by Calculated Risk on 6/03/2015 08:46:00 AM

The Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $40.9 billion in April, down $9.7 billion from $50.6 billion in March, revised. April exports were $189.9 billion, $1.9 billion more than March exports. April imports were $230.8 billion, $7.8 billion less than March imports.

The trade deficit was smaller than the consensus forecast of $43.9 billion.

The first graph shows the monthly U.S. exports and imports in dollars through April 2015.

Click on graph for larger image.

Imports decreased and exports increased in April. Note: Imports surged in March due to the resolution of the West Coast port slowdown and the unloading of waiting ships, so a decrease in imports was expected in April.

Exports are 14% above the pre-recession peak and down 3% compared to April 2014; imports are at the pre-recession peak, and down 3% compared to April 2014. 

The second graph shows the U.S. trade deficit, with and without petroleum.

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 (wild swings over last few months due to port slowdown.

Oil imports averaged $46.52 in April, up slightly from $46.47 in March, and down from $95.00 in April 2014.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.

The trade deficit with China decreased to $26.5 billion in April, from $27.3 billion in April 2014. The deficit with China is a large portion of the overall deficit.

by Calculated Risk on 6/03/2015 08:18:00 AM

From ADP:

Private sector employment increased by 201,000 jobs from April to May according to the May ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
Goods-producing employment rose by 9,000 jobs in May, after adding just 1,000 in April. The construction industry had another good month in May adding 27,000 jobs, up from 24,000 last month. Meanwhile, manufacturing lost 5,000 jobs in May, after losing 8,000 in April.

Service-providing employment rose by 192,000 jobs in May, a strong rise from 164,000 in April. The ADP National Employment Report indicates that professional/business services contributed 28,000 jobs in May, down from April’s 35,000. Trade/transportation/utilities grew by 56,000, up from April’s 41,000. The 12,000 new jobs added in financial activities is double last month’s 6,000.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “The job market posted a solid gain in May. Employment growth remains near the average of the past couple of years. At the current pace of job growth the economy will be back to full employment by this time next year. The only blemishes are the decline in mining jobs due to the collapse in oil prices and the decline in manufacturing due to the strong dollar.”

This was at the consensus forecast for 200,000 private sector jobs added in the ADP report. 

The BLS report for May will be released on Friday and the consensus is for 220,000 non-farm payroll jobs added in May.

by Calculated Risk on 6/03/2015 07:00:00 AM

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

Mortgage applications decreased 7.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 29, 2015. This week’s results include an adjustment to account for the Memorial Day holiday. ...

The Refinance Index decreased 12 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 14 percent compared with the previous week and was 14 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.02 percent from 4.07 percent, with points decreasing to 0.33 from 0.35 (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.

2014 was the lowest year for refinance activity since year 2000.

It would take much lower rates - below 3.5% - to see a significant refinance boom this year.

The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 14% higher than a year ago.

by Calculated Risk on 6/02/2015 08:43:00 PM

This made me chuckle today ... "If the last seven years have taught investors anything, it’s to focus on the negatives and never change your mind." Josh Brown

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, ADP Employment Report for May. This report is for private payrolls only (no government). The consensus is for 200,000 payroll jobs added in May, up from 169,000 in April.

• At 8:30 AM, Trade Balance report for April from the Census Bureau. The consensus is for the U.S. trade deficit to be at $43.9 billion in April from $51.4 billion in March. Note: The trade deficit increased sharply in March after the West Coast port slowdown was resolved in February. The deficit should decline significantly in April.

• At 10:00 AM, the ISM non-Manufacturing Index for April. The consensus is for index to decrease to 57.2 from 57.8 in April.

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

by Calculated Risk on 6/02/2015 05:32:00 PM

A few excerpts from a research piece by Goldman Sachs chief economist Jan Hatzius: A September Hike: Sensible in the Base Case, Premature on Risk Management Grounds

The monetary policy path in the March "dot plot", which implies rate hikes starting at the September FOMC meeting, is consistent with the implications of a Taylor 1999 rule with a focus on broad labor market slack. To us, this looks like sensible policy in the FOMC's base case for the economy (which is broadly similar to our own at this point).

Nevertheless, we think the risk management case for delaying the first hike until 2016 remains persuasive. There is substantial uncertainty around the economic outlook, the equilibrium funds rate, and the true amount of labor market slack. This uncertainty has asymmetric effects on optimal monetary policy, and generally favors waiting.

Meanwhile, we are unconvinced by the main risk management arguments that are typically deployed in favor of an earlier liftoff than implied by the baseline economic scenario, which include financial stability concerns, worries about "falling behind the curve", and a desire to test the machinery of exit.

