by Calculated Risk on 1/30/2009 02:04:00 PM

From Bloomberg: Simon Falls on Plan to Pay Part of Dividend in Stock (hat tip Sam)

David Simon [Chief Executive Officer, Simon Property Group Inc., the biggest U.S. shopping mall owner] ... said the company doesn’t plan to begin construction on new projects or major redevelopments in 2009 and there will be little new U.S. retail construction for years to come.

“The new development business is dead for a decade,” Simon said on today’s call. “Maybe it’s eight years. Maybe it’s not completely dead. Maybe I’m over-dramatizing it for effect.”

In Q3, investment in U.S. malls was at a $33 billion annual pace, but that includes renovations (there are always renovations). Still I'd expect mall investment to decline in half or more by the end of 2009. I'll have more on mall investment in a few days (when the supplemental GDP data is released).

by Calculated Risk on 1/30/2009 01:22:00 PM

The rebalancing of the U.S. economy is ongoing. The savings rate is rising, consumption is falling, and the trade deficit is declining ...

Click on graph for larger image in new window.

The first graph shows Personal Consumption Expenditures (PCE) as a percent of GDP. Note: the graph doesn't start at zero to better show the change.

PCE as a percent of GDP declined to 69.6% in Q4, the lowest level since Q2 2001.

Some analysts think the U.S. will return to the days of Ozzie and Harriet with PCE as a percent of GDP in the low 60s, but I think a decline to around 68% is more likely.

Net exports as a percent of GDP has declined sharply to 3.7% of GDP. This is the smallest deficit since the end of the '01 recession.

Since GDP = C + I + G + (X − M), the decline in C is being offset by the improvement in net trade (X - M).

As we all know, I (investment) is declining and some components of investment (like non-residential investment in structures) will decline sharply in 2009. G (government) will increase with the Obama stimulus package, and the goal is to increase G until Investment bottoms out. We will see, but the rebalancing of the U.S. economy that we discussed several years ago is now happening.

Note:
C = Personal Consumption expenditures.
I = Gross private domestic investment.
G = Government consumption expenditures and gross investment.
X = exports
M = imports.

by Calculated Risk on 1/30/2009 12:11:00 PM

From Fannie Mae: Fannie Mae Extends Eviction Suspension Another Month (hat tip Bradley)

Fannie Mae (FNM/NYSE) today announced that it will extend its suspension of evictions from Fannie Mae-owned single-family properties through February 28, 2009. The suspension applies to all single-family properties including owner-occupied properties that have been foreclosed upon as well as foreclosed properties occupied by renters.

The company this month began implementing its National Real Estate Owned (REO) Rental Policy that allows qualified renters in Fannie Mae-owned foreclosed properties to stay in their homes. The new policy applies to renters occupying any type of single-family foreclosed properties at the time Fannie Mae acquires the property. Eligible renters will be offered a new month-to-month lease with Fannie Mae or financial assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code requirements for a rental property. On behalf of the company, property managers are contacting renters in Fannie Mae-owned foreclosed properties to notify them of their options.

It is usually easier to sell a vacant home, but with the glut of homes on the market, and because the foreclosure is not the fault of the renter, this policy seems to make sense.

by Calculated Risk on 1/30/2009 09:09:00 AM

Here are a couple of graphs on the investment slump. Residential real residential fixed investment decreased at an a 23.6% annualized rate in Q4.

Click on graph for larger image in new window.

This graph shows residential investment (RI) as a percent of GDP since 1947. Residential investment has fallen to 3.07% of GDP. This is the lowest residential investment, as a percent of GDP, since WW II.

I'll post more on the components of RI in a few days when the supplemental data is released.

The second graph shows non-residential investment as a percent of GDP.

Investment in software and equipment declined at a 27.8% annualized rate in Q4. Cliff diving! This investment is at the lowest rate since the '70s.

However investment in non-residential structures only declined at a 1.8% annualized rate. As a percent of GDP, non-residential structure investment actually increased slightly in Q4. This story will change in 2009, and non-residential structure investment will be a significant drag on GDP.

I'll have much more on non-residential structures in a few days ...

This investment slump is a huge part of the recession story. Residential led the economy into recession (as is typical) and now non-residential investment is falling off a cliff - or, as in the case of non-residential structures, will fall off a cliff in 2009.

by Calculated Risk on 1/30/2009 08:31:00 AM

I'll have more a little later ...

From the BEA: GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2008 (ADVANCE)

From MarketWatch:

U.S. Q4 GDP down 3.8%, inventories limit downturn The U.S. economy contracted at a 3.8% annualized rate in the fourth quarter but the decline would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth.

A clearer picture of the scope of the weakness in the fourth quarter, which excludes the inventory buildup, contracted at a 5.1% pace, the weakest in 28 years.
...
Consumer spending fell 3.5%, including a 7.1% drop in spending on services, a 3.5% drop in spending on durable goods and a 22.4% decline in spending on nondurable goods, the weakest in 21 years.

Business investment fell 20.1% in the fourth quarter, subtracting 2.3 percentage points from growth. ...

Investments in equipment and software dropped 27.8%, the weakest in 50 years.

Investments in structures fell 19.1%, the largest decline since the first quarter of 1975.

Exports fell 19.7% in the fourth quarter, while imports, which are a subtraction from the calculation of GDP, fell 15.7%. As a result, the narrowing trade deficit added 0.09 percentage points to growth.

Government spending increased 1.9% after rising 5.8% in the third quarter. ...

Businesses added $6.2 billion to their inventories after cutting them by $29.6 billion in the third quarter. The change in inventories added 1.32 percentage points to growth.

Residential investment fell 23.6% in the fourth quarter ...