by Calculated Risk on 5/17/2010 01:00:00 PM

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

Click on graph for larger image in new window.

This graph shows the builder confidence index from the National Association of Home Builders (NAHB).

The housing market index (HMI) was at 22 in May. This is an increase from 19 in April. This is the highest level since August 2007 - and builders were seen as depressed then!

The record low was 8 set in January 2009. This is still very low ...

This second graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the May release for the HMI and the March data for starts (April starts will be released tomorrow).

This shows that the HMI and single family starts mostly move generally in the same direction - although there is plenty of noise month-to-month.

Press release from the NAHB: Builder Confidence Continues to Strengthen in May

Builder confidence in the market for newly built, single-family homes rose for a second consecutive month in May to its highest level in more than two years, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI gained three points to 22 in May, its highest point since August of 2007.

“Builders surveyed for the HMI at the beginning of May were undoubtedly reacting to the heightened consumer interest they had just witnessed as the deadline for home buyer tax credits arrived at the end of April,” said Bob Jones, Chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. “Builders are also hopeful that the solid momentum that the tax credits initiated will continue even now that those incentives are gone.”

“The really encouraging part of today’s HMI is that sales expectations for the next six months continued to gain, despite the expiration of the home buyer tax credits at the end of April,” said NAHB Chief Economist David Crowe. “This means builders are more comfortable that the market is truly beginning to recover, and that positive factors for buying a new home – low interest rates, great selection, stabilizing prices, and a recovering job market – are taking the place of tax incentives to generate buyer demand.”

Crowe was quick to point out, however, that while builder confidence has improved from the depths of the housing downturn, it is still quite low by historic standards. “Obviously we still have a long way to go ..."

Each of the HMI’s three component indexes posted three-point gains in May. The component gauging current sales conditions climbed to 23, its highest level since July of 2007. The component gauging sales expectations in the next six months rose to 28, its highest point since November 2009, and the component gauging traffic of prospective buyers improved to 16, its best showing since September 2009.

by Calculated Risk on 5/17/2010 09:50:00 AM

From Keith Bradsher at the NY Times: Europe’s Debt Crisis Is Casting a Shadow Over China

The steep rise of the renminbi prompted a Commerce Ministry official in Beijing to warn Monday that China’s exports could be threatened. ...

“The yuan has risen about 14.5 percent against the euro during the past four months, which will increase cost pressure for Chinese exporters and also have a negative impact on China’s exports to European countries,” Yao Jian, the ministry’s spokesman, said at a news conference in Beijing, according to news services.
...
Because American companies in particular compete in the Chinese market with European companies in many industries, the euro’s weakness against the renminbi is putting American companies at a disadvantage ...

As I noted a few weeks ago ... keep an eye on the Shanghai index (in red).

Click on graph for larger image in new window.

This graph shows the Shanghai SSE Composite Index and the S&P 500 (in blue).

The SSE Composite Index is at 2,559.93 - down 5% last night and off almost 20% since early April. This is the lowest level in over a year.

Should we be more concerned about the slowdown in Europe, or the slowdown in China?

by Calculated Risk on 5/17/2010 08:32:00 AM

From the NY Fed: Empire State Manufacturing Survey

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to improve for a tenth consecutive month in May, albeit at a slower pace than in April. The general business conditions index fell 13 points, to 19.1. Similarly, the new orders and shipments indexes also moved lower but remained at positive levels. The inventories index dropped back to a level near zero after rising into positive territory in March and April. .... Future indexes suggest that activity is expected to expand further in the months ahead, but the level of optimism was noticeably lower in May than in recent months.
...
The new orders index was also lower, falling 15 points to 14.3. ... The index for number of employees climbed to 22.4, with nearly a third of respondents increasing employment levels in May. The average workweek index fell to zero, following four months of positive readings. .... The future inventories index fell below zero for the first time since October of last year, suggesting that inventory levels were not expected to rise in the coming months.

This came in below expectations. New orders are softer and the inventory adjustment is over. Manufacturing continued to improve, although at a slower pace in May. This is an early indicator for the national ISM survey that will be released June 1st.

by Calculated Risk on 5/16/2010 10:15:00 PM

The U.S. futures are off tonight:

From CNBC: Pre-Market Data shows the S&P 500 off about 11 points or 1%. Dow futures are off about 100 points.

CBOT mini-sized Dow

And the Asian markets are in the red with most indexes off about 2%.

And a graph of the Asian markets.

The Euro is at 1.23 dollars. Update: more currency exchange rates and from NetDania.

It will be a busy week ...

Best to all.

by Calculated Risk on 5/16/2010 04:33:00 PM

Note: here is the Weekly Summary and a Look Ahead (busy week)!

On the Libor and the Euro ...

From the Financial Times: Banks’ debt exposure fuels risk aversion

Concern about the exposure of European banks to the debts of weaker countries in the eurozone is ... increasing the amounts banks charge to lend to each other.

The London inter-bank offer rate, or Libor, has risen in recent weeks to its highest level since last August ... which is significant because the rate has served as a leading gauge of stress during the financial crisis.
excerpt with permission

The Libor has risen recently, but it is still very low (here is a graph from Bloomberg). The Libor is at 0.45%; the Libor peaked at 4.81875% on Oct 10, 2008.

The TED spread has increased too, but it is still very low at 30. This is the difference between the interbank rate for three month loans and the three month Treasury. The peak was 463 on Oct 10th and a normal spread is around 50 bps - so this is still below normal.

And from The Times: Euro heads for parity with dollar

THE euro is set to slide further and could be heading for parity with the dollar, analysts say. ... The euro fell to a 19-month low against the dollar of $1.23 on Friday night ...

Click on graph for larger image in new window.

Update: Oops. Chart was labeled backwards. There are 1.23 dollars per Euro.

The Euro has only been around since Jan 1999. The graph shows the number of dollars per euro since Jan 1, 1999.

There is nothing magical about "parity" except it makes a good headline - and would be a significant decline.