by Calculated Risk on 10/01/2020 11:42:00 AM

From HotelNewsNow.com: STR: U.S. hotel results for week ending 26 September

U.S. hotel occupancy remained nearly flat from the previous week, according to the latest data from STR through 26 September.

20-26 September 2020 (percentage change from comparable week in 2019):

• Occupancy: 48.7% (-31.5%)
• Average daily rate (ADR): US$96.38 (-29.6%)
• Revenue per available room (RevPAR): US$46.96 (-51.7%)
...
Most of the markets with the highest occupancy levels were those in areas with displaced residents from natural disasters. Affected by Hurricane Sally, Mobile, Alabama, reported the week’s highest occupancy level at 74.9%. Amid continued wildfires, California South/Central was next at 74.3%.
emphasis added

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

Click on graph for larger image.

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

There was some recent boost from natural disasters - perhaps 1 or 2 percentage points total based on previous disasters - but so far there has been little business travel pickup that usually happens in the Fall.

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

by Calculated Risk on 10/01/2020 10:24:00 AM

The ISM manufacturing index indicated expansion in September. The PMI was at 55.4% in September, down from 56.0% in August. The employment index was at 49.6%, up from 46.3% last month, and the new orders index was at 60.2%, down from 67.6%.

From ISM: PMI® at 55.4% September 2020 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector grew in September, with the overall economy notching a fifth consecutive month of growth, 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 September PMI® registered 55.4 percent, down 0.6 percentage point from the August reading of 56 percent. This figure indicates expansion in the overall economy for the fifth month in a row after a contraction in April, which ended a period of 131 consecutive months of growth. The New Orders Index registered 60.2 percent, a decrease of 7.4 percentage points from the August reading of 67.6 percent. The Production Index registered 61 percent, down 2.3 percentage points compared to the August reading of 63.3 percent. The Backlog of Orders Index registered 55.2 percent, 0.6 percentage point higher compared to the August reading of 54.6 percent. The Employment Index registered 49.6 percent, an increase of 3.2 percentage points from the August reading of 46.4 percent. The Supplier Deliveries Index registered 59 percent, up 0.8 percentage point from the August figure of 58.2 percent.

This was below expectations of 56.2%, and the employment index improved, but indicated some further slight contraction.

This suggests manufacturing expanded at a slightly slower pace in September than in August.

by Calculated Risk on 10/01/2020 10:17:00 AM

From the Census Bureau reported that overall construction spending decreased in June:

Construction spending during August 2020 was estimated at a seasonally adjusted annual rate of $1,412.8 billion, 1.4 percent above the revised July estimate of $1,392.7 billion. The August figure is 2.5 percent above the August 2019 estimate of $1,379.0 billion.
emphasis added

Both private and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,061.4 billion, 1.9 percent above the revised July estimate of $1,041.7 billion. ...

In August, the estimated seasonally adjusted annual rate of public construction spending was $351.4 billion, 0.1 percent above the revised July estimate of $350.9 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Residential spending is 13% below the previous peak.

Non-residential spending is 14% above the previous peak in January 2008 (nominal dollars), but has been weak recently.

Public construction spending is 8% above the previous peak in March 2009, and 34% above the austerity low in February 2014.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 6.7%. Non-residential spending is down 4.3% year-over-year. Public spending is up  5.5% year-over-year.

This was above consensus expectations of a 0.7% increase in spending, and construction spending for the previous two months was revised up.

Construction was considered an essential service in most areas and did not decline sharply like many other sectors, but it seems likely that non-residential, and possibly public spending, will be under pressure.

by Calculated Risk on 10/01/2020 08:56:00 AM

The BEA released the Personal Income and Outlays report for August:

Personal income decreased $543.5 billion (2.7 percent) in August according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased $570.9 billion (3.2 percent) and personal consumption expenditures (PCE) increased $141.1 billion (1.0 percent).

Real DPI decreased 3.5 percent in August and Real PCE increased 0.7 percent. The PCE price index increased 0.3 percent. Excluding food and energy, the PCE price index increased 0.3 percent.

The decrease in personal income was below expectations,  and the increase in PCE was above expectations.  

The August PCE price index increased 1.4 percent year-over-year and the August PCE price index, excluding food and energy, increased 1.6 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) since January 2019 through August 2020 (2012 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

Note the low level in April (when the economy was partially shutdown).  PCE has bounced back, but is still well below the February level.

