by Calculated Risk on 9/16/2020 10:05:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 83, up from 78 in August. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Soars to an All-Time High, Lumber Risks Remain

In a strong signal that housing is leading the economic recovery, builder confidence in the market for newly-built single-family homes increased five points to hit an all-time high of 83 in September, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. The previous highest reading of 78 in the 35-year history of the series was set last month and also matched in December 1998.

“Historic traffic numbers have builders seeing positive market conditions, but many in the industry are worried about rising costs and delays for building materials, especially lumber,” said NAHB Chairman Chuck Fowke. “More domestic lumber production or tariff relief is needed to avoid a slowdown in the market in the coming months.”

“Lumber prices are now up more than 170% since mid-April, adding more than $16,000 to the price of a typical new single-family home,” said NAHB Chief Economist Robert Dietz. “That said, the suburban shift for home building is keeping builders busy, supported on the demand side by low interest rates. In another sign of this growing trend, builders in other parts of the country have reported receiving calls from customers in high-density markets asking about relocating.”
...
All the HMI indices posted their highest readings ever in September. The HMI index gauging current sales conditions rose four points to 88, the component measuring sales expectations in the next six months increased six points to 84 and the measure charting traffic of prospective buyers posted a nine-point gain to 73.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased 11 points to 76, the Midwest increased nine points to 72, the South rose eight points to 79 and the West increased seven points to 85.

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was above the consensus forecast.

Housing and homebuilding have been one of the best performing sectors during the pandemic.

by Calculated Risk on 9/16/2020 08:39:00 AM

On a monthly basis, retail sales increased 0.6 percent from July to August (seasonally adjusted), and sales were up 2.6 percent from August 2019.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for August 2020, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $537.5 billion, an increase of 0.6 percent from the previous month, and 2.6 percent above August 2019. Total sales for the June 2020 through August 2020 period were up 2.4 percent from the same period a year ago. The June 2020 to July 2020 percent change was revised from up 1.2 percent to up 0.9 percent.
emphasis added

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 0.6% in August.


The second 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 4.0% on a YoY basis.

The increase in August was below expectations, and sales in June and July were revised down, combined.

by Calculated Risk on 9/16/2020 07:00:00 AM

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

Mortgage applications decreased 2.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 11, 2020. This week’s results include an adjustment for the Labor Day holiday.

... The Refinance Index decreased 4 percent from the previous week and was 30 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 12 percent compared with the previous week and was 6 percent higher than the same week one year ago.

“Mortgage rates held steady last week, and the 30-year fixed rate – at 3.07 percent – has now stayed near the 3 percent mark for the past two months. A 5 percent decline in conventional refinances pulled the overall index lower, but activity was still 30 percent higher than last year. With the flurry of refinance activity reported over the past several months, demand may be slowing as remaining borrowers in the market potentially wait for another sizeable drop in rates,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Applications to buy a home also decreased last week, but the underlying trend remains strong. Purchase activity has outpaced year-ago levels for 17 consecutive weeks, with a stronger growth in loans with higher balances pushing MBA’s average loan size to a new survey high of $370,200.”
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The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) remained unchanged at 3.07 percent, with points decreasing to 0.32 from 0.36 (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 with record low rates, the index is up significantly from last year.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 6% year-over-year unadjusted (like last week, this year-over-year percent was distorted by the timing of Labor Day).

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

by Calculated Risk on 9/15/2020 09:00:00 PM

Here is my FOMC Preview

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

• At 8:30 AM, Retail sales for August will be released.  The consensus is for a 1.0% increase in retail sales.

• At 10:00 AM, The September NAHB homebuilder survey. The consensus is for a reading of  78, unchanged from 78 in August. Any number above 50 indicates that more builders view sales conditions as good than poor.

• At 2:00 PM, FOMC Meeting Announcement. No change to policy is expected at this meeting.

• At 2:00 PM, FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

• At 2:30 PM, Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

by Calculated Risk on 9/15/2020 06:49:00 PM

The US is now mostly reporting over 700,000 tests per day. 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 (or take actions to push down the number of new infections).

There were 685,033 test results reported over the last 24 hours.

There were 35,445 positive tests.

Almost 12,000 people have died from COVID in the first half of September. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.2% (red line).

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

And check out COVID Exit Strategy to see how each state is doing.

The second graph shows the 7 day average of positive tests reported.

The dashed line is the June low.

Note that there were very few tests available in March and April, and many cases were missed (the percent positive was very high - see first graph). By June, the percent positive had dropped below 5%.

