by Calculated Risk on 6/29/2018 11:18:00 AM

From Merrill Lynch:

The data sliced 0.4pp from 2Q GDP tracking, bringing our estimate down to 3.6% qoq saar. [June 29 estimate].
emphasis added

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2018 is 3.8 percent on June 29, down from 4.5 percent on June 27. [June 29 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.8% for 2018:Q2 and 2.5% for 2018:Q3. [June 29 estimate]

CR Note: These estimates suggest real annualized GDP in the 2.8% to 3.8% range in Q2.

by Calculated Risk on 6/29/2018 08:36:00 AM

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

Personal income increased $60.0 billion (0.4 percent) in May according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $63.2 billion (0.4 percent) and personal consumption expenditures (PCE) increased $27.8 billion (0.2 percent).

Real DPI increased 0.2 percent in May and Real PCE decreased less than 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

The May PCE price index increased 2.3 percent year-over-year (up from 2.0 percent YoY in April) and the May PCE price index, excluding food and energy, increased 2.0 percent year-over-year (up from 1.8 percent YoY in April).

The following graph shows real Personal Consumption Expenditures (PCE) through May 2018 (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 at expectations,  and the increase in PCE was below expectations.

Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 3.0% annual rate in Q2 2018. (using the mid-month method, PCE was increasing 3.4%). This suggests decent PCE growth in Q2, but below expectations.   (Estimates for Q2 GDP will be revised down).

by Calculated Risk on 6/28/2018 07:03:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays for May. The consensus is for a 0.4% 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 9:45 AM, Chicago Purchasing Managers Index for June. The consensus is for a reading of 60.1, down from 62.7 in May.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for June). The consensus is for a reading of 99.2, down from 99.3.

by Calculated Risk on 6/28/2018 04:11:00 PM

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

From Aaron Terrazas at Zillow: April Case-Shiller Results and May Forecast: The New Normal

In a normal housing market, there is almost always a decently balanced pool of winners and losers. But as severely limited inventory continues to help push up home prices at a rapid clip, it’s clear that current housing trends are far from normal – and that there are a lot more losers right now than winners.

The U.S. National Case-Shiller Index rose 6.4 percent in April from a year ago, largely in line with expectations. April was the eighth straight month of annual appreciation of 6 percent or higher, and the longest such streak since a stretch of 19 months of breakneck appreciation that began in December 2012 as the housing market began to bounce back in earnest from the depths of the recession. Over the past 30-plus years, dating to January 1988, annual U.S. home price growth as measured by the Case Shiller National Index has averaged 3.8 percent.
...
Looking ahead, rapid home value growth may slow somewhat, although not likely by much to make a difference in the underlying trends of high demand and low supply that are driving the market right now. Zillow expects the U.S. National Index to grow by 6.3 percent in May from a year ago, down only slightly from April. The 10- and 20-city indices are likely to slow down further. Full Case-Shiller data for May is scheduled for release Tuesday, July 31.

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be larger in March than in February.

by Calculated Risk on 6/28/2018 11:17:00 AM

Note the comments on tariffs.

From the Kansas City Fed: Tenth District Manufacturing Activity Continued to Expand at a Rapid Pace

The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity continued to expand at a rapid pace, and expectations for future growth increased moderately.

“The composite index remained strong for the third consecutive month, and many firms reported difficulties finding qualified workers,” said Wilkerson. “Prices indexes remained at high levels.”
...
The month-over-month composite index was 28 in June, similar to the reading of 29 in May and higher than 26 in April. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Factory activity increased at durable and nondurable goods plants, particularly for computer, electronics, and food products. Most month-over-month indexes were slightly lower than the previous month, but all indexes remained at high levels. The production index edged down from 41 to 38, and the volume of shipments and new orders for exports indexes eased slightly. The employment index was unchanged, while the new orders and order backlog indexes saw a modest decline. The raw materials inventory index improved from 19 to 27, and the finished goods inventory index also increased.

Selected comments:
“Business is strong right now, but tariffs and wage inflation may impact margins going forward.”

“The steel tariffs are not helpful. Material prices are rising and these costs have to be passed along to the consumer.”

“Bracing for the worst concerning China tariffs. We will move the last of manufacturing off shore. Loss of business due to tariffs will have a larger impact than interest rates.”

“Working on a record year, but we are closely monitoring price increases from suppliers due to new tariffs.”
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).

Based on these regional surveys, it is possible the ISM manufacturing index will be close to 60 in June (to be released on Monday, July 2nd).

by Calculated Risk on 6/28/2018 08:38:00 AM

From the BEA: National Income and Product Accounts Gross Domestic Product: First Quarter 2018 (Third Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.0 percent in the first quarter of 2018, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.9 percent.

TThe GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 2.2 percent. With this third estimate for the first quarter, the general picture of economic growth remains the same; private inventory investment and personal consumption expenditures (PCE) were revised down.
emphasis added

Here is a Comparison of Third and Second Estimates. PCE growth was revised down from 1.0% to 0.9%. Residential investment was revised up from -2.0% to -1.1%. Most revisions were small. This was below the consensus forecast.

by Calculated Risk on 6/28/2018 08:33:00 AM

The DOL reported:

In the week ending June 23, the advance figure for seasonally adjusted initial claims was 227,000, an increase of 9,000 from the previous week's unrevised level of 218,000. The 4-week moving average was 222,000, an increase of 1,000 from the previous week's unrevised average of 221,000.
emphasis added

The previous week was unrevised.

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 increased to 222,000.

This was higher than the consensus forecast. The low level of claims suggest few layoffs.

by Calculated Risk on 6/27/2018 08:27:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 220 thousand initial claims, up from 218 thousand the previous week.

• At 8:30 AM, Gross Domestic Product, 1st quarter 2018 (Third estimate). The consensus is that real GDP increased 2.2% annualized in Q1, unchanged from the second estimate of 2.2% in Q1.

• At 11:00 AM, the Kansas City Fed manufacturing survey for June. This is the last of the regional surveys for June.

by Calculated Risk on 6/27/2018 04:52:00 PM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Continues Upward Climb Into Third Quarter

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 0.1 percent on a three-month moving average (3MMA) basis in June to 122.27. This marked the barometer’s tenth consecutive gain, following revisions. The barometer is up 4.1 percent on a 3MMA compared to a year earlier. The unadjusted CAB also increased, notching a 0.3 percent gain, pushing it to a 4.3 percent gain year-over-year. The March, April, and May readings were all adjusted upward. June readings indicate a continued expansion of U.S. commercial and industrial activity into early 2019.
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added

Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

The year-over-year increase in the CAB has been solid over the last year, suggesting further gains in industrial production in 2018 and early 2019.

by Calculated Risk on 6/27/2018 02:26:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for May 2018. Over the past three months, the indexes increased in all 50 states, for a three-month diffusion index of 100. In the past month, the indexes increased in 45 states, decreased in one, and remained stable in four, for a one-month diffusion index of 88.
emphasis added

Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all or mostly green during most of the recent expansion.

Once again, the map is all green on a three month basis.

Source: Philly Fed.

Note: For complaints about red / green issues, please contact the Philly Fed.

And here is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In Map, 45 states had increasing activity (including minor increases).

The downturn in 2015 and 2016, in the number of states increasing, was mostly related to the decline in oil prices.