by Calculated Risk on 5/28/2010 05:20:00 PM

There have been numerous reports of less small business lending. But it is unclear if this is because a lack of credit, or if the lower level of lending is because of less demand. A survey by the Atlanta Fed suggests that it is mostly a demand problem (especially excluding construction and real estate industries).

From Atlanta Fed senior economist Paula Tkac: How "discouraged" are small businesses? Insights from an Atlanta Fed small business lending survey

We at the Federal Reserve Bank of Atlanta have ... begun a series of small business credit surveys. Leveraging the contacts in our Regional Economic Information Network (REIN), we polled 311 small businesses in the states of the Sixth District (Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee) on their credit experiences and future plans. While the survey is not a stratified random sample and so should not be viewed as a statistical representation of small business firms in the Sixth District, we believe the results are informative.

Indeed, the results of our April 2010 survey suggest that demand-side factors may be the driving force behind lower levels of small business credit. To be sure, when asked about the recent obstacles to accessing credit, some firms (34 firms, or 11 percent of our sample) cited banks' unwillingness to lend, but many more firms cited factors that may reflect low credit quality on the part of prospective borrowers. For example, 32 percent of firms cited a decline in sales over the past two years as an obstacle, 19 percent cited a high level of outstanding business or personal debt, 10 percent cited a less than stellar credit score, and 112 firms (32 percent) report no recent obstacles to credit. Perhaps not surprisingly, outside of the troubled construction and real estate industries, close to half the firms polled (46 percent) do not believe there are any obstacles while only 9 percent report unwillingness on the part of banks.

This fits with comments from the National Federation of Independent Businesses that cited "poor sales" as the number one problem for small businesses.

by Calculated Risk on 5/28/2010 03:32:00 PM

This sounds so 2007 ... but it is today.

From David Bracken at the Newobserver.com: Sales stop for Raleigh condo project (ht dshort)

Hue, the multicolor building that is the largest condo project ever attempted in downtown Raleigh, closed its sales office without ever selling a unit.

Signs posted on the building's doors, as well as a message left on the sales office's answering machine, say Hue will be closed until further notice.
...
With its royal blue and mustard exterior, the 208-unit ... seven-story building across from the city administration building downtown replaced a parking lot and was considered a bold symbol of downtown Raleigh's revitalization.

So much for the "revitalization". This is part of the shadow inventory ...

by Calculated Risk on 5/28/2010 12:41:00 PM

This is one of several industry specific indexes I track each month.

Click on graph for larger image in new window.

Same store sales and customer traffic both showed declines in April. This was more than offset by a postive outlook in the "expectations index" and the overall index showed expansion in April.

Unfortunately the data for this index only goes back to 2002.

Note: Any reading above 100 shows expansion for this index.

From the National Restaurant Association (NRA): Restaurant Industry Outlook Remained Positive as the Restaurant Performance Index Stood Above 100 in April

[T]the National Restaurant Association’s Restaurant Performance Index (RPI) ... was essentially unchanged from its previous month’s level; the RPI stood at 100.4 in April, down slightly from its March level of 100.5. RPI levels above 100 indicate expansion of key industry indicators.

“Although the sales and traffic indicators softened somewhat from their March performance, restaurant operators remain optimistic that business conditions will improve in the months ahead,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, restaurant operators reported a positive outlook for staffing gains, as well as continued plans for capital expenditures in the coming months.”
...
After reporting net positive same-store sales in March for the first time in 22 months, restaurant operators reported softer sales results in April.
...
Similarly, restaurant operators reported a net decline in customer traffic levels in April, after posting positive traffic results in March.
emphasis added

Restaurants are a discretionary expense, and they tend to be 'first in, last out' of a recession for consumer spending (as opposed to housing that is usually first in and first out). So far the recovery for restaurants has been sluggish, and operators will only stay optimistic if sales and traffic picks up.

by Calculated Risk on 5/28/2010 09:51:00 AM

From the Institute for Supply Management – Chicago:

The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER eased again, tempering the pace of its expansion while marking its eighth month of growth. All Business Activity indexes except EMPLOYMENT signaled expansion. ... EMPLOYMENT slipped below neutral for the first time in 2010.

The new orders index declined from April (65.2 to 62.7), and inventories increased sharply. Note: any number above 50 shows expansion.

This is similar to other regional reports: continued expansion, but at a slower pace. New orders are softer, and the inventory adjustment is over.

Especially concerning is the sharp decline in the employment index (from 57.2 to 49.2). The national ISM manufacturing index will be released next Tuesday.

by Calculated Risk on 5/28/2010 08:30:00 AM

From the BEA: Personal Income and Outlays, April 2010

Personal income increased $54.4 billion, or 0.4 percent ... Personal consumption expenditures (PCE) increased $4.0 billion, or less than 0.1 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased less than 0.1 percent in April
...
Personal saving as a percentage of disposable personal income was 3.6 percent in April, compared with 3.1 percent in March.

The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for large image.

The quarterly change in PCE is based on the change from the average in one quarter, compared to the average of the preceding quarter.

The colored rectangles show the quarters, and the blue bars are the real monthly PCE.

Spending only increased slightly in April compared to March.

The National Bureau of Economic Research (NBER) uses several measures to determine if the economy is in recession. One of the measures is real personal income less transfer payments (see NBER memo). This increased in April to $9,059 billion (SAAR) and is barely above the low of October 2009 ($8,987 billion).

This graph shows real personal income less transfer payments since 1969.

This measure of economic activity is moving sideways - similar to what happened following the 2001 recession.

This month income increased faster than spending ... meaning the saving rate increased.

This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the April Personal Income report. The saving rate increased to 3.6% in April (decreased slightly using a three month average).

I still expect the saving rate to rise over the next couple of years slowing the growth in PCE.

The increase in income was good news, but personal income less transfer payments are still barely above the low of last year.