by Calculated Risk on 1/11/2019 12:50:00 PM

Merrill Lynch estimate of impact of government shutdown on GDP:

We think a deal to reopen the government will be reached eventually, but only after economic, financial and/or political pain is felt. Every two weeks of a shutdown will trim 0.1pp from growth; additional drag is likely due to delays in spending and investment.

From Merrill Lynch:

4Q GDP tracking remains at 2.8%. We forecast 1Q GDP growth of 2.2%, but downside risks are emerging due to the government shutdown. [Jan 11 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.5% for 2018:Q4 and 2.1% for 2019:Q1. [Jan 11 estimate]

And from the Altanta Fed: GDPNow

The current GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2018 remains 2.8 percent on January 10. [Jan 10 estimate]

CR Note: These estimates suggest GDP in the mid-to-high 2s for Q4.

by Calculated Risk on 1/11/2019 11:10:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.4% annualized rate) in December. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.5% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers fell 0.1% (-0.7% annualized rate) in December. The CPI less food and energy rose 0.2% (2.6% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed released the median CPI details for December here. Motor fuel was down 60% annualized in December.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.8%, the trimmed-mean CPI rose 2.2%, and the CPI less food and energy rose 2.2%. Core PCE is for November and increased 1.9% year-over-year.

On a monthly basis, median CPI was at 2.4% annualized, trimmed-mean CPI was at 2.5% annualized, and core CPI was at 2.6% annualized.

Using these measures, inflation was about the same in December on a year-over-year basis as in November. Overall, these measures are at or above the Fed's 2% target (Core PCE is below 2%).

by Calculated Risk on 1/11/2019 08:32:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in December on a seasonally adjusted basis after being unchanged in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.9 percent before seasonal adjustment.

The seasonally adjusted decline in the all items index was caused by a sharp decrease in the gasoline index, which fell 7.5 percent in December. This decline more than offset increases in several indexes including shelter, food, and other energy components. The energy index fell 3.5 percent, as the gasoline and fuel oil indexes fell, but the indexes for natural gas and for electricity increased. The food index increased 0.4 percent in December.

The index for all items less food and energy increased 0.2 percent in December, the same increase as in October and November. Along with the index for shelter, the indexes for recreation, medical care, and household furnishings and operations all increased in December, while the indexes for airline fares, used cars and trucks, and motor vehicle insurance all declined.

The all items index increased 1.9 percent for the 12 months ending December; this was the first time the 12-month change has been under 2.0 percent since August 2017. The index for all items less food and energy rose 2.2 percent over the last 12 months, the same increase as for the 12 months ending November.
emphasis added

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was at the consensus forecast.

by Calculated Risk on 1/10/2019 07:33:00 PM

Friday:
• At 8:30 AM ET, The Consumer Price Index for November from the BLS. The consensus is for 0.1% decrease in CPI, and a 0.2% increase in core CPI.

by Calculated Risk on 1/10/2019 04:48:00 PM

Here a statement from the BLS: Does the partial government shutdown impact BLS data or release dates?

by Calculated Risk on 1/10/2019 01:02:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 0.76% in November, from 0.79% in October. The serious delinquency rate is down from 1.12% in November 2017.

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

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

This is the lowest serious delinquency rate for Fannie Mae since August 2007.

Freddie Mac reported that the Single-Family serious delinquency rate in November was 0.70%, down from 0.71% in October. Freddie's rate is down from 0.95% in November 2017.

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

This is the lowest serious delinquency rate for Freddie Mac since December 2007.

Click on graph for larger image

For Fannie, by vintage, for loans made in 2004 or earlier (3% of portfolio), 2.62% are seriously delinquent. For loans made in 2005 through 2008 (5% of portfolio), 4.50% are seriously delinquent, For recent loans, originated in 2009 through 2018 (92% of portfolio), only 0.33% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

The increase late last year in the delinquency rate was due to the hurricanes - there were no worries about the overall market.

