by Calculated Risk on 10/28/2011 09:55:00 AM

The final October Reuters / University of Michigan consumer sentiment index increased to 60.9, up from the preliminary October reading of 57.5, and up from 59.4 in September.


Click on graph for larger image.

In general consumer sentiment is a coincident indicator and is usually impacted by employment (and the unemployment rate) and gasoline prices. In August, sentiment was probably negatively impacted by the debt ceiling debate.

This was still very weak, but above the consensus forecast of 58.0.

by Calculated Risk on 10/28/2011 08:30:00 AM

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

Personal income increased $17.3 billion, or 0.1 percent ... in September ... Personal consumption expenditures (PCE) increased $68.7 billion, or 0.6 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.5 percent in September, in contrast to a decrease of less than 0.1 percent in August. ... PCE price index -- The price index for PCE increased 0.2 percent in September, compared with an increase of 0.3 percent in August. The PCE price index, excluding food and energy, decreased less than 0.1 percent.

The following graph shows real Personal Consumption Expenditures (PCE) through August (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

PCE increased 0.6 in September, and real PCE increased 0.5%.

Note: The PCE price index, excluding food and energy, decreased 0.2 percent.

The personal saving rate was at 3.6% in Setpember.

Personal saving -- DPI less personal outlays -- was $419.8 billion in September, compared with $479.1 billion in August. Personal saving as a percentage of disposable personal income was 3.6 percent in September, compared with 4.1 percent in August.

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

Spending is growing faster than incomes - and the saving rate has been declining. That can't continue for long ...

by Calculated Risk on 10/27/2011 11:52:00 PM

If this moves forward, this might become a model for other states. A big "if" ...

From the LA Times:

Gov. Jerry Brown risks backlash on pension planBrown's 12-point plan, announced Thursday, would require that all public workers have at least half the cost of their pensions deducted from their paychecks. ...

The governor also wants future employees to receive up to a third of their retirement income from a 401(k)-style plan rather than a traditional guaranteed pension. And he urged that the retirement age for most new public workers be raised from 55 to 67.

Earlier on GDP:
• GDP slightly above pre-recession peak, Investment Contributions
• Advance Estimate: Real Annualized GDP Grew at 2.5% in Q3
• GDP Graphs

by Calculated Risk on 10/27/2011 08:50:00 PM

It looks like auto sales are fairly strong in October ...

From Edmunds.com: Edmunds.com October Auto Sales Forecast: Momentum Is Strong, But it May be a Bubble

An estimated 1,033,257 new cars will be sold in October, for a projected Seasonally Adjusted Annual Rate (SAAR) of 13.4 million units, forecasts Edmunds.com ... This sales pace would mark the highest monthly SAAR since August 2009, when sales were inflated by the Cash for Clunkers program.

Edmunds.com analysts attribute October’s sales results to the release of pent-up demand that has been building for more than a year. As a result, the auto industry may be in the midst of a small sales bubble.

“October’s sales numbers are certainly a bright spot in a sluggish economy, but it would be a mistake to believe that this momentum is the ‘new normal,’ said Jessica Caldwell, senior analyst at Edmunds.com. “Unless early holiday incentives inspire droves of buyers in November, we don’t expect sales to increase on the same trajectory as we have seen in the last two months.”

From Truecar.com: New Vehicle Sales Expected to Reach Highest SAAR Since August 2009 According to TrueCar.com

For October 2011, new light vehicle sales in the U.S. (including fleet) is expected to be 1,035,042 units, up 9.0 percent from October 2010 and down 1.7 percent from September 2011 (on an unadjusted basis)

The October 2011 forecast translates into a Seasonally Adjusted Annualized Rate (SAAR) of 13.4 million new car sales, up from 13.1 million in September 2011 and up from 12.2 million in October 2010.

Click on graph for larger image.

Sales in Q3 were up slightly from Q2, although - as part of the Q3 GDP release - the BEA estimated motor vehicles and parts made a small negative contribution to GDP in Q3 (probably due to mix of vehicles).

If sales are at this forecast for October - and just hold this level in November and December - vehicle sales will make a strong contribution to Q4 GDP.

by Calculated Risk on 10/27/2011 04:43:00 PM

Just catching up ...

• Last Sunday, I mentioned a rumor that a new program for investors to buy (and rent) foreclosed houses from Fannie and Freddie would be announced soon. Diana Olick at CNBC writes today: Investors Raising Cash to Buy Government Foreclosures

[T]he Obama Administration is pushing a potential [plan] to auction off foreclosed properties in bulk to investors, specifically the quarter of a million properties currently on the books of Fannie Mae, Freddie Mac and the FHA. As demand for single family rental properties rises, so too do potential investor returns.

"There is a hope that we'll be able to do a pilot in the near future, perhaps by the end of 2011 or early 2012. However, there hasn't been any decision on timing yet," according to an administration source.

• From the Kansas City Fed: Growth in Manufacturing Activity Edged Higher

Growth in Tenth District manufacturing activity edged higher in October. Expectations for future activity rebounded after easing somewhat the past few months. ... The month-over-month composite index was 8 in October, up from 6 in September and 3 in August ... the employment index remained unchanged [at 12].

• From Freddie Mac:

30-year fixed-rate mortgage (FRM) averaged 4.10 percent with an average 0.8 point for the week ending October 27, 2011, down from last week when it averaged 4.11 percent. Last year at this time, the 30-year FRM averaged 4.23 percent.

• From NAR: September Pending Home Sales Down, Still Higher Than a Year Ago

The Pending Home Sales Index ... fell 4.6 percent to 84.5 in September from 88.6 in August but is 6.4 percent higher than September 2010 when it stood at 79.4.

• This graph (click on graph for larger image) from Doug Short shows the recent market increase.

Earlier on GDP:
• GDP slightly above pre-recession peak, Investment Contributions
• Advance Estimate: Real Annualized GDP Grew at 2.5% in Q3
• GDP Graphs