by Calculated Risk on 8/18/2011 11:36:00 AM

Earlier from the Philly Fed: August 2011 Business Outlook Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009 [any reading below zero is contraction]. The demand for manufactured goods, as measured by the current new orders index, paralleled the decline in the general activity index, falling 27 points. The current shipments index fell 18 points and recorded its first negative reading since September of last year. Suggesting weakening activity, indexes for inventories, unfilled orders, and delivery times were all in negative territory this month.
...
Firms’ responses suggest a deterioration in the labor market compared with July. The current employment index fell 14 points, recording its first negative reading in 12 months. About 18 percent of the firms reported an increase in employment, but 23 percent reported a decrease. ...

Diffusion indexes for prices paid and prices received were lower this month and suggest a continued trend of moderating price pressures.

This indicates contraction in August and was well below the consensus of 4.0.

Click on graph for larger image in graph gallery.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through August. The ISM and total Fed surveys are through July.

The averaged Empire State and Philly Fed surveys are well below zero suggesting a further decline in the ISM index.

Earlier:
• Existing Home Sales in July: 4.67 million SAAR, 9.4 months of supply
• Existing Home Sales graphs

by Calculated Risk on 8/18/2011 10:00:00 AM

The NAR reports: Existing-Home Sales Down in July but Up Strongly From a Year Ago

Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 3.5 percent to a seasonally adjusted annual rate of 4.67 million in July from 4.84 million in June, but are 21.0 percent above the 3.86 million unit pace in July 2010, which was a cyclical low immediately following the expiration of the home buyer tax credit.
...
Total housing inventory at the end of July fell 1.7 percent to 3.65 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, up from a 9.2-month supply in June.

Click on graph for larger image in graph gallery.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in July 2011 (4.67 million SAAR) were 3.5% lower than last month, and were 21% above the July 2010 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 3.65 million in July from 3.72 million in June.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, so it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 8.9% year-over-year in July from July 2010. This is the sixth consecutive month with a YoY decrease in inventory.

Months of supply increased to 9.4 months in July, up from 9.2 months in June. This is much higher than normal. These sales numbers were below the consensus, but right at Lawler's forecast of 4.69 million using the NAR method.

by Calculated Risk on 8/18/2011 08:30:00 AM

The DOL reports:

In the week ending August 13, the advance figure for seasonally adjusted initial claims was 408,000, an increase of 9,000 from the previous week's revised figure of 399,000. The 4-week moving average was 402,500, a decrease of 3,500 from the previous week's revised average of 406,00.

The following graph shows the 4-week moving average of weekly claims since January 2000 (longer term graph in graph gallery).

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 402,500.

This is the lowest level for the 4-week average since early April. The 4-week average is still elevated, but has been moving down since mid-May.

Note: CPI increased 0.5% in July (0.2% core). I'll have some graphs later.

by Calculated Risk on 8/18/2011 12:13:00 AM

From Louise Story at the NY Times: U.S. Inquiry Eyes S.&P. Ratings of Mortgages

The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities ... the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers ... If the government finds enough evidence to support such a case ... it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns

There is no question that S&P incorrectly rated mortgage securities, but that was just their "opinion". This investigation is apparently focused on if the analysts wanted to downgrade the ratings, but they were overruled by managers. If so, S&P might lose their first amendment protection and then be open to lawsuits from investors.

by Calculated Risk on 8/17/2011 07:01:00 PM

From the Chicago Fed: Second Quarter Midwest Farmland Values Soar

Farmland values for the second quarter of 2011 climbed 17 percent from the level of a year ago in the Seventh Federal Reserve District. The value of “good” agricultural land increased 4 percent in the second quarter compared with the first quarter of 2011, according to a survey of 226 agricultural bankers in the District.
...
At 17 percent, the year-over-year increase in the value of District farmland for the second quarter of 2011 was the largest recorded since
the 1970s.

Apparently there is quite a bit of investor buying (Gold, guns and farmland?). The Chicago Fed will hold a conference on farmland values in November: Rising Farmland Values: Causes and Cautions

Back in the 1980s, when farmland values collapsed, many farmers lost their land - and many banks went under. I just hope the lenders and farmers remember the '80s and keep the loan-to-value for farmland down. I hope the regulators are paying attention too.