by Calculated Risk on 1/13/2010 07:05:00 PM

From Bloomberg: California’s Credit Cut by S&P Amid Budget Deficit

California’s credit rating on $64 billion of general obligation bonds was cut by Standard & Poor’s today as [California] faces strains over a $20 billion budget deficit.

... the rating was lowered one level to A-, the seventh-highest investment grade. ... the company has a negative outlook on California debt, a sign its standing may decline further. ... S&P’s cut brings its rating on California closer to that of Moody’s Investors Service and Fitch Ratings. Moody’s rates the state Baa1 and Fitch at BBB.

More from Tom Petruno at the LA Times: California's debt rating cut to A-minus by S & P on budget woes

S&P worries that the state could face a cash crunch in March, before it receives the income tax payments due in April.

"There could be days in March when they go into a negative cash position," said Gabriel Petek, an S&P analyst in San Francisco.

Although Petek said he didn't believe California would be in jeopardy of missing any payments due on its debt, he said the government might again pay other obligations with IOUs, or the state might again require a short-term loan from Wall Street.

Possibly more IOU fun for California!

by Calculated Risk on 1/13/2010 03:25:00 PM

From The Times: Britain's recession the steepest for 88 years

Britain's economy fell last year at the sharpest rate since 1921, despite hopes that it finally emerged from recession in the last three months of the year, according to a respected economics forecaster.

The National Institute of Economic and Social Research (NIESR) said today that its latest estimate showed that GDP rose by a modest 0.3 per cent in the final three months of 2009 compared with the third quarter.

That means that, for the year as a whole, the economy contracted by 4.8 per cent, a bigger fall than in any year of the Great Depression and the biggest contraction for 88 years.

Wow. The largest one year decline since 1921. Of course, during the Depression, there were a number of bad years in a row.

And from Statistischen Bundesamtes Deutschland: Germany experiencing serious recession in 2009 (ht Uwe)

Click on graph for larger image in new window.

The German economy shrank in 2009 for the first time in six years. With –5.0%, the decline in the price-adjusted gross domestic product (GDP) was larger than ever since World War II. This is shown by first calculations of the Federal Statistical Office (Destatis). The economic slump occurred mainly in the winter half-year of 2008/2009. Over the year, there were signs that the economic development would slightly stabilise on the new, lower level.

by Calculated Risk on 1/13/2010 01:00:00 PM

From the Association of American Railroads: Rail Time Indicators. AAR reports that "2009 saw total carload traffic on U.S. railroads at its lowest levels since at least 1988, when the AAR’s data series began."

Click on graph for larger image in new window.

This graph shows U.S. average weekly rail carloads. It is important to note that excluding coal, traffic is up 6.9% from December 2008, and traffic increased in 12 of the 19 major commodity categories.

Housing: In addition to the decline in coal, two key building materials were also down YoY from December 2008: Forest products and Nonmetallic minerals & prod. (like crushed stone, gravel, sand). This fits with the recent data on housing starts, new home sales, and the NAHB home builder index that shows residential investment is flat and non-residential investment is declining sharply.

From AAR:

• Good riddance to 2009. U.S. freight railroads completed a very difficult year by originating 1,241,293 carloads in December, an average of 248,259 carloads per week. That’s down 4.1% from December 2008’s average of 258,915 carloads per week and down 17.6% from December 2007’s average of 301,466.

• Rail traffic always falls sharply in late December due to the holidays. This year, unusually heavy early-season snow in parts of the country also negatively affected rail traffic.

• Total U.S. rail carloads in December 2009 were 53,281 lower than in December 2008, mainly because of coal. Coal was down 96,022 carloads in December 2009 from December 2008. That’s equal to 19,200 fewer coal carloads, or around 175 110-car coal trains, per week. Rail carloads excluding coal were 42,741 (6.9%) higher in December 2009 than in December 2008.

• It’s useful to compare current rail traffic levels to the collapsed levels of a yearago. To use a boxing analogy, doing so shows if rail carloads have gotten up off the mat after nearly getting knocked out. And, in fact, for many commodities that seems to be happening. 12 of the 19 major commodity categories tracked by the AAR saw higher carloads in December 2009 than in December 2008.
emphasis added

The AAR report has a number of other graphs for various sectors like autos and housing.

by Calculated Risk on 1/13/2010 11:17:00 AM

One of the ways California made it through 2009 was by cutting aid to cities, and that has led to severe cutbacks in local spending. I've been seeing more and more article like these ...

Riverside County: Massive county layoffs likely, chief exec says

Anaheim: City cuts 11 jobs, slashes tourism funds

And this will probably be a problem nationwide, from Reuters: Shortfalls for US cities could reach $56 bln-report

U.S. cities will face a collective budget shortfall of at least $56 billion over the next two years, with the current recession not seen hitting bottom until 2011, according to a report on Wednesday.
...
States are also threatening to cut another lifeline for cities -- direct aid transfers. As they attempt to reconcile their own battered budgets, states are saying they can send less money to cities. California, for one, has already taken back aid it had granted.

by Calculated Risk on 1/13/2010 08:39:00 AM

The MBA reports: Mortgage Refinance Applications Increase While Purchase Applications Remain Flat

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending January 8, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 14.3 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index increased 21.8 percent from last week’s holiday adjusted index ... The seasonally adjusted Purchase Index increased 0.8 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.13 percent from 5.18 percent, with points decreasing to 1.17 from 1.28 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The four week moving average is now at the lowest level since July 1997.