If people stay vigilant, the number of cases might drop to the June low by the end of September - although this seems unlikely now (that would still be a large number of new cases, but progress).

by Calculated Risk on 9/15/2020 03:28:00 PM

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 up 1.5% in August compared to the rolling 12 months ending in July.   Outbound traffic was down 0.4% 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).

Imports were up 16% YoY in August to a new record high, and exports were down 5% YoY.

by Calculated Risk on 9/15/2020 01:17:00 PM

The Census Bureau released an update today on 2020 Census Paid Temporary Workers

As of the August reference week, there were 288,204 decennial Census temporary workers. As of week of August 30 to September 5, there were 267,155 temp workers.

That was a decrease of around 21,000. Last week was the BLS reference week, and it seems likely there were even fewer temporary workers were on the payroll last week (to be released next week).

This means the September employment report will show a decrease in temporary Census employment.  In August, the employment report showed a gain of 238,000 temporary 2020 Census workers, boosting the headline number.

by Calculated Risk on 9/15/2020 10:59:00 AM

This survey was impacted by COVID, and the results are probably distorted (see last paragraph below).

From the Census Bureau: Income, Poverty and Health Insurance Coverage in the United States: 2019

The U.S. Census Bureau announced today that median household income in 2019 increased 6.8% from 2018, and the official poverty rate decreased 1.3 percentage points. Meanwhile the percentage of people with health insurance coverage for all or part of 2019 was 92.0% and 8.0% of people, or 26.1 million, did not have health insurance at any point during 2019, according to the 2020 Current Population Survey Annual Social and Economic Supplement (CPS ASEC).

Median household income was $68,703 in 2019, an increase of 6.8% from the 2018 median. Between 2018 and 2019, the real median earnings of all workers increased by 1.4%, while the real median earnings of full-time, year-round workers increased 0.8%.

The official poverty rate in 2019 was 10.5%, a decrease of 1.3 percentage points from 11.8% in 2018. This is the fifth consecutive annual decline in the national poverty rate. Since 2014, the poverty rate has fallen 4.3 percentage points, from 14.8% to 10.5%. The 2019 poverty rate of 10.5% is the lowest rate observed since estimates were initially published for 1959. The number of people in poverty in 2019 was 34.0 million, 4.2 million fewer people than 2018.
...
While the Census Bureau went to great lengths to complete interviews by telephone, the response rate for the CPS basic household survey was 73% in March 2020, about 10 percentage points lower than in preceding months and the same period in 2019, which were regularly above 80%. The change from conducting first interviews in person to making first contacts by telephone contributed to the lower response rates and it is likely that the characteristics of people for whom a telephone number was found may be systematically different from the people for whom the Census Bureau was unable to obtain a telephone number.
emphasis added

by Calculated Risk on 9/15/2020 09:23:00 AM

From the Fed: Industrial Production and Capacity Utilization

Industrial production rose 0.4 percent in August for its fourth consecutive monthly increase. However, even after the recent gains, the index in August was 7.3 percent below its pre-pandemic February level. Manufacturing output continued to improve in August, rising 1.0 percent, but the gains for most manufacturing industries have gradually slowed since June. Mining production fell 2.5 percent in August, as Tropical Storm Marco and Hurricane Laura caused sharp but temporary drops in oil and gas extraction and well drilling. The output of utilities moved down 0.4 percent. At 101.4 percent of its 2012 average, the level of total industrial production was 7.7 percent lower in August than it was a year earlier. Capacity utilization for the industrial sector increased 0.3 percentage point in August to 71.4 percent, a rate that is 8.4 percentage points below its long-run (1972–2019) average but 7.3 percentage points above its low in April.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April, but still well below the level in February 2020.

Capacity utilization at 71.4% is 8.4% below the average from 1972 to 2017.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased in August to  101.4. This is 7.2% below the February 2020 level.

The change in industrial production was below consensus expectations, however industrial production in June and July were revised up.

by Calculated Risk on 9/15/2020 08:35:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity expanded at a solid clip in New York State, according to firms responding to the September 2020 Empire State Manufacturing Survey. The headline general business conditions index climbed thirteen points to 17.0.
...
The index for number of employees held steady at 2.6, indicating little change in employment levels. The average workweek index rose fourteen points to 6.7, its first positive reading since the pandemic began, signaling an increase in hours worked.
emphasis added

This was above expectations, and showed activity expanded in September.