I expect the serious delinquency rate will probably decline to 0.5 to 0.7 percent or so to a cycle bottom.  But this is close.

by Calculated Risk on 1/10/2019 10:48:00 AM

Earlier I wrote: The Impact of the Government Shutdown on the January Employment Report

Here are some clarifications (based on further information from the BLS):

As I wrote before, if the government shutdown continues through this coming week, then the unemployment rate in the January report will be negatively impacted. This is a key week since it is the reference week for the BLS report (contains the 12th of the month). If the shutdown continues through next weekend, Federal employees who are on furlough will be counted as unemployed in the January report (CPS, Household survey).

If the government shutdown continues, then the unemployment rate will probably bump up to 4.0% or 4.1% in the January report.

As far as the headline jobs number from the CES (Establishment survey), the jobs were people who are working without pay will still be counted. For the furloughed employees, it is different. Since they are not being paid, the positions will not be counted - UNLESS - legislation is passed that provides for back pay.    If the legislation is passed, even after the reference week, the furloughed positions will be counted in the CES (headline jobs number). This is what has happened in previous shutdowns.

So, for the unemployment number, it depends on what happens this week.

For the headline jobs number, it depends on what legislation is eventually passed.

by Calculated Risk on 1/10/2019 08:32:00 AM

The DOL reported:

In the week ending January 5, the advance figure for seasonally adjusted initial claims was 216,000, a decrease of 17,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 231,000 to 233,000. The 4-week moving average was 221,750, an increase of 2,500 from the previous week's revised average. The previous week's average was revised up by 500 from 218,750 to 219,250.
emphasis added

The previous week was revised up.

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 221,750.

This was lower than the consensus forecast.

by Calculated Risk on 1/09/2019 07:11:00 PM

Note: I'd expect a bump up in unemployment claims related to the government shutdown, but the consensus is expecting claims to decline.

Thursday:
• At 8:30 AM, The initial weekly unemployment claims report will be released. The consensus is for 222 thousand initial claims, down from 231 thousand the previous week.

• At 8:30 AM, The Producer Price Index for December from the BLS.

• At 12:45 PM, Discussion, Fed Chair Jerome Powell, At the Economic Club of Washington, D.C., Washington, D.C.

by Calculated Risk on 1/09/2019 04:09:00 PM

Houston set a record for sales in 2018. However, the year ended soft, and with lower oil prices - in addition to higher mortgage rates - 2019 will probably be a more difficult year in Houston.

From the HAR: Sluggish December sales and limited housing supply can’t slow down overall real estate activity for the year

The Houston real estate market set new records in 2018 despite uncertainty across the region when the year began, with many survivors of Hurricane Harvey still rebuilding their homes and lives. Single-family home sales for the full year surpassed 2017’s record volume by nearly four percent. However, as 2019 gets underway, housing inventory remains constrained – still sitting below its more balanced pre-Harvey levels.

According to the Houston Association of Realtors’ (HAR) 2018 annual report, single family home sales rose 3.8 percent to 82,177 while sales of all property types totaled 98,323, a 3.7-percent increase over 2017’s record volume. Total dollar volume for full-year 2018 jumped 21.5 percent to a record-breaking $28 billion.

“We entered 2018 cautiously optimistic that the Houston real estate market would continue the resilience it showed after Hurricane Harvey, but no one that I know anticipated it being a record year,” said HAR Chair Shannon Cobb Evans with Heritage Texas Properties. “Now, as we look ahead to the new year, federal workers are on edge about the ongoing government shutdown and how that might hurt their cash flow, which could affect housing. And our market is still challenged in terms of housing inventory, which is something that truly needs to improve in 2019 to ensure that real estate remains a vibrant player in the overall Houston economy."

December single-family home sales fell 4.1 percent to 6,543 versus December 2017. Only two housing segments saw positive sales activity, with the strongest taking place in the luxury market – that is, homes priced from $750,000 and up. Total property sales for the month declined 4.6 percent to 7,709.
...
Total active listings, or the total number of available properties, jumped 13.3 percent from December 2017 to 37,554.

Single-family homes inventory grew slightly from a 3.2-months supply to 3.5 months.
emphasis added