by Calculated Risk on 3/02/2015 02:18:00 PM

The Case-Shiller house price indexes for December were released last Tuesday. Zillow forecasts Case-Shiller a month early - now including the National Index - and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: 10- & 20-City Case-Shiller Composites Expected to Show Declines In Jan. From Dec

The December S&P/Case-Shiller (SPCS) data released [last] week showed healthy home price appreciation largely at pace with prior months, with annual growth in the U.S. National Index at 4.6 percent in December.

Annual appreciation in home values as measured by SPCS has been less than 5 percent for the past four months. We anticipate this trend to continue as annual growth in home prices slows to more normal levels between 3 percent and 5 percent. Zillow predicts the U.S. National Index to rise 4.5 percent on an annual basis in January.

The 10- and 20-City Composite Indices both experienced modest bumps in annual growth rates in December; the 10-City index rose to 4.3 percent and the 20-City Index rose to 4.5 percent – up from rates of 4.2 percent and 4.3 percent, respectively, in November. The non-seasonally adjusted (NSA) 10- and 20-City indices both rose 0.1 percent from November to December. We expect both to turn negative in January, with each predicted to fall 0.1 percent month-over-month (NSA).

All forecasts are shown in the table below. These forecasts are based on the December SPCS data release and the January 2014 Zillow Home Value Index (ZHVI), released Feb. 19. Officially, the SPCS Composite Home Price Indices for January will not be released until Tuesday, March 31.

So the year-over-year change in for January Case-Shiller index will probably be about the same, or a little lower, than in the December report.

Zillow Case-Shiller Forecast
	Case-Shiller Composite 10		Case-Shiller Composite 20		Case-Shiller National
	NSA	SA	NSA	SA	NSA	SA
December Actual YoY	4.3%	4.3%	4.5%	4.5%	4.6%	4.6%
January Forecast YoY	4.3%	4.3%	4.5%	4.5%	4.5%	4.5%
January Forecast MoM	-0.1%	0.6%	-0.1%	0.6%	0.0%	0.5%

by Calculated Risk on 3/02/2015 11:01:00 AM

The Census Bureau reported that overall construction spending decreased in January:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during January 2015 was estimated at a seasonally adjusted annual rate of $971.4 billion, 1.1 percent below the revised December estimate of $982.0 billion. The January figure is 1.8 percent above the January 2014 estimate of $954.6 billion.

Both private and public spending decreased in January:

Spending on private construction was at a seasonally adjusted annual rate of $697.6 billion, 0.5 percent below the revised December estimate of $700.9 billion. ...

In January, the estimated seasonally adjusted annual rate of public construction spending was $273.8 billion, 2.6 percent below the revised December estimate of $281.1 billion.
emphasis added

Note: Non-residential for offices and hotels is generally increasing, but spending for oil and gas is generally declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.

As an example, construction spending for lodging is up 18% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 14% year-over-year (and will fall further in the coming months).

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 dipped a little last year, but is increasing again.

Non-residential spending is 17% below the peak in January 2008.

Public construction spending is now 16% below the peak in March 2009 and about 5% above the post-recession low.

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

On a year-over-year basis, private residential construction spending is down 3%. Non-residential spending is up 5% year-over-year. Public spending is up 5% year-over-year.

Looking forward, all categories of construction spending should increase in 2015. Residential spending is still very low, non-residential is starting to pickup (except oil and gas), and public spending has probably hit bottom after several years of austerity.

This was well below the consensus forecast of a 0.3% increase, with weakness in Public and non-residential spending.

by Calculated Risk on 3/02/2015 10:00:00 AM

The ISM manufacturing index suggests slower expansion in February than in January. The PMI was at 52.9% in February, down from 53.5% in January. The employment index was at 51.4%, down from 54.1% in January, and the new orders index was at 52.5%, down from 52.9%.

From the Institute for Supply Management: February 2015 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in February for the 26th consecutive month, and the overall economy grew for the 69th 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® (ISM®) Manufacturing Business Survey Committee. "The February PMI® registered 52.9 percent, a decrease of 0.6 percentage point from January’s reading of 53.5 percent. The New Orders Index registered 52.5 percent, a decrease of 0.4 percentage point from the reading of 52.9 percent in January. The Production Index registered 53.7 percent, 2.8 percentage points below the January reading of 56.5 percent. The Employment Index registered 51.4 percent, 2.7 percentage points below the January reading of 54.1 percent. Inventories of raw materials registered 52.5 percent, an increase of 1.5 percentage points above the January reading of 51 percent. The Prices Index registered 35 percent, the same percentage as in January, indicating lower raw materials prices for the fourth consecutive month. Comments from the panel express a growing level of concern over the West Coast dock slowdown, negatively impacting exports and imports and requiring workarounds and added costs."
emphasis added

On that last sentence - the good news is the West Cost port slowdown has been resolved, although it will take a few months to catch up.

