by Calculated Risk on 6/15/2020 08:18:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Slightly Higher, But Still Near All-Time Lows

Mortgage rates were slightly higher today for the average lender. Additionally, some lenders bumped rates a bit in the middle of the day in response to weakness in the bond market. … the average lender doesn't have a ton of incentive to drop rates very quickly given that top tier scenarios are increasingly seeing rates under 3%. [30YR FIXED - 2.96%]
emphasis added

Tuesday:
• At 8:30 AM ET, Retail sales for May is scheduled to be released.  The consensus is for 8.0% increase in retail sales.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for May. The consensus is for a 3.0% increase in Industrial Production, and for Capacity Utilization to increase to 66.9%.

• At 10:00 AM, The June NAHB homebuilder survey. The consensus is for a reading of 45, up from 37. Any number below 50 indicates that more builders view sales conditions as poor than good.

• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Monetary Policy Report submitted to the Congress on June 12, 2020, pursuant to section 2B of the Federal Reserve Act, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate

by Calculated Risk on 6/15/2020 05:34:00 PM

Note: I started posting this graph when the US was doing a few thousand tests per day. Clearly the US was way under testing early in the pandemic. I'll continue posting this graph daily at least until the percent positive is continuously under 3% and the daily positive is significantly lower than today.

The US is now conducting over 400,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly.

According to Dr. Jha of Harvard's Global Health Institute, the US might need more than 900,000 tests per day .

There were 449,488 test results reported over the last 24 hours.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 4.1% (red line).

For the status of contact tracing by state, check out testandtrace.com.

by Calculated Risk on 6/15/2020 04:03:00 PM

Note: To put these numbers in perspective, the MBA notes "For the week of March 2, only 0.25% of all loans were in forbearance."

From the MBA: Share of Mortgage Loans in Forbearance Increases Slightly to 8.55%

The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance increased from 8.53% of servicers’ portfolio volume in the prior week to 8.55% as of June 7, 2020. According to MBA’s estimate, almost 4.3 million homeowners are now in forbearance plans.
...
“MBA’s survey results from the first week of June showed a slight uptick in the overall share of loans in forbearance, but this increase was primarily driven by a larger share of portfolio and PLS loans in forbearance. Half of the servicers in our sample saw the forbearance share decline for at least one investor category,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Although there continues to be layoffs, the job market does appear to be improving, and this is likely leading to many borrowers in forbearance deciding to opt out of their plan.”

Added Fratantoni, “With June mortgage payments due, servicers did report the first increase in forbearance requests in two months. The level of forbearance requests is still quite low, but there was a noticeable increase in call volume over the course of the week.”
emphasis added

Click on graph for larger image.

This graph shows the percent of portfolio in forbearance by investor type over time.  Most of the increase was in late March and early April.

The MBA notes: "Forbearance requests as a percent of servicing portfolio volume (#) increased across all investor types for the first time since the week of March 30-April 5: from 0.17% to 0.19%."

by Calculated Risk on 6/15/2020 10:59:00 AM

Note: The expansion to the Panama Canal was completed in 2016 (As I noted a few years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was down 1.2% in May compared to the rolling 12 months ending in April.   Outbound traffic was down 1.5% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year (January 25th in 2020).

Because of the timing of the New Year, we would have expected traffic to decline in February without an impact from COVID-19, but bounce back in March and April.

Imports were down 14% YoY in May, and exports were down 17% YoY.

In general imports both imports and exports have turned down recently.  There might be some bounce back soon.

by Calculated Risk on 6/15/2020 08:44:00 AM

These indicators are mostly for travel and entertainment - some of the sectors that will probably recover very slowly.

The TSA is providing daily travel numbers.

Click on graph for larger image.

This data shows the daily total traveler throughput from the TSA for 2019 (Blue) and 2020 (Red).

On June 14th there were 544,046 travelers compared to 2,642,083 a year ago.

That is a decline of 79.4%. There has been a steady increase from the bottom, but air travel is still down significantly.

The second graph shows the year-over-year change in diners as tabulated by OpenTable for the US and several selected cities.

Thanks to OpenTable for providing this restaurant data:

This data is updated through June 13, 2020.

This data is "a sample of restaurants on the OpenTable network across all channels: online reservations, phone reservations, and walk-ins. For year-over-year comparisons by day, we compare to the same day of the week from the same week in the previous year."

Note that this data is for "only the restaurants that have chosen to reopen in a given market".

New York is still off 92%.

Texas is only down 43% YoY.

This data shows domestic box office for each week (red) and the maximum and minimum for the previous four years.  Data is from BoxOfficeMojo through June 11th.

Note that the data is noisy and depends on when blockbusters are released.

Movie ticket sales have picked up a little, but have been essentially at zero for three months.

Most  movie theaters are closed all across the country, and will probably reopen slowly (probably with limited seating at first).

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

The red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

2020 was off to a solid start, however, COVID-19 has crushed hotel occupancy.

Notes: Y-axis doesn't start at zero to better show the seasonal change.

STR reported hotel occupancy was off 45.3% year-over-year last week.  Occupancy has increased over the last few of weeks, but is still very low.

This graph, based on weekly data from the U.S. Energy Information Administration (EIA), shows the year-over-year change in gasoline consumption.

At one point, gasoline consumption was off almost 50% YoY.

As of June 5th, gasoline consumption was off about 20% YoY (about 80% of normal).  This was the same decline as the previous week.

The final graph is from Apple mobility.

This data is through June 13th for the United States and several selected cities.

