by Calculated Risk on 2/03/2014 03:17:00 PM

Based on an estimate from WardsAuto, light vehicle sales were at a 15.14 million SAAR in January. That is down slightly from January 2013, and down 2.5% from the sales rate last month. 

This was below the consensus forecast of 15.7 million SAAR (seasonally adjusted annual rate).

Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for January (red, light vehicle sales of 15.14 million SAAR from WardsAuto).

The automakers reported January sales were impacted by the unusually cold weather.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Unlike residential investment, auto sales bounced back fairly quickly following the recession and were a key driver of the recovery.   

Looking forward, the growth rate will slow for auto sales, and most forecasts are for around a small gain in 2014 to around 16.1 million light vehicles.  Of course 2014 is off to a slow start.

by Calculated Risk on 2/03/2014 02:19:00 PM

This is a quarterly index from the the National Association of Home Builders (NAHB) and is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008, so the readings have been very low.

From the NAHB: Builder Confidence in the 55+ Housing Market Ends Fourth Quarter on a Record High

Builder confidence in the 55+ housing market for the fourth quarter of 2013 is up sharply, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI) released today. All segments of the market—single-family homes, condominiums and multifamily rental—registered strong increases compared to the same quarter a year ago. The single-family index increased 20 points to a level of 48, which is the highest fourth-quarter reading since the inception of the index in 2008 and the ninth consecutive quarter of year over year improvements. [CR Note: NAHB is reporting the year-over-year increase]
...
All of the components of the 55+ single-family HMI showed significant growth from a year ago: present sales climbed 26 points to 53, expected sales for the next six months rose 24 points to 62 and traffic of prospective buyers increased 9 points to 33.
...
“The 55+ segment of the housing market contains more discretionary purchases so as expected it has taken longer for that segment to join the housing recovery,” said NAHB Chief Economist David Crowe. “The 20 point year-over-year increase in 55+ HMI for single-family homes matches earlier gains in the NAHB/Wells Fargo HMI for the overall single-family market and surpasses the more recent gains in the other housing segments.”
emphasis added

Click on graph for larger image.

This graph shows the NAHB 55+ HMI through Q4 2013.  The index declined in Q4 to 48 from 50 in Q3 - however the index is up solidly year-over-year.  This indicates that about the same numbers builders view conditions as good than as  poor.

This is going to be a key demographic for household formation over the next couple of decades, but only if the baby boomers can sell their current homes.

There are two key drivers: 1) there is a large cohort moving into the 55+ group, and 2) the homeownership rate typically increases for people in the 55 to 70 year old age group. So demographics should be favorable for the 55+ market.

by Calculated Risk on 2/03/2014 11:45:00 AM

The Census Bureau reported that overall construction spending increased slightly in December:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during December 2013 was estimated at a seasonally adjusted annual rate of $930.5 billion, 0.1 percent above the revised November estimate of $929.9 billion. The December figure is 5.3 percent above the December 2012 estimate of $883.6 billion.
...
Spending on private construction was at a seasonally adjusted annual rate of $663.9 billion, 1.0 percent above the revised November estimate of $657.1 billion. Residential construction was at a seasonally adjusted annual rate of $352.6 billion in December, 2.6 percent above the revised November estimate of $343.8 billion. Nonresidential construction was at a seasonally adjusted annual rate of $311.3 billion in December, 0.7 percent below the revised November estimate of $313.4 billion. ...

In December, the estimated seasonally adjusted annual rate of public construction spending was $266.6 billion, 2.3 percent below the revised November estimate of $272.8 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 48% below the peak in early 2006, and up 54% from the post-bubble low.

Non-residential spending is 25% below the peak in January 2008, and up about 38% from the recent low.

Public construction spending is now 18% below the peak in March 2009 and up just about 1% from the recent low.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 25%. Non-residential spending is down 2% year-over-year. Public spending is down slightly year-over-year.

To repeat a few key themes:
1) Private residential construction is usually the largest category for construction spending, and is now the largest category once again.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time for a couple of years - mostly related to energy and power - but the key sectors of office, retail and hotels are still at very low levels.  Based on the architecture billings index, I expect private non-residential to increase in 2014

3) Public construction spending was down in December and is now only 1% above the low in April.  However it appears that the drag from public construction spending is over.  Public spending has declined to 2006 levels (not adjusted for inflation) and was a drag on the economy for 4+ years. In real terms, public construction spending has declined to 2001 levels.