Click on graph for larger image.

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

This was slightly below expectations of 53.0%, but still indicates expansion in February.

by Calculated Risk on 3/02/2015 08:41:00 AM

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

Personal income increased $50.8 billion, or 0.3 percent ... in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $18.9 billion, or 0.2 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in January, in contrast to a decrease of 0.1 percent in December. ... The price index for PCE decreased 0.5 percent in January, compared with a decrease of 0.2 percent in December. The PCE price index, excluding food and energy, increased 0.1 percent, compared with an increase of less than 0.1 percent.

The following graph shows real Personal Consumption Expenditures (PCE) through January 2015 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was lower than expected,  Also the increase in PCE was below the 0.1% decrease consensus.  The sharp decline in oil and gasoline prices pulled down PCE (and the PCE price index).  Even though PCE decreased, real PCE increased in January (as shown in the graph).

On inflation: The PCE price index increased 0.2 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.3 percent year-over-year in January.

by Calculated Risk on 3/01/2015 08:48:00 PM

An excellent piece about the Fed from Tim Duy: Game On

Bottom Line: The Fed's confidence in the US economy is driving them closer to policy normalization. The labor market improvements are key - as long as unemployment is falling, confidence in the inflation outlook is rising. The more important message, however, is as the timing of the first rate hike draws closer, the level of uncertainty is rising. And it is not just about the timing of that rate hike. The Fed is sending a clear message that the subsequent path of rates is also very uncertain, and they don't think that uncertainty is being taken seriously by market participants. In their view, financial markets are too complacent about the likely path of interest rates.

Monday:
• At 8:30 AM ET, Personal Income and Outlays for January. The consensus is for a 0.4% increase in personal income, and for a 0.1% decrease in personal spending. And for the Core PCE price index to increase 0.1%.

• At 10:00 AM, the ISM Manufacturing Index for February. The consensus is for a decrease to 53.0 from 53.5 in January. The ISM manufacturing index indicated expansion in January at 53.5%. The employment index was at 54.1%, and the new orders index was at 52.9%.

• Also at 10:00 AM, Construction Spending for January. The consensus is for a 0.3% increase in construction spending.

Weekend:
• Schedule for Week of March 1, 2015

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up slightly and DOW futures are up 30 (fair value).

Oil prices were mixed over the last week with WTI futures at $49.40 per barrel and Brent at $62.19 per barrel.  A year ago, WTI was at $103, and Brent was at $110 - so prices are down 52% and 43% respectively year-over-year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are up to $2.42 per gallon (down about $1.00 per gallon from 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 3/01/2015 09:30:00 AM

Note: In a related story, the WSJ reported yesterday Wages Rise at Restaurants as Labor Market Tightens

Restaurant wages zoomed up to an annualized pace of more than 3% in the second half of last year from below a 1.5% pace in the first half of 2013, according to the Labor Department. ... Many restaurant owners are now scrambling to hire and retain workers, a potential precursor to widespread wage gains if it signals diminished slack in the labor market.

Here is a minor indicator I follow from the National Restaurant Association: Restaurant Performance Index Remained Elevated in January

Buoyed by higher same-store sales and traffic and a positive outlook among operators, the National Restaurant Association’s Restaurant Performance Index (RPI) remained elevated in January. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.7 in January, which represented the fourth consecutive month above the level of 102. In addition, January marked the 23rd consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“A solid majority of restaurant operators reported higher same-store sales and customer traffic in January, which helped keep the RPI well into positive territory,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, nearly six in 10 operators expect their business to improve in the next six months, with plans for capital expenditures also continuing at a high level.” br />
emphasis added

Click on graph for larger image.

The index decreased to 102.7 in January, down from 102.9 in December. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month. This is another very solid reading - and it is likely restaurants are benefiting from lower gasoline prices and are having to raise wages - a little - to attract and retain workers.

by Calculated Risk on 2/28/2015 01:12:00 PM

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

Other key indicators include the January Personal Income and Outlays report on Monday, February ISM manufacturing index also on Monday, February vehicle sales on Tuesday, the ISM non-manufacturing index on Wednesday, and the January Trade Deficit on Friday.