IMPORTANT: All data is relative to January 13, 2020. This data is NOT Seasonally Adjusted. People walk and drive more when the weather is nice, so I'm just using the transit data.

According to the Apple data public transit in the US is still only about 45% of the January level. It is at 31% in New York, and 63% in Houston.

by Calculated Risk on 6/15/2020 08:41:00 AM

Earlier from the NY Fed: Empire State Manufacturing Survey

Business activity steadied in New York State, according to firms responding to the June 2020 Empire State Manufacturing Survey. After breaching record lows in April and May, the headline general business conditions index climbed forty-eight points to -0.2.
...
The index for number of employees was little changed at -3.5, pointing to a second consecutive month of slight employment declines. Notably, 18 percent of firms said that employment levels increased in June. The average workweek index increased ten points, but remained negative at -12.0, indicating an ongoing decline in hours worked, though at a slower pace than in recent months.
emphasis added

This was well above expectations, and showed activity "steadied" (at a low level) in June.

by Calculated Risk on 6/14/2020 07:30:00 PM

Weekend:
• Schedule for Week of June 14, 2020

Monday:
• At 8:30 AM ET, The New York Fed Empire State manufacturing survey for June. The consensus is for a reading of -27.5, up from -48.5.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 42 and DOW futures are down 375 (fair value).

Oil prices were down over the last week with WTI futures at $35.70 per barrel and Brent at $38.32 barrel.  A year ago, WTI was at $53, and Brent was at $67 - so WTI oil prices are down about 33% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.09 per gallon. A year ago prices were at $2.68 per gallon, so gasoline prices are down $0.59 per gallon year-over-year.

by Calculated Risk on 6/14/2020 05:53:00 PM

Note: I started posting this graph when the US was doing a few thousand tests per day. Clearly the US was way under testing early in the pandemic. I'll continue posting this graph daily at least until the percent positive is continuously under 3% and the daily positive is significantly lower than today.

The US is now conducting over 400,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly.

According to Dr. Jha of Harvard's Global Health Institute, the US might need more than 900,000 tests per day .

There were 485,082 test results reported over the last 24 hours.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 4.4% (red line).

For the status of contact tracing by state, check out testandtrace.com.

by Calculated Risk on 6/14/2020 09:08:00 AM

Calling the beginning or end of a recession usually takes time.   However, the economic decline in March was so severe that the National Bureau of Economic Research (NBER) has already called the end of the expansion in February.

The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. The expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854. The previous record was held by the business expansion that lasted for 120 months from March 1991 to March 2001.
...
The usual definition of a recession involves a decline in economic activity that lasts more than a few months. However, in deciding whether to identify a recession, the committee weighs the depth of the contraction, its duration, and whether economic activity declined broadly across the economy (the diffusion of the downturn). The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions. Nonetheless, it concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions.

The NBER will probably wait some time before calling the end of the recession, this process can take from 18 months to two years or longer.

In the mean time, if the economy slides into recession again, the committee will only consider it a new recession if most major indicators were close to or above their previous highs. Otherwise it will just be considered a continuation of the previous recession.

A good example of the NBER calling two separate recessions was in the early '80s, from the NBER memo:

"The period following July 1980 will appear in the NBER chronology as an expansion. An important factor influencing that decision is that most major indicators, including real GNP, are already close to or above their previous highs."
emphasis added

It will take some time for most major indicators to be above their previous high after the current recession because of the severe contraction as the graphs below show.

GDP is the key measure, as the NBER committee notes in their business cycle dating procedure:

The committee views real GDP as the single best measure of aggregate economic activity.

Click on graph for larger image.

This graph is for real GDP through Q1 2020.

This is the key measure, and the NBER will probably use GDP and GDI to determine the trough of the recession.

Real GDP is only 1.2% below the pre-recession peak - however real GDP is expected to decline another 7% to 8% in Q2 (A much larger decline than the Great Recession).

Most forecasters expect GDP to be positive in Q3, but will remain below the pre-recession peak until sometime in 2021.

The second graph is for monthly industrial production based on data from the Federal Reserve through Apr 2020.

Industrial production is off over 16% from the pre-recession peak, but is expected to increase in May (to be released this week).

Note that industrial production was weak prior to the onset of the pandemic.

Industrial production usually takes a long time to recover after a significant decline.

The third graph is for employment through May 2020.

Historically employment was a coincident indicator for the end of recessions, but that hasn't been true for the previous three recessions (1990-1991, 2001, 2007-2009).

Employment is currently off about 12.8% from the pre-recession peak (dashed line).  This is an improvement from off 14.5% in April.

It is likely that employment will not recover to pre-recession levels for some time.

And the last graph is for real personal income excluding transfer payments through Apr 2020.

Real personal income less transfer payments was off 9% in April.  This was a larger decline than the worst of the great recession.

Once again it will take a long time to return to pre-recession levels.

These graphs are useful in trying to identify peaks and troughs in economic activity.

My guess is that economic activity will bottom in Q2 (it may have already happened in April), but the pace of the recovery will depend on the course of the virus.

by Calculated Risk on 6/13/2020 06:09:00 PM

Positive cases are increasing significantly in some areas.

Note: I started posting this graph when the US was doing a few thousand tests per day. Clearly the US was way under testing early in the pandemic. I'll continue posting this graph daily at least until the percent positive is continuously under 3% and the daily positive is significantly lower than today.

The US is now conducting over 400,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly.

According to Dr. Jha of Harvard's Global Health Institute, the US might need more than 900,000 tests per day .

There were 523,042 test results reported over the last 24 hours.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.0% (red line).

For the status of contact tracing by state, check out testandtrace.com.