For now, our forecast remains that the FOMC will hike rates at the September FOMC meeting. But our discussion today reinforces our existing view that this remains a close call.

by Calculated Risk on 6/02/2015 03:00:00 PM

Based on an AutoData estimate, light vehicle sales were at a 17.9 million SAAR in May. That is up 6.2% from May 2014, and up 7.3% from the 16.5 million annual sales rate last month.


Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for May (red, light vehicle sales of 17.79 million SAAR from AutoData).

This was above the consensus forecast of 17.0 million SAAR (seasonally adjusted annual rate).

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

Note: dashed line is current estimated sales rate.

This was above the consensus forecast, and the strongest sales pace since July 2005. It appears 2015 will be the best year for light vehicle sales since 2001.

by Calculated Risk on 6/02/2015 12:14:00 PM

From WardsAuto: May 2015 U.S. LV Sales Thread: May SAAR Should Top 17 Million

May WardsAuto report forecasted LV sales for May at 1.6 million units, equating to a SAAR of nearly 17.5 million units. Wtih 6 of the Top 7 automakers reporting sales are trending at 1.63 million units, equating to a SAAR slightly above 17.7 million units.
emphasis added

From the WSJ: Auto Makers Posted Stronger-Than-Expected U.S. Sales in May

Several top auto makers logged stronger-than-expected U.S. vehicle sales in May, adding to the industry’s momentum this year.
...
The results came despite one less selling day compared with last May, which was expected to result in slight year-over-year declines for most major manufacturers.

Still, the U.S. auto industry is on its way to delivering 17 million new vehicles this year—a level unseen since 2001.

I'll post a graph in a few hours (after all of the results have been reported), but sales were well above the consensus forecast of 17.0 million for May.

by Calculated Risk on 6/02/2015 09:41:00 AM

Notes: This CoreLogic House Price Index report is for April. The recent Case-Shiller index release was for March. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports National Homes Prices Rose by 6.8 Percent Year Over Year in April 2015

CoreLogic® ... today released its April 2015 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased by 6.8 percent in April 2015 compared with April 2014. This change represents 38 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 2.7 percent in April 2015 compared with March 2015.

Including distressed sales, 30 states plus the District of Columbia were at or within 10 percent of their peak prices in April. Eight states and the District of Columbia reached new price peaks not experienced since January 1976 when the CoreLogic HPI started. These states include Alaska, Colorado, Nebraska, New York, Oklahoma, Tennessee, Texas and Wyoming.

Excluding distressed sales, home prices increased by 6.8 percent in April 2015 compared with April 2014 and increased by 2.3 percent month over month compared with March 2015. ...

“For the first four months of 2015, home sales were up 9 percent compared to the same period a year ago,” said Frank Nothaft, chief economist for CoreLogic. “One byproduct of the increased sales activity is rising house prices, and, as a result, month-over-month home prices are up almost 3 percent for April 2015 and up more than 6 percent from a year ago.”
emphasis added

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 2.7% in April (NSA), and is up 6.8% over the last year.

This index is not seasonally adjusted, and this was a solid month-to-month increase.


The second graph is from CoreLogic. The year-over-year comparison has been positive for thirty eight consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

The YoY increase had been moving sideways over the previous 7 or 8 months, but has picked up a little recently.

by Calculated Risk on 6/01/2015 07:48:00 PM

Tuesday:
• All day: Light vehicle sales for May. The consensus is for light vehicle sales to increase to 17.0 million SAAR in May from 16.5 million in April (Seasonally Adjusted Annual Rate).

• At 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for April. The consensus is a 0.1% decrease in orders

From the Financial Times: Greek bailout monitors hold emergency summit

Officials insisted that if a compromise is reached in Berlin, it will not be used as a “take it or leave it” ultimatum for Athens, but rather an outline to be presented to Alexis Tsipras, the Greek prime minister, for a “quick reaction.”
excerpt with permission

The talks apparently ended at 11:30 PM Berlin time. The details will be sent to Tsipras for his response. If there is a compromise, it sounds like the ESM (Eurozone's bailout fund) will take the hit, not the IMF or ECB.

The article also mentions a possible solution to cover debt payments over the summer.

by Calculated Risk on 6/01/2015 03:52:00 PM

From Reuters: Draghi, Lagarde joining Berlin meeting on Greece - officials

European Central Bank President Mario Draghi and IMF chief Christine Lagarde will join the leaders of Germany, France, and the European Commission for talks on Monday evening in Berlin on Greece, European Union officials said.

The goal of the meeting was to reach a joint position on how to negotiate with Greece, the officials said.

"How to negotiate" is the key sentence. The rumor is that the Germans want to make a "take it or leave it" final offer. That would probably mean a referendum in Greece. Most likely the "offer" would be more crushing austerity, and the Greek vote would probably be no.

It would be better to find a compromise that keeps Greece in the eurozone - and doesn't make the depression too much worse. Good luck.