by Calculated Risk on 9/14/2011 08:30:00 AM

On a monthly basis, retail sales were flat from July to August (seasonally adjusted, after revisions), and sales were up 7.2% from August 2010. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for August, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $389.5 billion, virtually unchanged (±0.5%)* from the previous month and 7.2 percent (±0.7%) above August 2010.

Retail sales excluding autos increased 0.1% in August. Sales for and June and July were revised down.

Click on graph for larger image in graph gallery.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales are up 17.1% from the bottom, and now 2.9% above the pre-recession peak.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 5.7% on a YoY basis (7.2% for all retail sales).

The consensus was for retail sales to increase 0.2% in August, and for a 0.3% increase ex-auto.

This was another weak report for August.

by Calculated Risk on 9/14/2011 07:29:00 AM

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

The seasonally adjusted Purchase Index increased 7.0 percent from one week earlier. ... The Refinance Index increased 6.0 percent from the previous week, stopping a run of three consecutive weekly decreases.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.17 percent from 4.23 percent, with points decreasing to 0.97 from 1.04 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week. The 30-year fixed contract rate is the lowest in the history of the survey, with the previous low being 4.21 percent in the week ending October 8, 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.

August was an especially weak month for this index. This increase was pretty small, and although this doesn't include the large number of cash buyers, this suggests fairly weak home sales in September and October.

Note: Existing home sales will probably increase in August compared to July (sales are counted at closing), but this suggests another decline in September and October.

by Calculated Risk on 9/13/2011 08:55:00 PM

The Census Bureau released the 2010 Income, Poverty, and Health Insurance Coverage in the United States report. Here is the press release, the report (long), and the slide deck with graphs. A couple of articles:

• From the WSJ: Income Slides to 1996 Levels

The income of the typical American family ... has dropped for the third year in a row and is now roughly where it was in 1996 when adjusted for inflation.

The income of a household considered to be at the statistical middle fell 2.3% to an inflation-adjusted $49,445 in 2010, which is 7.1% below its 1999 peak, the Census Bureau said.

• From the WaPo: U.S. poverty rate reaches 15.1 percent

The nation’s poverty rate spiked to 15.1 percent in 2010, the highest level since 1993, the Census Bureau reported on Tuesday ... About 46.2 million Americans lived in poverty last year, marking an increase of 2.6 million over 2009 and the fourth consecutive annual increase in poverty.

• And an IMF report that analyzes austerity program, from the WaPo: IMF: Austerity boosts unemployment, lowers paychecks

In a new paper for the International Monetary Fund, Laurence Ball, Daniel Leigh and Prakash Loungani look at 173 episodes of fiscal austerity over the past 30 years—with the average deficit cut amounting to 1 percent of GDP. Their verdict? Austerity “lowers incomes in the short term, with wage-earners taking more of a hit than others; it also raises unemployment, particularly long-term unemployment.”

More specifically, an austerity program that curbs the deficit by 1 percent of GDP reduces real incomes by about 0.6 percent and raises unemployment by almost 0.5 percentage points. What’s more, the IMF notes, the losses are twice as big when the central bank can’t cut rates (a good description of the present.) Typically, income and employment don’t fully recover even five years after the austerity program is put in place ... if multiple countries are all carrying out austerity at the same time, the overall pain is likely to be greater.

Under an austerity program, high income earners usually do better than lower income earners, and profits tend to bounce back faster than wages. Sounds like the current situation.

by Calculated Risk on 9/13/2011 05:27:00 PM

There are two key meetings this week: 1) a video conference tomorrow with German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek prime minister, George Papandreou, and 2) a meeting of European finance ministers on Friday with Timothy Geithner making an appearance.

Also Greece is expected to resume talks with the trioka - European Commission, IMF and ECB officials - in the next day or so.

From the WSJ: Merkel Quells Speculation on Greek Default

German Chancellor Angela Merkel ... stressed that Germany remains committed to financing Greece through the euro zone's bailout funds until Greece can repair its own finances through austerity measures. She gave a thinly veiled rebuke to German politicians, including her own economics minister and Deputy Chancellor Philipp Rösler, who have suggested in recent days that Greece should be allowed to go bust.

"I think we will do Greece the biggest favor by not speculating much, but instead encouraging Greece to implement the commitments it has made," Ms. Merkel told RBB Inforadio

And from the NY Times: Europe Scrambles to Ease Greek Debt Crisis

[T]he president of France and the chancellor of Germany will hold a video conference call Wednesday evening with the Greek prime minister, George A. Papandreou, officials announced Tuesday, with the prospect of a further restructuring of Greek debt hovering in the air.
...
Timothy F. Geithner [will] make a rare, if not unprecedented, appearance at a meeting of European finance ministers, to be held Friday in Wroclaw, Poland.

The Greek 2 year yield is at 76.7%. The Greek 1 year yield is at 134.6%. Ouch.

by Calculated Risk on 9/13/2011 02:02:00 PM

From Diana Olick at CNBC: Huge Surge in Bank of America Foreclosures

Bank of America is ramping up its foreclosure processing, sending out far more notices of default to borrowers in August than in previous months ... Mortgage and housing analyst and strategist Mark Hanson alerted me to unusually high legal default filing activity ... [BofA responded to Olick]

"It appears the numbers you noted to me this afternoon generally track with our own numbers for key categories. It should be noted it’s driven more in key states like California and Nevada than overall, and certainly the progress we’re seeing is limited to non-judicial states. Judicial states continue to move very slowly, with key states like New Jersey only beginning to start processing foreclosures again this month."

RealtyTrac ... is also confirming a surge in overall notices of default in its August numbers

As Olick notes, this might be a short term pickup. However other servicers have told me they are staffing up - and we will probably see foreclosure activity pickup late this year or early in 2012.