----- Monday, March 2nd -----
8:30 AM ET: Personal Income and Outlays for January. The consensus is for a 0.4% increase in personal income, and for a 0.1% decrease in personal spending. And for the Core PCE price index to increase 0.1%.

10:00 AM: ISM Manufacturing Index for February. The consensus is for a decrease to 53.0 from 53.5 in January.

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

The ISM manufacturing index indicated expansion in January at 53.5%. The employment index was at 54.1%, and the new orders index was at 52.9%

10:00 AM: Construction Spending for January. The consensus is for a 0.3% increase in construction spending.

----- Tuesday, March 3rd -----
All day: Light vehicle sales for February. The consensus is for light vehicle sales to increase to 16.7 million SAAR in February from 16.6 million in January (Seasonally Adjusted Annual Rate).

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

8:15 PM: Speech, Fed Chair Janet L. Yellen, Bank Regulation and Supervision, At the Citizens Budget Commission's Annual Awards Dinner, New York, New York

----- Wednesday, March 4th -----
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 February. This report is for private payrolls only (no government). The consensus is for 220,000 payroll jobs added in February, up from 213,000 in January.

10:00 AM: ISM non-Manufacturing Index for February. The consensus is for a reading of 56.5, down from 56.7 in January. Note: Above 50 indicates expansion.

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

----- Thursday, March 5th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 300 thousand from 313 thousand.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for January. The consensus is for no change in January orders.

4:30 PM: Dodd-Frank Act Stress Test Results

----- Friday, March 6th -----
8:30 AM: Employment Report for February. The consensus is for an increase of 230,000 non-farm payroll jobs added in February, down from the 257,000 non-farm payroll jobs added in January.

The consensus is for the unemployment rate to decline to 5.6% in February from 5.7% in January.

This graph shows the year-over-year change in total non-farm employment since 1968.

In January, the year-over-year change was 3.21 million jobs. This was the highest year-over-year gain since the '90s.

As always, a key will be the change in real wages - and as the unemployment rate falls, wage growth should start to pickup.

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

This graph shows the U.S. trade deficit, with and without petroleum, through December. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $41.8 billion in January from $46.6 billion in December.

3:00 PM: Consumer Credit for January from the Federal Reserve.  The consensus is for credit to increase $15.0 billion.

by Calculated Risk on 2/28/2015 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 February, 2015.

Changes and comments from surferdude808:

Very busy week for the Unofficial Problem Bank List as the FDIC closed a bank and provided an update on its enforcement actions through January 2015. There were 21 removals this week pushing the list count down to 357 institutions with assets of $109.2 billion. A year ago, the list held 566 institutions with assets of $182 billion. During January 2015, the unofficial list declined by 31 institutions after 25 action terminations, four mergers, and two failures. In addition, assets fell by $13.3 billion during the month, which is the largest monthly decline since $18.1 billion in January 2014.

As widely expected, the FDIC closed Doral Bank, San Juan, PR ($5.9 billion Ticker: DRL) today. Doral Bank was the third largest bank on the Unofficial Problem Bank List. Since the on-set of the Great Recession, Doral Bank is the 14th largest bank failure and the 2nd largest failure in Puerto Rico behind the $10.8 billion Westernbank Puerto Rico that failed in 2010.

Finding their way off the list through unassisted mergers were Valley Community Bank, Pleasanton, CA ($130 million Ticker: VCBC); The Bank of Perry, Perry, GA ($116 million); The Peoples Bank, Covington, GA ($96 million); and Winfield Community Bank, Winfield, IL ($55 million).

Actions were terminated against Hancock Bank & Trust Company, Hawesville, KY ($275 million); Frontenac Bank, Earth City, MO ($271 million); CornerstoneBank , Atlanta, GA ($248 million); Florida Citizens Bank, Gainesville, FL ($231 million); The Bank of Versailles, Versailles, MO, ($226 million); Balboa Thrift and Loan Association, Chula Vista, CA ($206 million); The First National Bank of Mount Dora, Mount Dora, FL ($205 million); Colombo Bank, Rockville, MD ($201 million); Uniti Bank, Buena Park, CA ($190 million); Wisconsin River Bank, Sauk City, WI ($97 million); One American Bank, Centerville, SD ($81 million); State Bank of Delano, Delano, MN ($79 million); Currie State Bank, Currie, MN ($67 million); Systematic Savings Bank, Springfield, MO ($36 million); Kentucky Federal Savings and Loan Association, Covington, KY ($36 million); and First National Bank in Pawhuska, Pawhuska, OK ($29 million).

