RSS Feed by Calculated Risk on 1/14/2019 12:41:00 PM
Monday, January 14, 2019
Fed: Q3 2018 Household Debt Service Ratio at Series Low
The Fed's Household Debt Service ratio through Q3 2018 was released last week: Household Debt Service and Financial Obligations Ratios. I used to track this quarterly back in 2005 and 2006 to point out that households were taking on excessive financial obligations.
These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households. Note: The Fed changed the release in Q3 2013.
The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income.This data has limited value in terms of absolute numbers, but is useful in looking at trends. Here is a discussion from the Fed:
The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR.
The limitations of current sources of data make the calculation of the ratio especially difficult. The ideal data set for such a calculation would have the required payments on every loan held by every household in the United States. Such a data set is not available, and thus the calculated series is only an approximation of the debt service ratio faced by households. Nonetheless, this approximation is useful to the extent that, by using the same method and data series over time, it generates a time series that captures the important changes in the household debt service burden.
Click on graph for larger image.The graph shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow).
The overall Debt Service Ratio decreased in Q3, and is at a new series low. Note: The financial obligation ratio (FOR) also decreased in Q3.
The DSR for mortgages (blue) is also at a series low. This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.
The consumer debt DSR (yellow) had been increasing, but has decreased recently.
This data suggests aggregate household cash flow has improved significantly since the great recession.
Housing Inventory Tracking
by Calculated Risk on 1/14/2019 08:44:00 AM
Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.
And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.
And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases.
I don't have a crystal ball, but watching inventory helps understand the housing market.
Inventory, on a national basis, was up 4.2% year-over-year (YoY) in November, this was the fourth consecutive month with a YoY increase, following over three years of YoY declines.
The graph below shows the YoY change for non-contingent inventory in Houston and Las Vegas (through December), and Phoenix and Sacramento (through November) and total existing home inventory as reported by the NAR (through November). (I'll be adding more areas).
Click on graph for larger image.
The black line is the year-over-year change in inventory as reported by the NAR.
Note that inventory was up 82% YoY in Las Vegas in December (red), the sixth consecutive month with a YoY increase.
Houston is a special case, and inventory was up for several years due to lower oil prices, but declined YoY recently as oil prices increased. Inventory was up 13% year-over-year in Houston in December. With falling oil prices - along with higher mortgage rates - inventory will probably increase in Houston.
Inventory is a key for the housing market, and I am watching inventory for the impact of the new tax law and higher mortgage rates on housing. I expect further increase in inventory in 2019.
Also note that inventory in Seattle was up 272% year-over-year in December, and Denver up 45% YoY (not graphed)!
Sunday, January 13, 2019
Sunday Night Futures
by Calculated Risk on 1/13/2019 06:59:00 PM
Weekend:
• Schedule for Week of January 13, 2019
Monday:
• No major economic releases scheduled.
From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 10 and DOW futures are down 92 (fair value).
Oil prices were up over the last week with WTI futures at $51.91 per barrel and Brent at $60.87 per barrel. A year ago, WTI was at $64, and Brent was at $70 - so oil prices are down about 20% year-over-year.
Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.24 per gallon. A year ago prices were at $2.52 per gallon, so gasoline prices are down 28 cents per gallon year-over-year.
Update: "Scariest jobs chart ever"
by Calculated Risk on 1/13/2019 02:16:00 PM
During and following the 2007 recession, every month I posted a graph showing the percent jobs lost during the recession compared to previous post-WWII recessions.
Some people started calling this the "scariest jobs chart ever". In 2009 it was pretty scary!
I retired the graph in May 2014 when employment finally exceeded the pre-recession peak.
I keep getting asked if I could post an update to the graph, and here it is through the December 2018 report.
This graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. Since exceeding the pre-recession peak in May 2014, employment is now 8.6% above the previous peak.
Note: I ended the lines for most previous recessions when employment reached a new peak, although I continued the 2001 recession too on this graph. The downturn at the end of the 2001 recession is the beginning of the 2007 recession. I don't expect a downturn for employment any time soon (unlike in 2007 when I was forecasting a recession).
Saturday, January 12, 2019
Schedule for Week of January 13th
by Calculated Risk on 1/12/2019 08:11:00 AM
Special Note on Government Shutdown: If the Government shutdown continues, then some additional releases will be delayed. For example, this coming week, the retail sales and housing starts reports will not be released if the government remains shutdown. (see bottom for key releases already delayed).
