by Calculated Risk on 6/15/2011 08:30:00 AM

• From the NY Fed: Empire State Manufacturing Survey

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated in June. The general business conditions index slipped below zero for the first time since November of 2010, falling twenty points to -7.8.

The new orders and shipments indexes also posted steep declines and fell below zero. The index for number of employees dropped fifteen points to 10.2.

This was well below expectations of a reading of 13.0. This is the first regional survey released for June and shows that manufacturing is contracting.

• From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. ... The index for all items less food and energy increased 0.3 percent in May, its largest increase since July 2008.

Even though the rate of inflation slowed, it was still higher than expected. The pickup in core inflation is bad news - I'll have more on inflation later.

• From the NY Times: Moody's to Review French Banks Over Greece Exposure

French banks were punished Wednesday for their exposure to the Greece after Moody’s Investors Service placed three of the largest on review for a possible downgrade.

Moody’s cited “concerns” about the exposure of BNP Paribas, Société Générale and Crédit Agricole to the Greek economy ...

by Calculated Risk on 6/15/2011 07:18:00 AM

The MBA reports: MMortgage Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 16.5 percent from the previous week. The seasonally adjusted Purchase Index increased 4.5 percent from one week earlier.
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"Mortgage rates have declined for 8 of the past 9 weeks. Coming off of the Memorial Day holiday, refinance application volume increased significantly, as borrowers jumped to lock in the lowest mortgage rates since last November," said Michael Fratantoni, MBA's Vice President of Research and Economics. "The volume of refinance applications still remains 28 percent below levels seen at that time, as borrowers with an incentive to refinance remain constrained from doing so by lack of equity in their homes."
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.51 percent from 4.54 percent, with points increasing to 1.05 from 0.94 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year average rate since November 19, 2010.

The following graph shows the MBA Purchase Index and four week moving average since 1990.

Click on graph for larger image in graph gallery.

The four week average of purchase activity is still at about 1997 levels. Of course there is a very high percentage of cash buyers right now, but this suggests weak existing home sales through mid-year (not counting cash buyers). Note that mortgage rates have fallen to the lowest level since last November and refinance activity has increased.

by Calculated Risk on 6/14/2011 11:02:00 PM

The BuildFax Residential Remodeling Index was at 109.7 in April, up from 98.0 in March. This is based on the number of properties pulling residential construction permits in a given month.

From BuildFax:

The Residential BuildFax Remodeling Index rose 15% year-over-year—and for the eighteenth straight month—in April to 109.7, the highest April number in the index to date.
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In April, all regions posted month-over-month gains, and only the Midwest posted a year-over-year loss.
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According to Joe Masters Emison, vice president of research and development at BuildFax, “April traditionally sets a baseline for the rest of the year in residential remodeling activity, and April 2011 is the best we’ve seen since the beginning of the index in April 2004.”

Click on graph for larger image in graph gallery.

This is the highest level for the month of April since the index was started in 2004 - and even slightly above the levels for May in 2005 and 2006 (during the home equity and remodel boom).

Note: permits are not adjusted by value, so this doesn't mean there is more money being spent, just more permit activity. Also some smaller remodeling projects are done without permits and the index will miss that activity.

Since there is a strong seasonal pattern for remodeling, the second graph shows the year-over-year change from the same month of the previous year.

The remodeling index is up 15% from April 2010.

As I mentioned earlier today in Key Question: Is the slowdown temporary?, Residential Investment (RI) is a leading indicator for the economy, and RI will will probably make a positive contribution to the economy this year for the first time since 2005. Even though new home construction is still moving sideways, it appears that two other components of residential investment will increase in 2011: multi-family construction and home improvement.

Data Source: BuildFax, Courtesy of Index.BuildFax.com

by Calculated Risk on 6/14/2011 07:46:00 PM

The first graph shows the rolling 12 month average of loaded inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported - and possible hints about the trade report for May. LA area ports handle about 40% of the nation's container port traffic.

To remove the strong seasonal component for inbound traffic, this graph shows the rolling 12 month average.

Click on graph for larger image in graph gallery.

On a rolling 12 month basis, inbound traffic is up 0.4% from April, and outbound traffic also up 0.4%.

The 2nd graph is the monthly data (with strong seasonal pattern).

For the month of May, loaded inbound traffic was up 5% compared to May 2010, and loaded outbound traffic was also up 5% compared to May 2010.

Exports are near the pre-recession peak in 2008, although imports in May were still below the levels of May 2006 and May 2007.

This suggests the trade deficit with China (and other Asians countries) probably increased seasonally in May.

by Calculated Risk on 6/14/2011 04:11:00 PM

From economist Tom Lawler:

Based on my tracking of regional MLS that have reported data so far (not as large a sample as I would like), I estimate that existing home sales, as estimated by the National Association of Realtors, ran at a seasonally adjusted annual rate of 4.8 million in May, down about 5% from April’s pace, and down 15.5% from last May’s pace. Unadjusted sales should show a smaller YOY decline, as this May had one more business day than last May.

On the inventory front, active listings appeared to have increased modestly from April to May nationwide, but were down from a year ago in the vast majority of places – in some cases by a lot, in aggregate in the 7-8% range. What that means for the NAR’s inventory estimate, however, is not clear. Over the last several years the NAR’s existing home inventory estimate has shown MASSIVELY larger gains from March to April than have other listings sources (including realtor.com), but then showed either smaller gains or larger declines than other sources from April to May. In addition, NAR’s YOY inventory decline in April seemed materially lower than other data listing sources suggested.

Based on limited historical data I’d estimate that the NAR’s methodology will result in a reported 2.5% monthly decline in existing home inventory. That combination of sales and inventories would produce a NAR-defined “month’s supply” of 9.4 months, up from 9.2 months in April.

Shifting to pending sales, April’s seasonally adjusted 11.6% drop was surprisingly sharp and only partly explainable by “questionable” seasonal factors. Looking at the limited number of regional realtor associations/MLS/boards that report on “new” pending sales, it appears as if pending sales in aggregate showed a significant rebound from April to May. I estimate that the NAR’s Pending Home Sales Index will show a seasonally adjusted gain from April to May of around 11% -- suggesting that weather, flooding, oil prices, and “other stuff” may have had a temporarily negative impact on contract signings in April and closed sales in May, as well as a temporarily negative impact on other economic data for May.

CR Notes: The NAR reported existing home sales at a 5.05 million seasonally adjusted annual rate (SAAR) in April and inventory of 3.87 million units.

Click on graph for larger image in graph gallery.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis through April. Sales in April 2011 (5.05 million SAAR) were 0.8% lower than in March, and were 12.9% lower than in April 2010.

Based on Tom Lawler's estimate, this will be the lowest level of inventory in May since 2006 and sales will decline 15.5% YoY. Of course sales in 2010 were boosted by the homebuyer tax credit.

No word yet on when the NAR will release their benchmark revision (expected this summer - and expected to show significant downward revisions to sales and inventory for the last several years).