by Calculated Risk on 5/27/2010 11:59:00 PM

I was out for some time ... the euro is back under 1.23 dollars again ... futures are off slightly (Dow off about 45).

On Friday the BEA will release the Personal Income and Outlay report for April - and that will provide some hints for PCE for Q2. Also the Chicago Purchasing Managers Index for May will be released. Another fun day!

Best to all

by Calculated Risk on 5/27/2010 06:49:00 PM

I thought this was from The Onion ... unfortunately it is not.

From the NAHB: Legislation Addresses Housing Production Credit Crisis

Legislation introduced yesterday by Reps. Brad Miller (D-N.C.) and original co-sponsors Carolyn Maloney (D-N.Y.) and Joe Baca (D-Calif.) would help alleviate the severe lack of credit for acquisition, development and construction (AD&C) financing that threatens to end the budding housing recovery before it has time to take root, according to the National Association of Home Builders (NAHB).

“We applaud these lawmakers for taking the lead to address the housing production credit crisis that is jeopardizing the housing and economic recovery now under way,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich.

H.R. 5409, the Residential Construction Lending Act, would create a new residential construction loan guarantee program within the Department of Treasury to provide loans to builders with viable construction projects. Designed to unfreeze credit for small home building firms, the measure would expand the flow of credit to residential builders on competitive terms.

Under intense pressure from their bank examiners to reduce their exposure to development and construction loans to builders and curtail their outstanding portfolios of real estate loans, many lenders are refusing to make loans for viable new housing projects and cutting off the funding for performing loans, or calling them. This is causing unnecessary foreclosures and losses on these loans. Performing loans are also being reappraised, reducing the value of the collateral and forcing borrowers to come up with large amounts of cash to keep their loans current.

“H.R. 5409 will help restore the flow of credit to housing, provide jobs and give a meaningful lift to the economy,” said Jones. “We urge Congress to act quickly on this bill.”

There is still a large overhang of existing housing units (at the current price). The last thing we need is more production - and then sticking the U.S. taxpayers with more bad loans.

by Calculated Risk on 5/27/2010 03:49:00 PM

Most of the revisions in the "Second Estimate" GDP report this morning were small; the headline GDP number was revised down to 3.0% from 3.2% (annualized real growth rate).

There are really two measures of GDP: 1) real GDP, and 2) real Gross Domestic Income (GDI). The BEA also released GDI today. Recent research suggests that GDI is often more accurate than GDP.

For a discussion on GDI, see from Fed economist Jeremy Nalewaik, “Income and Product Side Estimates of US Output Growth,” Brookings Papers on Economic Activity. An excerpt:

The U.S. produces two conceptually identical official measures of its economic output, currently called Gross Domestic Product (GDP) and Gross Domestic Income (GDI). These two measures have shown markedly different business cycle fluctuations over the past twenty five years, with GDI showing a more-pronounced cycle than GDP. These differences have become particularly glaring over the latest cyclical downturn, which appears considerably worse along several dimensions when looking at GDI. ...

In discussing the information content of these two sets of estimates, the confusion often starts with the nomenclature. GDP can mean either the true output variable of interest, or an estimate of that output variable based on the expenditure approach. Since these are two very different things, using “GDP” for both is confusing. Furthermore, since GDI has a different name than GDP, it may not be initially clear that GDI measures the same concept as GDP, using the equally valid income approach.

The NBER uses both real GDP and real GDI to date recessions.

The following graph is constructed as a percent of the previous peak in both GDP and GDI. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%. The recent recession is marked as ending in Q3 2009 - this is preliminary and NOT an NBER determination.

Click on graph for larger image in new window.

It appears that GDP bottomed in Q2 2009 and GDI in Q3 2009. Real GDP is only 1.2% below the pre-recession peak - but real GDI is still 2.3% below the previous peak.

GDI suggests the recovery has been more sluggish than the headline GDP report and better explains the weakness in the labor market.

Also "Personal income excluding current transfer receipts (billions of chained 2005 dollars)" was revised down for the last two quarters, and now shows essentially no growth in real personal income since the bottom of the recession.

by Calculated Risk on 5/27/2010 01:46:00 PM

From HotelNewsNow.com: STR: Urban hotels top weekly performance

Overall, the industry’s occupancy increased 4.0 percent to 61.6 percent, ADR ended the week virtually flat with a 0.3-percent decrease to US$98.15, and RevPAR rose 3.7 percent to US$60.49.

The occupancy rate has been running about 3% to 4% above 2009 for the last three months. The following graph shows the occupancy rate by week and the 52 week rolling average since 2000.

Click on graph for larger image in new window.

Notes: the scale doesn't start at zero to better show the change.

The graph shows the distinct seasonal pattern for the occupancy rate; higher in the summer because of leisure/vacation travel, and lower on certain holidays.

The occupancy rate is running above 2009 - the worst year since the Depression - but still well below the normal level of close to 67% for this week.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 5/27/2010 11:21:00 AM

From Lori Montgomery at the WaPo: Bill on jobless benefits, state financial help scaled back

[C]ongressional leaders reached a tentative agreement Wednesday to scale back a package that would have devoted nearly $200 billion to jobless benefits and other economic provisions ...

Under Wednesday's agreement, the overall cost of the package would drop from more than $190 billion to about $145 billion ... Unemployment benefits would be extended through the end of November, instead of through the end of the year ... $32 billion in expiring tax credits and deductions for businesses and individuals and $24 billion to help cash-strapped state governments.

The "extension" of the unemployment benefits doesn't add more weeks; it extends the eligibility for the previously expanded benefits.

The spending from the American Recovery and Reinvestment Act (ARRA) starts to decline in Q3, and that will be a drag on GDP growth. However the additional spending (including this proposed package) will probably keep the overall contribution to GDP growth slightly positive in Q3, but will be a drag on GDP growth starting in Q4 as spending declines.