by Calculated Risk on 8/30/2011 05:39:00 PM

By request, here is an update to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

These graphs show that most major indicators are still way below the pre-recession peaks.

Click on graph for larger image in graph gallery.

This graph is for real GDP through Q2 2011 and shows real GDP is still 0.5% below the previous pre-recession peak. However Gross Domestic Income (red) is now back to the pre-recession peak. (For a discussion of GDI, see here).

At the worst point, real GDP was off 5.1% from the 2007 peak. Real GDI was off 5.7% at the trough.

And real GDP has performed better than other indicators ...

This graph shows real personal income less transfer payments as a percent of the previous peak through July.

With the revisions, this measure was off almost 11% at the trough - a significant downward revision!

Real personal income less transfer payments is still 4.8% below the previous peak.

This graph is for industrial production through July.

Industrial production had been one of the stronger performing sectors because of inventory restocking and some growth in exports.

However industrial production is still 6.5% below the pre-recession peak, and it will probably be some time before industrial production returns to pre-recession levels.

The final graph is for employment. This is similar to the graph I post every month comparing percent payroll jobs lost in several recessions.

On the timing of the trough of the recession, GDP and industrial production would suggest the end of Q2 2009 (and June 2009). The other two indicators would suggest later troughs.

And of course the recovery in all indicators has been very sluggish compared to recent recessions.

Earlier:
• Case Shiller: Home Prices increased in June
• Real House Prices and Price-to-Rent

by Calculated Risk on 8/30/2011 02:00:00 PM

From the Fed: Minutes of the Federal Open Market Committee, August 9, 2011. Excerpts:

Participants discussed the range of policy tools available to promote a stronger economic recovery should the Committee judge that providing additional monetary accommodation was warranted. Reinforcing the Committee's forward guidance about the likely path of monetary policy was seen as a possible way to reduce interest rates and provide greater support to the economic expansion; a few participants emphasized that guidance focusing solely on the state of the economy would be preferable to guidance that named specific spans of time or calendar dates. Some participants noted that additional asset purchases could be used to provide more accommodation by lowering longer-term interest rates. Others suggested that increasing the average maturity of the System's portfolio--perhaps by selling securities with relatively short remaining maturities and purchasing securities with relatively long remaining maturities--could have a similar effect on longer-term interest rates. Such an approach would not boost the size of the Federal Reserve's balance sheet and the quantity of reserve balances. A few participants noted that a reduction in the interest rate paid on excess reserve balances could also be helpful in easing financial conditions. In contrast, some participants judged that none of the tools available to the Committee would likely do much to promote a faster economic recovery, either because the headwinds that the economy faced would unwind only gradually and that process could not be accelerated with monetary policy or because recent events had significantly lowered the path of potential output. Consequently, these participants thought that providing additional stimulus at this time would risk boosting inflation without providing a significant gain in output or employment. Participants noted that devoting additional time to discussion of the possible costs and benefits of various potential tools would be useful, and they agreed that the September meeting should be extended to two days in order to provide more time.
...
In the discussion of monetary policy for the period ahead, most members agreed that the economic outlook had deteriorated by enough to warrant a Committee response at this meeting. While all felt that monetary policy could not completely address the various strains on the economy, most members thought that it could contribute importantly to better outcomes in terms of the Committee's dual mandate of maximum employment and price stability. In particular, some members expressed the view that additional accommodation was warranted because they expected the unemployment rate to remain well above, and inflation to be at or below, levels consistent with the Committee's mandate. Those viewing a shift toward more accommodative policy as appropriate generally agreed that a strengthening of the Committee's forward guidance regarding the federal funds rate, by being more explicit about the period over which the Committee expected the federal funds rate to remain exceptionally low, would be a measured response to the deterioration in the outlook over the intermeeting period. A few members felt that recent economic developments justified a more substantial move at this meeting, but they were willing to accept the stronger forward guidance as a step in the direction of additional accommodation. Three members dissented because they preferred to retain the forward guidance language employed in the June statement.

The forward guidance was included in the last FOMC statement. The other three options are: Additional asset purchases (QE3), extend maturities, and reduce interest paid on reserves. As Bernanke noted in his Jackson Hole speech, the next meeting has been extended to allow for more discussion of these options.

by Calculated Risk on 8/30/2011 11:25:00 AM

Case-Shiller, CoreLogic and others report nominal house prices. However it is also useful to look at house prices in real terms (adjusted for inflation), as a price-to-rent ratio, and also price-to-income (not shown here).

Below are three graphs showing nominal prices (as reported), real prices and a price-to-rent ratio. Real prices are back to 1999/2000 levels, and the price-to-rent ratio is also back to 2000 levels.

Nominal House Prices

Click on graph for larger image in graph gallery.

The first graph shows the quarterly Case-Shiller National Index SA (through Q2 2011), and the monthly Case-Shiller Composite 20 SA (through June) and CoreLogic House Price Indexes (through June) in nominal terms (as reported).

