by Calculated Risk on 5/17/2011 07:37:00 PM

From Motoko Rich and Stephanie Clifford at the NY Times: In Consumer Behavior, Signs of Gas Price Pinch

“Our customers are consolidating trips due to higher gas prices,” said Bill Simon, who oversees the [WalMart] United States business.
...
“Rising gas and energy prices are cited by homeowners as the top factor affecting future spending plans, followed by the state of the overall economy and inflation in general,” said Lowe’s chief executive, Robert A. Niblock, explaining earnings that missed analyst expectations in a call with investors.

MasterCard Advisors SpendingPulse, which researches consumer spending, reported on Tuesday that the gallons of gas pumped nationwide in the last month fell by 1 percent from the same period a year ago.

And a similar article from Miguel Bustillo at the WSJ: Fewer Trips to Stores Hurt Wal-Mart, Lowe's

The price of gas has remained close to $4 a gallon in May. The national average was $3.94 Tuesday morning, according to the automotive group AAA, up substantially from $2.87 a year ago.

These reports from Home Depot, Lowe's and WalMart were all for Q1, and oil prices averaged close to $95 per barrel (WTI) in Q1, and even with the recent decline - that is below the current price of $98 per barrel. So April and May (so far) were probably worse for these retailers since gasoline prices were even higher than in Q1.

by Calculated Risk on 5/17/2011 03:45:00 PM

CR Note: A key piece of data for the housing market - and the U.S. economy - is the current number of excess vacant housing units.

Unfortunately it is very difficult to get a good handle on this excess supply (it is large, but how large?). Both Tom Lawler and I are hopeful that we can arrive at a more accurate estimate using the Census 2010 data to be released this month (the estimate will be as of April 1, 2010).

Please excuse Tom's punctuation - but he has been arguing for better housing data for years - and he is clearly frustrated!

By Tom Lawler: The “Excess Supply of Housing” War: Is the 3.5 Million Estimate “Gold” (Man, No!); or Can You Take the 1.2 Million Estimate to the (Deutsche) Bank?

A few weeks ago Goldman Sachs’ analysts made headlines by arguing that the “excess” supply of housing, or actually the number of US housing units sitting vacant “above and beyond normal seasonal and frictional vacancies,” was “about” 3.5 million. This week Deutsche Bank analysts estimated that at the end of 2010 there were about 1.2 million “excess” vacant housing units in the US. Both sets of analysts relied heavily on data “provided” by the US Bureau of the Census in deriving their “estimates.” And, to the best of my knowledge, neither set of analysts was comprised of imbeciles. Yet jiminy cricket, those are pretty huge differences with massively different implications about the prospects for the housing markets and home prices over the next few years!!!!! And the major reasons for these differences? You guessed it, massively disparate sets of data from different areas of the Census Bureau on US housing!!!!

As readers probably guessed, Goldman analysts’ estimates are based on what are almost certainly flawed and biased estimates of the occupied and vacant housing units from Census’ quarterly “Residential Vacancies and Homeownership” Reports, commonly referred to as the Housing Vacancy Survey (HVS). While there had already been strong evidence that the HVS dramatically overstated both homeownership rates and vacancy rates prior to the decennial Census 2010 (from the ACS), the incoming data from Census 2010 pretty much confirm that the HVS data has serious biases, probably related to serious sampling issues.

The Deutsche Bank analysts’ estimates are based on the Census 2010 gross vacancy rate versus a weighted average of the Census 1990 gross vacancy rate (weighted 75% for pretty flimsy reasons) and the Census 2000 gross vacancy rates (weighted, of course, 25%). (DB analysts “walk forward” the April 1 Census 2010 estimates to the end of 2010 using what I believe are “questionable” assumptions about household formations and net demolitions). Census 2010 has not yet released national data on vacant units by status (for rent, for sale, etc., and it was sorta weird that DB analysts didn’t just wait a few weeks to do a more “rigorous’ estimate based on more complete Census 2010 data.

DB’s piece includes a decently long and not “too” bad discussion (though with many errors and/or omissions) of the multiple and disparate sets of data on the US housing stock derived from various surveys done by different areas in the Census Bureau.

What is disturbing, of course, is not necessarily that different sets of analysts can come to different sets of conclusions when analyzing US housing data. Rather, it is that there are multiple and conflicting “official” sets of government-produced data on the US housing stock, with little or no discussion from government officials/analysts are which – if any – dataset should be used by analysts to estimate the “excess” supply of housing in the United States

Earlier:
• Housing Starts decline in April
• Industrial Production unchanged in April, Capacity Utilization declines slightly
• Multi-family Starts and Completions, and Quarterly Starts by Intent

by Calculated Risk on 5/17/2011 12:20:00 PM

Also from the Housing Starts report this morning ...

