by Calculated Risk on 7/01/2020 10:05:00 AM

The ISM manufacturing index indicated expansion in June. The PMI was at 52.6% in June, up from 43.1% in May. The employment index was at 42.1%, up from 32.1% last month, and the new orders index was at 56.4%, up from 31.8%.

From the Institute for Supply Management: June 2020 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector grew in June, with the overall economy notching a second month of growth after one month of contraction, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The June PMI® registered 52.6 percent, up 9.5 percentage points from the May reading of 43.1 percent. This figure indicates expansion in the overall economy for the second straight month after April’s contraction, which ended a period of 131 consecutive months of growth. The New Orders Index registered 56.4 percent, an increase of 24.6 percentage points from the May reading of 31.8 percent. The Production Index registered 57.3 percent, up 24.1 percentage points compared to the May reading of 33.2 percent. The Backlog of Orders Index registered 45.3 percent, an increase of 7.1 percentage points compared to the May reading of 38.2 percent. The Employment Index registered 42.1 percent, an increase of 10 percentage points from the May reading of 32.1 percent. The Supplier Deliveries Index registered 56.9 percent, down 11.1 percentage points from the May figure of 68 percent.
emphasis added

This was above expectations of 49.0%, but the employment index indicated further contraction.

This suggests manufacturing expanded slightly in June, after the steep collapse in the previous months.

by Calculated Risk on 7/01/2020 08:19:00 AM

From ADP:

Private sector employment increased by 2,369,000 jobs from May to June according to the June ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.

“Small business hiring picked up in the month of June,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “As the economy slowly continues to recover, we are seeing a significant rebound in industries that once experienced the greatest job losses. In fact, 70 percent of the jobs added this month were in the leisure and hospitality, trade and construction industries.”

This was below the consensus forecast for 3,000,000 private sector jobs added in the ADP report.

The BLS report will be released Thursday (Friday is a holiday), and the consensus is for 3,074,000 non-farm payroll jobs added in June.

by Calculated Risk on 7/01/2020 07:00:00 AM

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

Mortgage applications decreased 1.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 26, 2020.

... The Refinance Index decreased 2 percent from the previous week and was 74 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 15 percent higher than the same week one year ago.

“Mortgage applications fell last week despite mortgage rates hitting another record low in MBA’s survey. Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result,” said Joel Kan, MBA’s Associative Vice President of Economic and Industry Forecasting. “After two months of strong growth, purchase applications declined for the second week in a row. The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers’ options. The average purchase application loan size increased to a record high in our survey – more proof that tight inventory conditions are leading to faster price growth.”

Added Kan, “Refinance applications also decreased but remained 74 percent higher than a year ago. The 30-year fixed rate has been below the 3.5 percent mark since late March. It is possible that many borrowers have already refinanced or are waiting for rates to go even lower.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.29 percent from 3.30 percent, with points increasing to 0.36 from 0.32 (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.

The refinance index has been very volatile recently depending on rates and liquidity.

But the index is up signficantly from last year.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 15% year-over-year.

Note: Red is a four-week average (blue is weekly).

by Calculated Risk on 6/30/2020 08:52:00 PM

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

• At 8:15 AM, The ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 3,000,000 payroll jobs added in June, up from 2,760,000 lost in May.

• At 10:00 AM, ISM Manufacturing Index for June. The consensus is for the ISM to be at 49.0, up from 43.1 in May.

• At 10:00 AM, Construction Spending for May. The consensus is for a 1.0% increase in construction spending.

•All day, Light vehicle sales for June from the BEA. The consensus is for light vehicle sales to be 13.0 million SAAR in June, up from 12.2 million in May (Seasonally Adjusted Annual Rate).

• At 2:00 PM, FOMC Minutes, Meeting of June 9-10, 2020

by Calculated Risk on 6/30/2020 05:59:00 PM

The US is now conducting over 500,000 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 648,838 test results reported over the last 24 hours.  This is the most test results reported daily.

There were 44,358 positive tests.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 6.8% (red line).

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

by Calculated Risk on 6/30/2020 04:09:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency increased to 0.89% in May, from 0.70% in April. The serious delinquency rate is up from 0.70% in May 2019.

This is the highest serious delinquency rate since June 2018.

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%.

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (2% of portfolio), 3.09% are seriously delinquent (up from 2.64% in April). For loans made in 2005 through 2008 (3% of portfolio), 5.22% are seriously delinquent (up from 4.41%), For recent loans, originated in 2009 through 2018 (95% of portfolio), only 0.53% are seriously delinquent (up from 0.38%). So Fannie is still working through a few poor performing loans from the bubble years.

With COVID-19, this rate will increase significantly in June and July (it takes time since these are mortgages three months or more past due).

I believe mortgages in forbearance will be counted as delinquent in this monthly report, but they will not be reported to the credit bureaus.