In nominal terms, the Case-Shiller National index is back to Q4 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to June 2003 levels, and the CoreLogic index is back to May 2003.

Real House Prices

The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q3 1999 levels, the Composite 20 index is back to September 2000, and the CoreLogic index back to May 2000.

In real terms, all appreciation in the last decade is gone.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller Composite 20 and CoreLogic House Price Index (through May).

This graph shows the price to rent ratio (January 1998 = 1.0).

Note: the measure of Owners' Equivalent Rent (OER) was mostly flat for two years - so the price-to-rent ratio mostly followed changes in nominal house prices. In recent months, OER has been increasing - lowering the price-to-rent ratio.

On a price-to-rent basis, the Composite 20 index is back to September 2000 levels, and the CoreLogic index is back to May 2000.

Earlier:
• Case Shiller: Home Prices increased in June

by Calculated Risk on 8/30/2011 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for June (actually a 3 month average of April, May and June).

This includes prices for 20 individual cities and and two composite indices (for 10 cities and 20 cities), plus the Q2 2011 quarterly national house price index.

Note: Case-Shiller reports NSA, I use the SA data. The composite indexes were up about 1.1% in June (from May) Not Seasonally Adjusted (NSA), but flat Seasonally Adjusted (SA).

From S&P: Nationally, Home Prices Went Up in the Second Quarter of 2011 According to the S&P/Case-Shiller Home Price Indices

Data through June 2011, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices ... show that the U.S. National Home Price Index increased by 3.6% in the second quarter of 2011, after having fallen 4.1% in the first quarter of 2011. With the second quarter’s data, the National Index recovered from its first quarter low, but still posted an annual decline of 5.9% versus the second quarter of 2010. Nationally, home prices are back to their early 2003 levels.
...
As of June 2011, 19 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up versus May – Portland was flat. However, they were all down compared to June 2010.

Click on graph for larger image in graph gallery.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 31.9% from the peak, and up slightly in June (SA). The Composite 10 is 1.5% above the June 2009 post-bubble bottom (Seasonally adjusted).

The Composite 20 index is off 31.9% from the peak, and down slightly in June (SA). The Composite 20 is slightly above the March 2011 post-bubble bottom seasonally adjusted.

The second graph shows the Year over year change in both indices.

The Composite 10 SA is down 3.9% compared to June 2010.

The Composite 20 SA is down 4.6% compared to June 2010.

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices increased (SA) in 8 of the 20 Case-Shiller cities in June seasonally adjusted. Prices in Las Vegas are off 59.2% from the peak, and prices in Dallas only off 9.7% from the peak.

From S&P (NSA):

“Nineteen of the 20 MSAs and both Composites were up in June over May. Portland was flat. Cleveland has improved enough that average home prices in this market are back above its January 2000 levels. Only Detroit and Las Vegas remain below those levels

There could be some confusion between the SA and NSA numbers, but this increase was mostly seasonal. I'll have more later ...

by Calculated Risk on 8/29/2011 09:00:00 PM

The Case-Shiller House Price index for June will be released tomorrow morning. Here is a roundup of a few other indexes:

• CoreLogic: Home Price Index increased 0.7% in June

[H]ome prices in the U.S. increased by 0.7 percent in June 2011 compared to May 2011, the third consecutive month-over-month increase. According to CoreLogic, national home prices, including distressed sales, declined by 6.8 percent in June 2011 compared to June 2010

• FNC: June Home Prices Up for Third Straight Month

Based on the latest data on non-distressed home sales (existing and new homes), FNC’s Residential Price Index™ 1 (RPI) indicates that single-family home prices were up in June at a seasonally unadjusted rate of 0.9%. As a gauge of underlying home value, the RPI excludes sales of foreclosed homes, which are often sold with large price discounts due to poor property conditions.

• FHFA Expanded House Price Index (quarterly)

The expanded FHFA national series was down 1.1 percent in Q2 (Seasonally adjusted), and down 6.1% from Q2 2010 ...

• Zillow: Real Estate Market Reports indicated house prices declined 0.1% in June.

• From RadarLogic Housing Markets Continue to Show Weakness

The RPX Composite price, which tracks housing values in 25 major metropolitan markets in the United States, declined 4.7 percent year over year through June. [CR Note: The 25-city composite index increased 1.7% in June 2011.]

Last month, we predicted that the S&P/Case-Shiller 10-City composite for May 2011 would be about 154 and the 20-City composite would be roughly 141. In fact, the 10-City composite was 153.64 and the 20-City composite was 139.87.

This month, we expect the June 2011 10-City composite index to be about 156 and the 20-City index to be roughly 142.

We expect RPX values to decline in coming months ... and we expect that similar declines will be observed in the S&P/Case-Shiller Composite indices.

The Case-Shiller index for June will be released Tuesday, August 30th at 9 AM ET. The consensus is for flat prices in June.

Earlier:
• Personal Income increased 0.3% in July, Spending increased 0.8%
• Comparison of Regional Fed Manufacturing Surveys and ISM
Weekend:
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th