The usual methods of estimating PCE (two month and mid-month) are not useful this quarter due to the huge distortion in April.   It looks like PCE will increase at a 35% to 40% in Q3 annualized.

by Calculated Risk on 10/01/2020 08:40:00 AM

Special technical note this week on California (see release).

The DOL reported:

In the week ending September 26, the advance figure for seasonally adjusted initial claims was 837,000, a decrease of 36,000 from the previous week's revised level. The previous week's level was revised up by 3,000 from 870,000 to 873,000. The 4-week moving average was 867,250, a decrease of 11,750 from the previous week's revised average. The previous week's average was revised up by 750 from 878,250 to 879,000.
emphasis added

This does not include the 650,120 initial claims for Pandemic Unemployment Assistance (PUA) that was up from 615,599 the previous week. (There are some questions on PUA numbers).

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 decreased to 867,250.

The previous week was revised up.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims decreased to 11,767,000 (SA) from 12,747,000 (SA) last week and will likely stay at a high level until the crisis abates.

Note: There are an additional 11,828,338 receiving Pandemic Unemployment Assistance (PUA) that increased from 11,510,888 the previous week (there are questions about these numbers). This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.

by Calculated Risk on 9/30/2020 09:42:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. Initial claims were 870 thousand the previous week.

• Also at 8:30 AM, Personal Income and Outlays for August. The consensus is for a 2.2% decrease in personal income, and for a 0.7% increase in personal spending. And for the Core PCE price index to increase 0.3%.

• At 10:00 AM, ISM Manufacturing Index for September. The consensus is for a reading of 56.2, up from 56.0 in August.

• Also at 10:00 AM, Construction Spending for August. The consensus is for a 0.7% increase.

• All day: Light vehicle sales for September. The consensus is for sales of 16.2 million SAAR, up from 15.2 million SAAR in August (Seasonally Adjusted Annual Rate).

by Calculated Risk on 9/30/2020 07:32:00 PM

The US is now mostly reporting 700 thousand to 1 million 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 (probably close to 1%), 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 715,182 test results reported over the last 24 hours.

There were 44,391 positive tests.

Over 23,000 Americans died from COVID in 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 6.2% (red line is 7 day average).

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 towards the end of October (that would still be a large number of new cases, but progress).

by Calculated Risk on 9/30/2020 04:18:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency increased to 3.32% in August, from 3.24% in July. The serious delinquency rate is up from 0.67% in August 2019.

This is the highest serious delinquency rate since October 2012.

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), 5.79% are seriously delinquent (up from 5.57% in July). For loans made in 2005 through 2008 (3% of portfolio), 9.74% are seriously delinquent (up from 9.36%), For recent loans, originated in 2009 through 2018 (95% of portfolio), 2.86% are seriously delinquent (up from 2.79%). So Fannie is still working through a few poor performing loans from the bubble years.

Mortgages in forbearance are 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 9/30/2020 03:14:00 PM

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

With gradually more rooms opening and increased volume on weekends, the destination hosted over 1.5M visitors in August, down -57% from last year but up 6.9% from last month.

The convention segment continued to register minimal measurable volume with continued mandated restrictions on group sizes.

With open properties representing an inventory of 127,657 rooms*, total occupancy reached 42.7% for the month as weekend occupancy improved to 63.1% while midweek occupancy reached 34.4%.
* Reflects weighted average of daily room tallies

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 August was down 100% compared to July 2019.

And visitor traffic was down 57% YoY.

The casinos started to reopen on June 4th (it appears about 85% of rooms have now opened).

by Calculated Risk on 9/30/2020 10:03:00 AM

From the NAR: Pending Home Sales Index Reaches Record High as Sales Ascend 8.8% in August

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose 8.8% to 132.8 – a record high – in August. Year-over-year, contract signings rose 24.2%. An index of 100 is equal to the level of contract activity in 2001.
...
The Northeast PHSI grew 4.3% to 117.1 in August, a 26.0% jump from a year ago. In the Midwest, the index rose 8.6% to 124.5 last month, up 25.0% from August 2019.

Pending home sales in the South increased 8.6% to an index of 154.2 in August, up 23.6% from August 2019. The index in the West rose 13.1% in August to 120.3, up 23.6% from a year ago.
emphasis added

This was above expectations for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in September and October.