The FDIC provided an update on the Official Problem Bank List figures this week. They currently list 291 institutions with assets of $87 billion. Since the FDIC's last release, the number of institutions on the Official Problem Bank List fell by 38 or 11.6 percent. In contrast, the unofficial list fell by 51 institutions or 12.5 percent over the same period.

Given the slowdown in new additions to the list, we will start publishing updates at month-end going forward.

by Calculated Risk on 2/27/2015 06:46:00 PM

From the FDIC: Banco Popular De Puerto Rico, Hato Rey, Puerto Rico, Assumes all of the Deposits of Doral Bank, San Juan, Puerto Rico

As of December 31, 2014, Doral Bank had approximately $5.9 billion in total assets and $4.1 billion in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $748.9 million. ... Doral Bank is the fourth FDIC-insured institution to fail this year, and the first in Puerto Rico. The last time an FDIC-insured institution was closed in Puerto Rico was on April 30, 2010.

This was a decent size bank a fairly large hit to the DIF.

by Calculated Risk on 2/27/2015 03:04:00 PM

From housing economist Tom Lawler:

The National Association of Realtors reported that its Pending Home Sales Index, designed to gauge contract-signing activity on MLS-based existing home sales, increased by 1.2% on a seasonally adjusted basis from December to 104.2 in January. A value of 100 is equal to the average level of contract activity in 2001.

There were significant revisions in historical data – not just seasonally adjusted data but unadjusted data – with all of the unadjusted revisions coming in the West region. As I had noted several times over the past year, most recently in the October 1, 2014 LEHC report (“NAR’s Pending Home Sales Index: The “Curious Case” of the Wild, Wild West”), the NAR’s Pending Home Sales Index for the West had previously made no sense either in terms of the pattern of pending sales vs. closed sales in that region, or in terms of pending sales reports from realtors/MLS in the region. I sent that report to the NAR, and one of their analysts told me that they were aware that the pending data in the West did not look correct, and were looking through archived records to figure out why. Apparently the NAR “found” out why, and the PHSI for the West was revised massively in today’s report, as shown in the table below.

NAR Pending Home Sales Index for the West Region, 2014 (Not Seasonally Adjusted, 2001 = 100
	December 2014 Report	January 2015 Report	% Change
Jan	79.4	78.0	-1.7%
Feb	67.9	83.0	22.3%
Mar	88.6	104.2	17.6%
Apr	79.9	105.0	31.5%
May	99.9	106.1	6.2%
June	100.7	103.2	2.5%
July	109.7	104.1	-5.1%
Aug	126.2	100.9	-20.0%
Sept	111.2	94.4	-15.1%
Oct	109.8	93.3	-15.0%
Nov	101.6	76.8	-24.4%
Dec	65.3	65.3	0.0%

Click on graph for larger image

The NAR’s revisions also produced massive changes in the implied seasonal pattern of Pending Home Sales in the West, from the previously “silly” looking pattern to a more reasonable pattern, as shown on this graph.

Prior to the recent revision the NAR’s Pending Home Sales in the West showed a seasonal peak in August, while NAR estimates of closed existing home sales showed a typical seasonal peak in the May/June period. Local realtor reports in the West – including that of the California Association of Realtors – showed pending sales as reaching a seasonal peak around April, a result much more consistent with the seasonal pattern of closed sales.

The revisions in the Pending Home Sales Index for the West go way back, and the West PHSI for 2012, 2013, and 2014 were all revised downward by about 2.3 percentage points.

The revisions in the West PHSI, combined with annual benchmark seasonal adjustment revisions, produced the following changes in the NAR’s National Pending Home Sales Index for 2014.

NAR National Pending Home Sales Index for 2014, Seasonally Adjusted (2001 = 100)
	December 2014 Report	January 2015 Report	% Change
Jan	94.7	96.1	1.5%
Feb	94.2	95.4	1.3%
Apr	97.9	98.6	0.7%
May	103.8	101.9	-1.8%
June	102.5	101.9	-0.6%
July	105.8	103.3	-2.3%
Aug	104.7	103.1	-1.6%
Sept	105.3	103.7	-1.5%
Oct	104.0	103.7	-0.3%
Nov	104.6	104.1	-0.5%
Dec	100.7	102.5	1.8%

CR Note: The index was reported at 104.2 in January 2015.