditions as good than poor.

by Calculated Risk on 7/15/2013 05:25:00 PM

Weekly Update: One of key questions for 2013 is Will Housing inventory bottom this year?. Since this is a very important question, I'm tracking inventory weekly in 2013. 

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for May).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year (to normalize the data).

In 2010 (blue), inventory increased more than the normal seasonal pattern, and finished the year up 7%. However in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

So far in 2013, inventory is up 18.1%, and I expect some further increases over the next month or two.

It now seems likely that inventory bottomed early this year. 

It is important to remember that inventory is still very low, and is down 10.7% from the same week last year according to Housing Tracker.  Once inventory starts to increase (more than seasonal), I expect price increases to slow.