Although the number of multi-family starts can vary significantly month to month, apartment owners are seeing falling vacancy rates, and some have started to plan for 2012 and will be breaking ground this year. So we should see a pickup in multi-family starts in 2011.

However, since it takes over a year on average to complete multi-family projects - and multi-family starts were at a record low last year - there will be a record low number of multi-family completions this year.

The following graph shows the lag between multi-family starts and completions using a 12 month rolling average.

Click on graph for larger image in graph gallery.

The blue line is for multifamily starts and the red line is for multifamily completions. Since multifamily starts collapsed in 2009, completions collapsed in 2010.

For 2011, we should expect multi-family completions to be at or near a record low, and an increase in multi-family starts. It appears that the rolling 12 month starts (blue line) will be above completions (red line) next month.

Also today, the Census Bureau released the "Quarterly Starts and Completions by Purpose and Design" report for Q1 2011. Although this data is Not Seasonally Adjusted (NSA), it shows the trends for several key housing categories.

This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

Single family starts built for sale were up slightly from Q4, but still near a record low. Owner built starts were at a record low, and condos built for sale are scrapping along the bottom.

Only the 'units built for rent' is showing any significant pickup.

The largest category - starts of single family units, built for sale - is moving sideways, and will remain weak until more of the excess vacant housing units are absorbed.

by Calculated Risk on 5/17/2011 09:30:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production was unchanged in April after having increased 0.7 percent in March. Output in February is now estimated to have declined 0.3 percent; previously it was reported to have edged up 0.1 percent. In April, manufacturing production fell 0.4 percent after rising for nine consecutive months. Total motor vehicle assemblies dropped from an annual rate of 9.0 million units in March to 7.9 million units in April, mainly because of parts shortages that resulted from the earthquake in Japan. Excluding motor vehicles and parts, factory production rose 0.2 percent in April. The output of mines advanced 0.8 percent, while the output of utilities increased 1.7 percent. At 93.1 percent of its 2007 average, total industrial production was 5.0 percent above its year-earlier level. The rate of capacity utilization for total industry edged down 0.1 percentage point to 76.9 percent, a rate 3.5 percentage points below its average from 1972 to 2010.

Click on graph for larger image in graph gallery.

This graph shows Capacity Utilization. This series is up 9.6 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 76.9% is still "3.5 percentage points below its average from 1972 to 2010" - and below the pre-recession levels of 81.2% in November 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Edit: typo on graph, it should read 2007 = 100.

Industrial production was unchanged in April at 93.1; previous months were revised down, so this is a decline from the previously reported level in March.

Production is still 7.6% below the pre-recession levels at the end of 2007.

The consensus was for a 0.4% increase in Industrial Production in April, and an increase to 77.6% for Capacity Utilization. So this was well below expectations - partly because of the earthquake in Japan.

by Calculated Risk on 5/17/2011 08:30:00 AM

Click on graph for larger image in graph gallery.

Total housing starts were at 523 thousand (SAAR) in April, down 10.6% from the revised March rate of 585 thousand.

Single-family starts decreased 5.1% to 394 thousand in April.

The second graph shows total and single unit starts since 1968. This shows the huge collapse following the housing bubble, and that housing starts have mostly been moving sideways for over two years - with slight ups and downs due to the home buyer tax credit.

Here is the Census Bureau report on housing Permits, Starts and Completions.

Housing Starts:
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 523,000. This is 10.6 percent (±13.0%)* below the revised March estimate of 585 000 and is 23 9 percent (±7 0%) below the revised April 2010 rate of 687 000.

Single-family housing starts in April were at a rate of 394,000; this is 5.1 percent (±10.2%)* below the revised March figure of 415,000. The April rate for units in buildings with five units or more was 114,000.

Building Permits:
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 551,000. This is 4.0 percent (±1.1%) below the revised March rate of 574,000 and is 12.8 percent (±1.2%)below the revised April 2010 estimate of 632,000.

Single-family authorizations in April were at a rate of 385,000; this is 1.8 percent (±1.0%) below the revised March figure of 392,000. Authorizations of units in buildings with five units or more were at a rate of 143,000 in April.

This was well below expectations of 570 thousand starts in April. I'll have more on starts later ... I expect starts to stay low until more of the excess inventory of existing homes is absorbed.