by Calculated Risk on 6/27/2011 10:30:00 AM

From the Dallas Fed: Texas Manufacturing Activity Rises but at a Slower Pace

Texas factory activity expanded in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained positive but fell from 12.7 to 5.6, suggesting output growth slowed this month.

Other measures of current manufacturing conditions indicated flat activity, while new orders picked up. ... The new orders index rose from 1.1 in May to 6.4 in June, its eighth consecutive month in positive territory. ... Labor market indicators reflected slower growth in labor demand. The employment index came in at 5.3, with 14 percent of manufacturers reporting hiring new workers compared with 9 percent reporting layoffs. ... Price and wage pressures moderated this month.

There are two more regional manufacturing surveys that will be released this week (Richmond and Kansas City), and those surveys will probably show weakness similar to the Philly and Empire State surveys. So far the regional surveys suggest the ISM index will be in the low 50s in June - and might show contraction (below 50) for the first time since July 2009.

by Calculated Risk on 6/27/2011 08:30:00 AM

Note: sorry for typos.

The BEA released the Personal Income and Outlays report for May:

Personal income increased $36.2 billion, or 0.3 percent ... Personal consumption expenditures (PCE) increased $4.6 billion, or less than 0.1 percent.
...
Real PCE decreased 0.1 percent, the same decrease as in April.

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 larger image in graph gallery.

PCE increased less than 0.1% in May, but real PCE decreased 0.1% as the price index for PCE increased 0.2 percent in May. The graph shows that real PCE declined in the first two month of Q2.

Note: The PCE price index, excluding food and energy, increased 0.3 percent.

The personal saving rate was at 5.0% in May.

Personal saving -- DPI less personal outlays -- was $591.1 billion in May, compared with $568.0 billion in April. Personal saving as a percentage of disposable personal income was 5.0 percent in May, compared with 4.9 percent in April.

This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the May Personal Income report.

The saving rate has declined recently even as growth for real personal consumption expenditures has slowed. Part of this is due to higher overall inflation and higher oil / gasoline prices.

This would have been the first monthly decline in real PCE since January 2010 - except April was revised down too. This puts real PCE growth in Q2 on pace for only about 1% (an average of Q2 over Q1) - the slowest pace since Q4 2009.

by Calculated Risk on 6/26/2011 11:39:00 PM

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
• Schedule for Week of June 26th

The Asian markets are red tonight with the Nikkei off almost 1%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 is off about 2.7 points, and Dow futures are off about 30 points.

Oil: WTI futures are down to $90.60 and Brent is down to $104.47.

Of course we will be watching Greece again tomorrow: The Greek 2 year yield is at 28.3% and the ten year yield is at 16.8%.

Best to all.

by Calculated Risk on 6/26/2011 06:45:00 PM

Although I expect the recovery to remain sluggish and choppy, I do think some of the recent slowdown was temporary, and I expect some pickup in U.S. economic activity in Q3. There are downside risks to this forecast, such as spillover from the European financial crisis, another surge in oil and gasoline prices (or a supply shock), and more rapid fiscal tightening in the U.S. - to name a few risks.

Even though most of the U.S. data will be weak, there might be a few hints of improvement this week, although events overseas might overshadow U.S. economic data once again.

There are several regional manufacturing surveys that will be released this week (Richmond, Dallas and Kansas City), and all will probably show weakness similar to the Philly and Empire State surveys. The Chicago PMI will probably be weak too, and the closely watched ISM manufacturing survey might show contraction (below 50) for the first time since July 2009.

Also the Personal Income and Outlays report for May (to be released Monday) will probably show the first monthly decline in real PCE since early last year. So there will be plenty of "bad news".

However auto sales should be a little better in June than in May, although the supply chain issues are still impacting sales. And falling oil and gasoline prices might lead to a little more positive consumer sentiment - and a pickup in consumer spending in June and July.

On housing, the monthly mortgage delinquency reports from LPS and Fannie Mae will probably show a lower serious delinquency rate (continuing the recent trend). And even though expectations are for the Pending Home Sales index to show a 2% decline in May, housing economist Tom Lawler expects an increase in this index (based on limited data).

And on house prices, expectations are for the Case-Shiller index (NSA) to show a 0.3% decline in April, about half the decline reported in March. However several house prices indexes showed an increase in April:

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

• FNC reported:

Despite broad economic and job market weakness, home prices have increased for the first time since the withdrawal of the homebuyer tax credits a year ago.

Based on the latest data on non-distressed home sales (existing and new homes), FNC’s Residential Price Index™ (RPI) indicated that single-family home prices in April were up from March at a seasonally unadjusted rate of 0.5%.

• The FHFA (GSEs only): FHFA House Price Index Rises 0.8 Percent in April; First Monthly Increase Since May 2010

• And Radar Logic went further and predicted the Case-Shiller index will show an increase for April:

Last month, we predicted that the S&P/Case-Shiller 10-City composite for March 2011 would be about 152 and the 20-City composite would be roughly 138. In fact, the 10-City composite was 151.66 and the 20-City composite was 138.16.

This month, we expect the April 2011 10-City composite index to be about 153 and the 20-City index to be roughly 140.

EDITED for clarity: Seasonally April is usually slightly stronged than March, even though March is still a weak month (The NSA index will be below the SA index). However this means the NSA index would show a larger increase than the SA index. That might be a little confusing since S&P reports the NSA index, and I report the SA numbers.

It looks like the sharp house price declines are over for the summer months. I still think prices will fall further in real terms over the next couple of years (inflation adjusted), but I think we are close to the bottom nationally in nominal terms.

Overall most of the news flow will still be negative this week.

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
• Schedule for Week of June 26th

by Calculated Risk on 6/26/2011 01:44:00 PM

From the WSJ: French Banks Submit Plan for Greek Debt Rollover

French banks will propose on Monday ... for private creditors to halve their exposure to Greece by rolling over only about 50% of the Greek government bonds they hold ... Under the proposal, financial institutions would effectively reduce their exposure but tie their hands to Greece for a long period by committing to buy up to 30-year bonds ...

Since some analysts were expecting haircuts of up to 70 percent, rolling over half their debt would be a huge positive for the banks.

The Greek parliament is expect to vote on the new austerity package on Wednesday or Thursday. The German finance minister, Wolfgang Schaeuble, made it clear that the next bailout tranche was contingent on Greece passing the austerity package. From Reuters: No Greek budget cuts, no bailout aid -German FinMin (ht jb)

"If the package is rejected, which no one expects actually, then the prerequisites would no longer exist for the IMF, EU and euro zone countries to release the next tranche of aid," [Wolfgang Schaeuble] told German Sunday newspaper Bild am Sonntag.

Although the Greek government is "confident" the legislation will pass, the reaction in the streets - and the market reaction are less certain.