This is very different from the increase in delinquencies following the housing bubble.   Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes - and they will be able to restructure their loans once they are employed.

Note: Freddie Mac reported earlier.

by Calculated Risk on 6/30/2020 02:33:00 PM

From the Las Vegas Visitor Authority: May 2020 Las Vegas Visitor Statistics

Reflecting the continued shutdown in place due to the COVID-19 pandemic, Las Vegas visitation in May (approx. 151k visitors) was a small fraction of typical levels.

Like April, May saw no measurable convention attendance occurring in the destination.

Occupancy for the month came in at 2.8% as most of the destination's 148k+ hotel rooms were temporarily closed during the shutdown, while the average day rates (ADR) among the open properties neared $61.

Here is the data from the Las Vegas Convention and Visitors Authority.

Click on graph for larger image.

The blue and red bars are monthly visitor traffic (left scale) for 2019 and 2020.   The dashed blue and orange lines are convention attendance (right scale). 

Convention traffic in May was down 100% compared to May 2019.

And visitor traffic was down 96% YoY.

The number of visitors will increase in June (the casinos started to reopen on June 4th), but will still be down significantly from last year.

by Calculated Risk on 6/30/2020 11:52:00 AM

Here is Fed Chair Powell's prepared testimony: Coronavirus and CARES Act

The livestream is here starting at 12:30 PM ET.

by Calculated Risk on 6/30/2020 10:34:00 AM

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

From the American Chemistry Council: Chemical Activity Barometer Falls Slightly In June

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), eased 0.3 percent in June on a three-month moving average (3MMA) basis following a 4.6 percent decline in May. On a year-over-year (Y/Y) basis, the barometer fell 12.0 percent in June.

The unadjusted data show a 3.5 percent gain in June following a 2.2 percent gain in May and a 6.3 percent decline in April. The diffusion index rose from 35 percent to 53 percent. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for May was revised upward by 2.68 points and the April reading was revised upward by 0.05 points.

“While the latest CAB reading is consistent with a recession, two consecutive months of gains in the unadjusted data is a positive development,” said Kevin Swift, chief economist at ACC. “We’ll want to see at least another month of gains in order to conclude that the economy has turned a corner.”
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to 14 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 (CAB) compared to Industrial Production.

Although the CAB (red) generally leads Industrial Production (blue), they both collapsed together with the sudden stop of the economy in March. The unadjusted CAB data suggests that Industrial Production probably bottomed, but the CAB is not indicating a strong rebound.

by Calculated Risk on 6/30/2020 09:07:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for April ("April" is a 3 month average of February, March and April prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

From S&P: Annual Home Price Gains Remained Steady In April According To S&P CoreLogic Case-Shiller Index

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 4.7% annual gain in April, up from 4.6% in the previous month. The 10-City Composite annual increase came in at 3.4%, remaining the same as last month. The 20-City Composite posted a 4.0% year-over-year gain, up from 3.9% in the previous month.

Phoenix, Seattle and Minneapolis reported the highest year-over-year gains among the 19 cities (excluding Detroit) in April. Phoenix led the way with an 8.8% year-over-year price increase, followed by Seattle with a 7.3% increase and Minneapolis with a 6.4% increase. Twelve of the 19 cities reported higher price increases in the year ending April 2020 versus the year ending March 2020.
...
The National Index posted a 1.1% month-over-month increase, while the 10-City and 20-City Composites posted increases of 0.7% and 0.9% respectively before seasonal adjustment in April. After seasonal adjustment, the National Index posted a month-over-month increase of 0.5%, while the 10- City and 20-City Composites both posted 0.3% increases. In April, all 19 cities (excluding Detroit) reported increases before seasonal adjustment, while 16 of the 19 cities reported increases after seasonal adjustment.

"April’s housing price data continue to be remarkably stable,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices. “The National Composite Index rose by 4.7% in April 2020, with comparable growth in the 10- and 20-City Composites (up 3.4% and 4.0%, respectively). In all three cases, April’s year-over-year gains were ahead of March’s, continuing a trend of gently accelerating home prices that began last fall. Results in April continued to be broad-based. Prices rose in each of the 19 cities for which we have reported data, and price increases accelerated in 12 cities.

“As was the case in March, we have data from only 19 cities this month, since transactions records for Wayne County, Michigan (in the Detroit metropolitan area) continue to be unavailable. This is, so far, the only directly visible impact of COVID-19 on the S&P CoreLogic Case-Shiller Indices. The price trend that was in place pre-pandemic seems so far to be undisturbed, at least at the national level. Indeed, prices in 12 of the 20 cities in our survey were at an all-time high in April.
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 3.4% compared to April 2019.  The Composite 20 SA is up 4.0% year-over-year.

The National index SA is up 4.7% year-over-year.

I'll have more later.