The key reports this week are December housing starts and retail sales.
For manufacturing, the December Industrial Production report and the January NY and Philly Fed manufacturing surveys will be released.
No major economic releases scheduled.
8:30 AM ET: The Producer Price Index for December from the BLS. The consensus is for a 0.1% decrease in PPI, and a 0.2% increase in core PPI.
8:30 AM: The New York Fed Empire State manufacturing survey for January. The consensus is for a reading of 12.0, up from 10.9.
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
8:30 AM: Retail sales for December is scheduled to be released. The consensus is for a 0.2% increase in retail sales.This graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales, ex-gasoline, increased by 3.6% on a YoY basis.
10:00 AM: The January NAHB homebuilder survey. The consensus is for a reading of 57, up from 54. Any number above 50 indicates that more builders view sales conditions as good than poor.
2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.
8:30 AM: Housing Starts for December. This graph shows single and total housing starts since 1968.
The consensus is for 1.256 million SAAR, unchanged from 1.256 million SAAR.
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 220 thousand initial claims, up from 216 thousand the previous week.
8:30 AM: the Philly Fed manufacturing survey for January. The consensus is for a reading of 10.0, up from 9.4.
9:15 AM: The Fed will release Industrial Production and Capacity Utilization for December.This graph shows industrial production since 1967.
The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to be unchanged at 78.5%.
10:00 AM: University of Michigan's Consumer sentiment index (Final for January). The consensus is for a reading of 97.0.
10:00 AM: State Employment and Unemployment (Monthly) for December 2018
New Home Sales (Census) for November from the Census Bureau. The consensus was for 560 thousand SAAR, up from 544 thousand in October.
Construction Spending (Census) for November. The consensus was for a 0.3% increase in construction spending.
Light vehicle sales (BEA) for December. The consensus was for light vehicle sales to be 17.2 million SAAR in December, down from 17.4 million in November (Seasonally Adjusted Annual Rate).
Trade Balance report (Census) for November from the Census Bureau. The consensus was the trade deficit would be $53.9 billion. The U.S. trade deficit was at $55.5 billion in October.
Friday, January 11, 2019
Lawler: VERY Early Read on Existing Home Sales in December
by Calculated Risk on 1/11/2019 05:16:00 PM
From housing economist Tom Lawler:
Normally I do not send out anything about the upcoming Existing Home Sales Report until I have a sufficient number of Realtor/MLS reports to make a statistically sound projection. However, based on reports I have seen so far, it appears as if there is a very good chance that the National Association of Realtors' estimate for existing home sales in December will show a materially larger decline from November's estimate than what appears to be the "consensus" forecast. Based on the limited sample I have right now, I'd estimate (with a high standard error) that existing home sales in December as estimated by the NAR ran at a seasonally adjusted annual rate of just 5.0 million, down 6% from November's estimate. It is also likely that the YOY % change in the median existing SF home price will be below 3%.
CR Note: This is a VERY early estimate from Tom Lawler, and he will have an update (using more data) next week. Based on this estimate, December sales will the lowest level of sales since November 2015 (and that month was impacted by a regulation change),
Update on Shutdown impact on January Employment Report; Congress Approves Back Pay for Furloughed Employees
by Calculated Risk on 1/11/2019 03:14:00 PM
From the WaPo: Congress approves back pay — eventually — for furloughed federal employees. This measure is expected to be signed by the President.
For the January employment report, this means that the BLS will count all Federal employees as employed in the establishment survey - whether on furlough, or working without pay. So don't expect a negative headline jobs number due to the government shutdown (although some non-government employees will likely lose their jobs if the shutdown continues).
However, in the household report, furloughed employees will be counted as unemployed, so the unemployment rate will probably bump up to 4.0% or 4.1% in the January report (to be released February 1st).
Q4 GDP Forecasts: Mid-to-High 2s, Estimate of Shutdown Impact on GDP
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]From the NY Fed Nowcasting Report
emphasis added
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.
Key Measures Show Inflation about the same in December as in November on YoY Basis
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.Note: The Cleveland Fed released the median CPI details for December here. Motor fuel was down 60% annualized in December.
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.
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%).
BLS: CPI declined 0.1% in December, Core CPI increased 0.2%
by Calculated Risk on 1/11/2019 08:32:00 AM
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.I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was at the consensus forecast.
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
