by Calculated Risk on 6/30/2016 09:53:00 AM

Chicago PMI: June Chicago Business Barometer Up 7.5 Points to 56.8

The MNI Chicago Business Barometer rose 7.5 points to 56.8 in June from 49.3 in May, the highest since January 2015, led by strong gains in New Orders and Production.

June’s rebound was just enough to offset the previous two months of weakness, leaving the Barometer broadly unchanged over the quarter at an average of 52.2 in Q2 compared with 52.3 in Q1. New Orders increased sharply on the month to the highest since October 2014 ...
...
Chief Economist of MNI Indicators Philip Uglow said, “June’s sharp increase in the MNI Chicago Business Barometer needs to be viewed in the context of the weakness seen in April and May. Looking at the three-month average provides a better guide this month to the underlying trend in the economy with activity broadly unchanged between Q1 and Q2. Still, on a trend basis activity over the past four months is running above the very low levels seen around the turn of the year.”
emphasis added

This was above the consensus forecast of 50.5.

by Calculated Risk on 6/30/2016 08:34:00 AM

The DOL reported:

In the week ending June 25, the advance figure for seasonally adjusted initial claims was 268,000, an increase of 10,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 259,000 to 258,000. The 4-week moving average was 266,750, unchanged from the previous week's revised average. The previous week's average was revised down by 250 from 267,000 to 266,750.

There were no special factors impacting this week's initial claims. This marks 69 consecutive weeks of initial claims below 300,000, the longest streak since 1973.

The previous week was revised down by 1,000.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims was unchanged at 266,750.

This was close to the consensus forecast. The low level of claims suggests relatively few layoffs.

by Calculated Risk on 6/29/2016 04:35:00 PM

The Case-Shiller house price indexes for April were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: May Case-Shiller Forecast: April's Modest Monthly Slowdown Should Continue

April Case-Shiller data showed seasonally adjusted monthly home price growth that was slightly weaker than expected, and annual growth at a pace in line with recent months. Looking ahead, Zillow’s May Case-Shiller forecast calls for more of the same, with seasonally adjusted monthly growth in the 10- and 20-city indices falling slightly from April while annual growth stays largely flat.

The May Case-Shiller National Index is expected to grow 5 percent year-over-year and 0.1 percent month-to-month, both unchanged from April. We expect the 10-City Index to grow 4.7 percent year-over-year and 0.1 percent from April. The 20-City Index is expected to grow 5.3 percent between May 2015 and May 2016 and 0.1 percent from April.

Zillow’s May Case-Shiller forecast is shown in the table below. These forecasts are based on today’s April Case-Shiller data release and the May 2016 Zillow Home Value Index (ZHVI). The May Case-Shiller Composite Home Price Indices will not be officially released until Tuesday, July 26.

The year-over-year change for the 20-city index will probably be slightly lower in the May report than in the April report.  The change for the National index will probably be about the same.

by Calculated Risk on 6/29/2016 01:01:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate decreased in May to 1.11% from 1.15% in April.  Freddie's rate is down from 1.58% in May 2015.

This is the lowest rate since August 2008.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

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

Click on graph for larger image

Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. 

The Freddie Mac serious delinquency rate has fallen 0.47 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will be below 1% in a few months.

Note: Fannie Mae reported yesterday.

by Calculated Risk on 6/29/2016 10:02:00 AM

From the NAR: Pending Home Sales Skid in May

After steadily increasing for three straight months, pending home sales letup in May and declined year-over-year for the first time in almost two years, according to the National Association of Realtors®. All four major regions experienced a cutback in contract activity last month.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, slid 3.7 percent to 110.8 in May from a downwardly revised 115.0 in April and is now slightly lower (0.2 percent) than May 2015 (111.0). With last month’s decline, the index reading is still the third highest in the past year, but declined year-over-year for the first time since August 2014.
...
The PHSI in the Northeast dropped 5.3 percent to 93.0 in May, and is now unchanged from a year ago. In the Midwest the index slipped 4.2 percent to 108.0 in May, and is now 1.8 percent below May 2015.