Looking forward, all categories of construction spending should continue to increase. Residential spending is still very low, non-residential should start to pickup, and public spending appears to have bottomed.

by Calculated Risk on 2/03/2014 10:00:00 AM

The ISM manufacturing index indicated slower expansion in January than in December. The PMI was at 51.3% in January, down from 56.5% in December. The employment index was at 52.3%, down from 55.8%, and the new orders index was at 51.2%, down from 64.4% in December.

From the Institute for Supply Management: January 2014 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in January for the eighth consecutive month, and the overall economy grew for the 56th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The January PMI® registered 51.3 percent, a decrease of 5.2 percentage points from December's seasonally adjusted reading of 56.5 percent. The New Orders Index registered 51.2 percent, a significant decrease of 13.2 percentage points from December's seasonally adjusted reading of 64.4 percent. The Production Index registered 54.8 percent, a decrease of 6.9 percentage points compared to December's seasonally adjusted reading of 61.7 percent. Inventories of raw materials decreased by 3 percentage points to 44 percent, its lowest reading since December 2012 when the Inventories Index registered 43 percent. A number of comments from the panel cite adverse weather conditions as a factor negatively impacting their businesses in January, while others reflect optimism and increasing volumes in the early stages of 2014."
emphasis added

Click on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was well below expectations of 56.0%. A weak report, but probably weather related

by Calculated Risk on 2/03/2014 08:15:00 AM

Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division) released their Mortgage Monitor report for December today. According to LPS, 6.47% of mortgages were delinquent in December, up from 6.45% in November. BKFS reports that 2.48% of mortgages were in the foreclosure process, down from 3.44% in December 2012.

This gives a total of 8.95% delinquent or in foreclosure. It breaks down as:

• 1,964,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,280,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,244,000 loans in foreclosure process.

For a total of ​​4,488,000 loans delinquent or in foreclosure in December. This is down from 5,292,000 in December 2012.

Click on graph for larger image.

This graph from BKFS shows percent of loans delinquent and in the foreclosure process over time.

From BKFS:

• Delinquencies are now just 1.5x the pre-crisis average with foreclosures 4.6x (down from over 8)

• Foreclosure starts ended the year at the lowest level since April 2007 and pipelines are clearing in most states

• Sizeable delinquent inventories remain in the north- and south-east

Delinquencies and foreclosures are moving down - and might be back to normal levels in a couple of years.

The second graph from BKFS shows foreclosure starts. From BKFS:

Black Knight found that 2013 marked the fourth consecutive year of significant, sustained improvement in the nation’s inventory of delinquent mortgages, and the second consecutive year of significant improvement for those in foreclosure. Delinquencies were just 1.5 times their pre-crisis average, with foreclosures down to 4.6 times their pre-crisis levels (declining from more than eight times the historical norm).

“In many ways, 2013 marked an abatement to crisis conditions in the U.S. mortgage market,” said Herb Blecher, senior vice president of Black Knight Financial Services’ Data & Analytics division. “Delinquencies neared pre-crisis levels, foreclosure inventory declined 30 percent over the year, new problem loan rates improved in both judicial and non-judicial foreclosure states, and foreclosure starts ended the year at the lowest level since April 2007."
emphasis added

There is much more in the mortgage monitor.

by Calculated Risk on 2/02/2014 10:34:00 PM

From Jon Hilsenrath and Victoria McGrane at the WSJ: Rate Decision to Drive Yellen's Early Agenda

After she is sworn in as Fed chairwoman Monday a new question will almost immediately crowd [Janet Yellen's] agenda: Why is unemployment falling so fast and what, if anything, should the central bank do about it?
...
[Yellen] and other Fed officials worry [the decline in the unemployment rate] masks large pockets of stress still plaguing the labor market, including millions of people who want work but aren't looking anymore and therefore are no longer counted as unemployed.
...
People are leaving the labor force for different reasons— they're retiring, going back to school, joining disability rolls, giving up looking for jobs or doing other things—reducing the number of people counted as unemployed.

The trend raises hard-to-answer questions for the Fed. Will some of these people come back to work when the economy improves or have they left permanently? Do these shifts mean there is less slack in labor markets—workers available to take jobs—than they realized, or is the slack still out there, hidden in these numbers?

