by Calculated Risk on 10/19/2011 04:03:00 PM

Earlier:
• Housing Starts increased in September
• Rate of increase slows for Key Measures of Inflation in September
• AIA: Architecture Billings Index declined in September
• 2012 Social Security Cost-Of-Living Adjustment approximately 3.6% increase

A new song from blog favorite Merle Hazard about banking regulation. A creative joint venture of Merle Hazard & Marcy Shaffer (see Marcy's site for lyrics). Song by Merle Hazard, Marcy Shaffer and Curtis Threadneedle.

And from Paul Solman at the PBS NewsHour site, including a link to his 12 1/2 minute interview with former IMF chief economist Simon Johnson, discussing the song.

by Calculated Risk on 10/19/2011 02:00:00 PM

Fed's Beige Book:

Reports from the twelve Federal Reserve Districts indicate that overall economic activity continued to expand in September, although many Districts described the pace of growth as "modest" or "slight" and contacts generally noted weaker or less certain outlooks for business conditions. The reports suggest that consumer spending was up slightly in most Districts, with auto sales and tourism leading the way in several of them. Business spending increased somewhat, particularly for construction and mining equipment and auto dealer inventories, but many Districts noted restraint in hiring and capital spending plans.
...
Consumer spending was up slightly in September. The majority of Districts reported increases in auto sales, with the largest improvements in San Francisco and New York.
...
Respondents indicated that labor market conditions were little changed, on balance, in September. ... Most Districts reported that wage pressures remained subdued.

And on real estate:

All twelve Districts reported that real estate and construction activity was little changed on balance from the prior report. Residential construction remained at low levels, particularly for single-family homes. That said, Philadelphia, Cleveland, and Minneapolis noted small increases in single-family construction, and construction of multifamily dwellings continued to increase at a moderate pace in Boston, Philadelphia, Cleveland, Kansas City, Dallas, and San Francisco. Home sales remained weak overall, and home prices were reported to be either flat or declining across all of the Districts. In contrast, rental demand continued to rise in a number of Districts.

Commercial real estate conditions remained weak overall, although commercial construction increased at a slow pace in most Districts.

This was based on data gathered on or before October 7th. More sluggish growth ...

Earlier:
• Housing Starts increased in September
• Rate of increase slows for Key Measures of Inflation in September
• AIA: Architecture Billings Index declined in September
• 2012 Social Security Cost-Of-Living Adjustment approximately 3.6% increase

by Calculated Risk on 10/19/2011 01:06:00 PM

Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in September on a seasonally adjusted basis ... The index for all items less food and energy increased 0.1 percent in September, its smallest increase since March.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.3% annualized rate) in September. The 16% trimmed-mean Consumer Price Index increased 0.2% (2.5% annualized rate) during the month.

Over the last 12 months, the median CPI rose 2.1%, the trimmed-mean CPI rose 2.5%, the CPI rose 3.9%, and the CPI less food and energy rose 2.0%

Note: The Cleveland Fed has a discussion of a number of measures of inflation: Measuring Inflation. You can see the median CPI details for September here.

On a year-over-year basis, these measures of inflation are increasing, and are around the Fed's target.

Click on graph for larger image in graph gallery.

On a monthly basis, the median Consumer Price Index increased 2.3% at an annualized rate, the 16% trimmed-mean Consumer Price Index increased 2.5% annualized in July, and core CPI increased 0.7% annualized.

These key price measures increased at a lower rate than in August.

Earlier:
• Housing Starts increased in September
• AIA: Architecture Billings Index declined in September
• 2012 Social Security Cost-Of-Living Adjustment approximately 3.6% increase

by Calculated Risk on 10/19/2011 11:07:00 AM

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

From AIA: Another Drop for Architecture Billings Index

Following the first positive score in four months, the Architecture Billings Index (ABI) reversed direction again in September. ... The American Institute of Architects (AIA) reported the September ABI score was 46.9, following a score of 51.4 in August. This score reflects a sharp decrease in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 54.3, down from a reading of 56.9 the previous month.

“It appears that the positive conditions seen last month were more of an aberration,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The economy is weak enough at present that design activity is bouncing around more than usual; one strong month can be followed by a weak one. The economy needs to be stronger to generate sustained growth in design activity.”

Click on graph for larger image in graph gallery.

This graph shows the Architecture Billings Index since 1996. The index declined to 46.9 in September from 51.4 in August. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So the recent contraction suggests further declines in CRE investment in 2012.

by Calculated Risk on 10/19/2011 09:40:00 AM

I'll have more on prices later ...

The BLS reported this morning: "The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.4 percent over the last 12 months to an index level of 223.688 (1982-84=100)."

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). Here is an explanation:

The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and not seasonally adjusted.

Click on graph for larger image in graph gallery.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

• In 2008, the Q3 average of CPI-W was 215.495. In the previous year, 2007, the average in Q3 of CPI-W was 203.596. That gave an increase of 5.8% for COLA for 2009.

• In 2009, the Q3 average of CPI-W was 211.013. That was a decline of 2.1% from 2008, however, by law, the adjustment is never negative so the benefits remained the same in 2010.

• In 2010, the Q3 average of CPI-W was 214.136. That was an increase of 1.5% from 2009, however the average was still below the Q3 average in 2008, so the adjustment was zero.

• In 2011, the Q3 average of CPI-W was 223.233. This is above the Q3 2008 average, and COLA will increase around 3.6% for next year (the current 223.233 divided by the Q3 2008 level of 215.495).

Of course medicare premiums will increase too.

Contribution and Benefit Base

Since COLA increased, the contribution base will be adjusted using the National Average Wage Index.

This is based on a one year lag. Since there was no increase in COLA for the last two years, the contribution base has remained at $106,800 for three years. Since COLA will be positive this year, the adjustment this year will use the 2010 National Average Wage Index compared to the 2007 Wage Index. The National Average Wage Index for 2010 was $41,673.83 and the index for 2007 was $40,405.48. So $41,673.83 divided by $40,405.48 multiplied by $106,800 is approximately $110,000.

So the contribution base will increase to around $110,000 in 2012.

NOTE on CPI-chained: There has been some discussion of switching from CPI-W to CPI-chained for COLA. This will not happen this year, but could impact future Cost-of-living adjustments, see: Cost of Living and CPI-Chained