Pending home sales in the South declined 3.1 percent to an index of 126.6 in May but are still 0.6 percent higher than last May. The index in the West decreased 3.4 percent in May to 102.6, and is now 0.1 percent below a year ago..
emphasis added

This was below expectations of a 1.0% decrease for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in June and July.

by Calculated Risk on 6/29/2016 08:37:00 AM

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

Personal income increased $37.1 billion, or 0.2 percent ... according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $53.5 billion, or 0.4 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in May, compared with an increase of 0.8 percent in April. ... The price index for PCE increased 0.2 percent in May, compared with an increase of 0.3 percent in April. The PCE price index, excluding food and energy, increased 0.2 percent, the same increase as in April.

The May PCE price index increased 0.9 percent from May a year ago. The May PCE price index, excluding food and energy, increased 1.6 percent from May a year ago.

The following graph shows real Personal Consumption Expenditures (PCE) through February 2016 (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 slightly less than expected.  And the increase in PCE was at the 0.4% increase consensus.

On inflation: The PCE price index increased 0.9 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.6 percent year-over-year in May.

Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 4.1% annual rate in Q2 2016 (using the mid-month method, PCE was increasing 4.1%). This suggests solid PCE growth in Q2.

by Calculated Risk on 6/29/2016 07:01:00 AM

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

Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 24, 2016.
...
The Refinance Index decreased 2 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 13 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) to its lowest level since May 2013, 3.75 percent, from 3.76 percent, with points increasing to 0.36 from 0.33 (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 since 1990.

Refinance activity has increased a little this year since rates have declined.

30-year fixed rates would probably have to fall below 3.35% (the previous low - getting close) before there is a large increase in refinance activity.

The second graph shows the MBA mortgage purchase index.

The purchase index is "13 percent higher than the same week one year ago".

by Calculated Risk on 6/28/2016 08:21:00 PM

NOTE: Fed Chair Yellen was scheduled to participate in a "Policy Panel" at the ECB Forum on Central Banking in Portugal on Wednesday. She has cancelled.  Mark Carney, Governor of the Bank of England and Chairman of the G20's Financial Stability Board, has also cancelled.

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

• At 8:30 AM, Personal Income and Outlays for May. The consensus is for a 0.3% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 10:00 AM, Pending Home Sales Index for May. The consensus is for a 1.0% decrease in the index.

From Matthew Graham at Mortgage News Daily: Mortgage Rates Lower Despite Bond Market Weakness

Mortgage rates fell modestly today despite some weakness in underlying bond markets. Typically, when bond yields (which move inversely with bond prices) are rising, mortgage rates tend to be higher as well. That wasn't the case today for a few reasons. The most obvious reason is that bond markets didn't move that much. [30 year fixed mortgage rates are between 3 3/8% and 3 1/2% on best scenarios]
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 6/28/2016 04:23:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in May to 1.38%, down from 1.40% in April. The serious delinquency rate is down from 1.70% in May 2015.

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

This is the lowest rate since June 2008.

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

Click on graph for larger image

Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. 

The Fannie Mae serious delinquency rate has fallen 0.32 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until the second half of 2017.

.

by Calculated Risk on 6/28/2016 02:51:00 PM

Earlier from the Richmond Fed: Manufacturing Sector Activity Declined; New Orders Decreased, Firms Continued to Increase Wages

Fifth District manufacturing activity weakened in June, according to the most recent survey by the Federal Reserve Bank of Richmond. New orders and shipments declined this month, while backlogs decreased further compared to last month. Manufacturing employment softened, while firms continued to increase wages.
...
Overall, manufacturing conditions weakened in June. The composite index for manufacturing dropped to a reading of −7. ...

Manufacturing hiring softened in June. The index leveled off to a reading of −1, compared to last month's reading of 4. The average workweek index dropped 10 points this month to end −4. Average wage growth remained on pace with last month; that index slipped only one point to end at a reading of 14.
emphasis added

This was the last of the regional Fed surveys for June.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through June), and five Fed surveys are averaged (blue, through June) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through May (right axis).

It seems likely the ISM manufacturing index will show expansion in June. The consensus is for the ISM to be at 51.5, up from 51.3 in May.