Understanding the decline in the labor force participation rate is very important. A decline was expected - even before the recession - but it isn't clear how much of the decline is related to demographic trends, and how much is due to the weak labor market (my view is that over half of the decline in participation is due to demographics - both people retiring, and more people staying in school).

For much more, see: Labor Force Participation Rate Update, Labor Force Participation Rate Research, Understanding the Decline in the Participation Rate and Update: Further Discussion on Labor Force Participation Rate.

Monday:
• All day, Light vehicle sales for January. The consensus is for light vehicle sales to increase to 15.7 million SAAR in January (Seasonally Adjusted Annual Rate) from 15.3 million SAAR in December.

• At 9:00 AM ET, the Markit US PMI Manufacturing Index for January. The consensus is for a decrease to 53.9 from 55.0 in December.

• At 10:00 AM, the ISM Manufacturing Index for January. The consensus is for a decrease to 56.0 from 57.0 in December. The ISM manufacturing index indicated expansion in December at 57.0%. The employment index was at 56.9%, and the new orders index was at 64.2%.

• Also at 10:00 AM, Construction Spending for December. The consensus is for no change in construction spending.

Weekend:
• Schedule for Week of February 2nd

The Nikkei is down about 0.8%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 4 and DOW futures are up 37 (fair value).

Oil prices are mostly moving sideways with WTI futures at $97.16 per barrel and Brent at $106.29 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.26 per gallon (about the same as a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 2/02/2014 09:35:00 AM

Fannie Mae reported Friday that the Single-Family Serious Delinquency rate declined in December to 2.38% from 2.44% in November. The serious delinquency rate is down from 3.29% in December 2012, and this is the lowest level since November 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Last week, Freddie Mac reported that the Single-Family serious delinquency rate declined in December to 2.39% from 2.43% in November. Freddie's rate is down from 3.25% in December 2012, and is at the lowest level since February 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.91 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in about eighteen months. Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be back to normal in late 2015 or 2016.

by Calculated Risk on 2/01/2014 02:28:00 PM

Here are some excepts from two research reports ... first, from Goldman Sachs chief economist Jan Hatzius

Our preliminary forecast for the nonfarm payroll report is a bounceback to a 200,000 pace of increase. There are two key reasons why we expect the report to look strong ... Better weather (yes, really). Although the month of January as a whole was quite cold, the payroll survey week was actually somewhat warmer than normal ... Even excluding the weather impact, the December employment gain looks to be about 50,000 below the recent trend. In our view, this is implausibly weak relative to other job market measures ... This could result in a bounceback to an above-trend pace even outside the weather impact, although it is also possible that the December reading will be revised up.

... we see a drop in the unemployment rate from 6.7% to 6.6%, partly because the expiration of emergency unemployment benefits at yearend may have caused another drop in labor force participation and partly because we expect a good increase in household employment, which has likewise underperformed job market indicators such as claims.

From Ethan Harris at Merrill Lynch:

We forecast nonfarm payrolls to increase 185,000, an improvement from the 74,000 gain in December, but still somewhat below the recent trend. The unemployment rate is likely to slip to 6.6% from 6.7%.

Typically when poor weather conditions result in a downward bias to payroll growth, there will be a positive reversal the subsequent month when those “missing” payrolls reappear on the books. Although job growth was held back in December by the harsh weather, we do not think a strong snap-back will occur in January. ... On balance, the weather in January was worse than normal, which would depress activity. While conditions improved for the survey week (since the 12th falls on a Sunday, the pay period is the week of the 13th), the rest of the month was quite cold. In particular, the week prior experienced the "polar vortex."
...
The benchmark revision to nonfarm payrolls will also be released along with this report. The preliminary revision was for an upward revision of 345,000, or 0.3% of payrolls. This will impact the data from April 2012 through March 2013.

From CR: At Harris notes, the annual benchmark revision will be released with the January employment report, and the preliminary estimate is an upward revision of 345,000 jobs, however the revision would have been negative except for the reclassification of certain jobs (that weren't previously included in the payroll report).

On the weather, it is uncertain. It was very cold in many parts of the country during January, but the weather during the survey week was decent for January.   So the weather impact might be minimal.

 I'll write an employment report preview later this week after more data for January is released.

by Calculated Risk on 2/01/2014 11:15:00 AM

This will be a busy week for economic data with several key reports including the January employment report on Friday.

