by Calculated Risk on 6/01/2011 06:55:00 PM

Catching up ... this morning from the Census Bureau reported that overall construction spending increased in April:

[C]onstruction spending during April 2011 was estimated at a seasonally adjusted annual rate of $765.0 billion, 0.4 percent (±1.6%) above the revised March estimate of $762.1 billion. The April figure is 9.3 percent (±1.6%) below the April 2010 estimate of $843.1 billion.

Private construction spending also increased in April:

Spending on private construction was at a seasonally adjusted annual rate of $483.0 billion, 1.7 percent (±1.4%) above the revised March estimate of $474.7 billion. Residential construction was at a seasonally adjusted annual rate of $232.1 billion in April, 3.1 percent (±1.3%) above the revised March estimate of $225.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $250.8 billion in April, 0.5 percent (±1.4%)* above the revised March estimate of $249.6 billion.

Click on graph for larger image in graph gallery.

This graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

The small increase in non-residential in April was mostly due to power. Office and lodging construction spending declined.

Residential spending is 65.7% below the peak in early 2006, and non-residential spending is 39.4% below the peak in January 2008.

I expect residential spending to pick up a little this year (mostly multifamily) - and residential will probably be above non-residential spending by the end of the year.

by Calculated Risk on 6/01/2011 04:00:00 PM

A few comments:
• Obviously the Japanese supply chain disruption impacted auto sales significantly in May. This has also negatively impacted manufacturing overall, and at least partially explains why the ISM manufacturing index was down sharply in May. The ISM employment index was still fairly strong, suggesting many manufacturers view this as a short term issue.

• The good news is the supply issues are being resolved ahead of schedule. From Edmunds.com:

“Manufacturing disruptions appear to have peaked in April and May, and recent news points to steady improvements moving forward,” said Lacey Plache, chief economist at Edmunds.com. “Toyota said it expects North American production of its top-selling Camry and Corolla models to be back at 100 percent next month, and Nissan’s key engine plant in Japan is returning to full production next week – ahead of schedule next week. Even Honda, which was the hardest hit of the big three Japanese automakers, is making optimistic statements about its recovery."

• The automakers lowered their incentives in May, and this also impacted sales. From TrueCar.com:

“Even though incentives are their lowest in nine years, we believe this is an anomaly and expect incentives to climb again in June.”

TrueCar.com estimated that the average incentive for light-vehicles was $2,017 in May 2011, down $822 (28.9 percent) from May 2010 and down $304 (13.1 percent) from April 2011.

• It is difficult to tell how much of the recent slowdown is related to supply chain issues, and how much is related to other issues (high oil and gasoline prices, weakness in housing, European financial crisis, government cutbacks, etc), but we should see a bounce back in auto sales over the next few months because most of this decline appears to be from temporary factors.

Click on graph for larger image in graph gallery.

Based on an estimate from Autodata Corp, light vehicle sales were at a 11.79 million SAAR in May. That is up 1.5% from May 2010, and down 10.2% from the sales rate last month (April 2011).

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for May (red, light vehicle sales of 11.79 million SAAR from Autodata Corp).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

This was well below the absurd consensus estimate of 12.8 million SAAR. As mentioned above, it is difficult to tell how much of the decline is due to supply chain issues - but my guess is we see a bounce back over the next few months.

by Calculated Risk on 6/01/2011 01:55:00 PM

Notes: Case-Shiller is the most followed house price index, but CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average of February, March, and April (April weighted the most) and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic® Home Price Index Shows First Month-over-Month Increase since mid-2010

CoreLogic ... today released its April Home Price Index (HPI) which shows that home prices in the U.S. increased on a month-to-month basis by 0.7 percent between March and April, 2011, the first such increase since the home-buyer tax credit expired in mid-2010. However, national home prices, including distressed sales, declined by 7.5 percent in April 2011 compared to April 2010 after declining by 6.8 per cent in March 2011 compared to March 2010. Excluding distressed sales, year-over-year prices declined by 0.5 percent in April 2011 compared to April 2010.
...
"While the economic recovery is still fragile and one data point is not a trend, the month-over-month increase based on April sales activity is a positive sign. ..." said Mark Fleming, chief economist for CoreLogic.

I was expecting the CoreLogic index to increase over the summer because it is not seasonally adjusted, however the seasonal increases usually start in June (when the Spring home purchases start to closes). This is just one data point, but it is possible this index will have small increases all summer.

I'll have more later (and hopefully a graph).

by Calculated Risk on 6/01/2011 11:07:00 AM

From MarketWatch: General Motors U.S. May sales fall 1.2%

[GM] said Wednesday that May U.S. car sales fell 1.2% to 221,192 vehicles from 223,822 a year ago.

The key number for the economy is the seasonally adjusted annual sales rate (SAAR) compared to the last few months, not the year-over-year comparison provided by the automakers. Once all the reports are released, I'll post a graph of the estimated total May light vehicle sales (SAAR) - usually around 4 PM ET.

The consensus is for a decrease to 12.8 million SAAR in May from 13.2 million SAAR in April, however I think we will see a sharper decline because of supply chain issues. Sales in May 2010 were at a 11.62 million SAAR. I'll add the reports from the other major auto companies as updates to this post.

Update from MarketWatch: Ford U.S. May sales virtually flat

Ford said Wednesday U.S. May sales were virtually flat, declining 0.1% to 192,102 vehicles, compared with 192,253 in the year-ago period.

Yesterday on housing:
• Case Shiller: National Home Prices Hit New Low in 2011 Q1
• Real House Prices and Price-to-Rent: Back to 1999
• The Excess Vacant Housing Supply
• Lawler: Census 2010 and the US Homeownership Rate
• Home Prices Graph Gallery

by Calculated Risk on 6/01/2011 10:00:00 AM

PMI was at 53.5% in May, sharply down from 60.4% in April. The employment index was at 58.2 and new orders at 51.0. All lower than in April.

From the Institute for Supply Management: May 2011 Manufacturing ISM Report On Business®

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 53.5 percent and indicates expansion in the manufacturing sector for the 22nd consecutive month. This month's index, however, registered 6.9 percentage points below the April reading of 60.4 percent, and is the first reading below 60 percent for 2011, as well as the lowest PMI reported for the past 12 months. Slower growth in new orders and production are the primary contributors to this month's lower PMI reading. Manufacturing employment continues to show good momentum for the year, as the Employment Index registered 58.2 percent, which is 4.5 percentage points lower than the 62.7 percent reported in April. Manufacturers continue to experience significant cost pressures from commodities and other inputs."

Click on graph for larger image in new window.

Here is a long term graph of the ISM manufacturing index.

This was well below expectations of 57.5%, but pretty much in line with the regional surveys.