Other key reports include the ISM manufacturing index on Monday, January vehicle sales also on Monday, the ISM service index on Wednesday, and the December trade deficit report on Thursday.

----- Monday, February 3rd -----
All day: Light vehicle sales for January. The consensus is for light vehicle sales to increase to 15.7 million SAAR in January (Seasonally Adjusted Annual Rate) from 15.3 million SAAR in December.

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

9:00 AM ET: The Markit US PMI Manufacturing Index for January.  The consensus is for a decrease to 53.9 from 55.0 in December.

10:00 AM ET: ISM Manufacturing Index for January. The consensus is for a decrease to 56.0 from 57.0 in December.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion in December at 57.0%. The employment index was at 56.9%, and the new orders index was at 64.2%.

10:00 AM: Construction Spending for December. The consensus is for no change in construction spending.

----- Tuesday, February 4th -----
10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for December. The consensus is for a 1.8% decrease in December orders.

10:00 AM: The Congressional Budget Office will release its annual Budget and Economic Outlook. The report will include updated economic and budget projections spanning the period from 2014 to 2024.

----- Wednesday, February 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 January. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in January, down from 238,000 in December.  

10:00 AM: ISM non-Manufacturing Index for January. The consensus is for a reading of 53.9, up from 53.0 in December. Note: Above 50 indicates expansion, below 50 contraction.

----- Thursday, February 6th -----
Early: Trulia Price Rent Monitors for January. 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.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 337 thousand from 348 thousand.

8:30 AM: Trade Balance report for December from the Census Bureau.

Imports decreased, and exports increased in November.

The consensus is for the U.S. trade deficit to increase to $36.0 billion in December from $34.3 billion in November.

----- Friday, February 7th -----
8:30 AM: Employment Report for January. The consensus is for an increase of 181,000 non-farm payroll jobs in January, up from the 74,000 non-farm payroll jobs added in December.

The consensus is for the unemployment rate to be unchanged at 6.7% in January. 

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

The economy has added 8.2 million private sector jobs since employment bottomed in February 2010 (7.6 million total jobs added including all the public sector layoffs).

There are still almost 640 thousand fewer private sector jobs now than when the recession started in 2007.

3:00 PM: Consumer Credit for December from the Federal Reserve. The consensus is for credit to increase $12.0 billion in December.

by Calculated Risk on 2/01/2014 08:11:00 AM

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

Here is the unofficial problem bank list for January 31, 2014.

Changes and comments from surferdude808:

The FDIC released its enforcement action activity through year-end 2013, which contributed to many changes to the Unofficial Problem Bank List. For the week, there were 10 removals and one addition that leave the list at 590 institutions with assets of $195.4 billion. A year ago, the list held 822 institutions with assets of $308 billion. During the month, the list declined by a net of 29 institutions and assets dropped by $18.1 billion. This was the largest net monthly decline in the number of institutions and assets since the list was first published. While the 19 action terminations during the month were above average, there are well below the monthly high of 25 terminations during April 2012. Thus, mergers, failures, and voluntary liquidations contributed to the 31 removals during the month.

Syringa Bank, Boise, ID ($34 million Ticker: SGBP) failed this week making it the second failure in Idaho since the on-set of the Great Recession. This is third consecutive week for a failure, which has not occurred since late October/early November 2012. Midwest Federal Savings and Loan Association of St Joseph, Saint Joseph, MO ($33 million Ticker: SJBA) found a merger partner to exit the list.

Actions were terminated against Falcon International Bank, Laredo, TX ($817 million); Community West Bank, National Association, Goleta, CA ($532 million); BankCherokee, Saint Paul, MN ($262 million); Sanibel Captiva Community Bank, Sanibel, FL ($228 million); Columbia Bank, Lake City, FL ($190 million); Peoples Bank, Clifton, TN ($135 million); Sunrise Bank, Cocoa Beach, FL ($107 million); Woodland Bank, Deer River, MN ($66 million); and Farmers State Bank of Sublette, Sublette, IL ($43 million).

The sole addition this week is Vantage Point Bank, Horsham, PA ($75 million).

Over the next two weeks, we expect for there to be only a few changes to the list as the OCC will likely not release an update until February 21st. By the end of the month, the FDIC should release fourth quarter industry results and provide an update to the official figures.

Enjoy the Super Bowl or at least the advertisements should your favorite fail to win.