RSS Feed by Calculated Risk on 10/30/2011 01:55:00 PM
Sunday, October 30, 2011
FOMC Meeting Preview
There will be a two day meeting of the Federal Open Market Committee (FOMC) this coming Tuesday and Wednesday. I expect no changes to the Fed Funds rate, or to the recently announced program to "extend the average maturity of its holdings of securities" (scheduled to end in June 2012), or to the program to "reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities".
The FOMC statement will be released at 12:30PM and Fed Chairman Ben Bernanke will hold a quarterly press briefing at 2:15 PM ET.
A couple of things to look for:
1) Fed Chairman Press Briefing. This is the third of the new press briefings. At the press briefing, Chairman Bernanke will discuss the new FOMC forecasts (these forecasts used to be released a few weeks after the FOMC meeting with the minutes). Growth forecasts have surely been revised down since June, the unemployment rate revised up, and inflation forecasts have been revised up.
Mr. Bernanke will probably also discuss some other policy options. I expect he will be asked about the possibility of a large scale MBS purchase program (as recently discussed by Fed Vice Chairman Janet Yellen, NY Fed President William Dudley, and Fed Governor Daniel Tarullo).
Here are the updated forecasts through June. The FOMC GDP forecasts for 2011 have been revised down all year, and will probably be revised down to the 1.5% to 2.0% range. The forecast for 2012 will probably be revised down again too.
| GDP projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Change in Real GDP1 | 2011 | 2012 | 2013 |
| Jan 2011 Projections | 3.4 to 3.9 | 3.5 to 4.4 | 3.7 to 4.6 |
| April 2011 Projections | 3.1 to 3.3 | 3.5 to 4.2 | 3.5 to 4.3 |
| June 2011 Projections | 2.7 to 2.9 | 3.3 to 3.7 | 3.5 to 4.2 |
| November 2011 Projections | ??? | ??? | ??? |
The unemployment rate was revised down in April, but was revised back up in June. This will probably be revised up to around 9.0% to 9.2% in the November forecast. The forecasts for the unemployment rate in 2012 and 2013 will also be key. In June, the FOMC expected the unemployment rate to be in the 7.0% to 7.5% in Q4 2013 (still high), and this forecast will probably be revised up again.
Note: The first forecast for 2014 will be included too.
| Unemployment projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Unemployment Rate2 | 2011 | 2012 | 2013 |
| Jan 2011 Projections | 8.8 to 9.0 | 7.6 to 8.1 | 6.8 to 7.2 |
| April 2011 Projections | 8.4 to 8.7 | 7.6 to 7.9 | 6.8 to 7.2 |
| June 2011 Projections | 8.6 to 8.9 | 7.8 to 8.2 | 7.0 to 7.5 |
| November 2011 Projections | ??? | ??? | ??? |
The forecasts for overall and core inflation have been revised up all year and will probably be revised up again in November (PCE inflation will probably be revised up close to 3% and core PCE inflation close to 2%).
| Inflation projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| PCE Inflation1 | 2011 | 2012 | 2013 |
| Jan 2011 Projections | 1.3 to 1.7 | 1.0 to 1.9 | 1.2 to 2.0 |
| April 2011 Projections | 2.1 to 2.8 | 1.2 to 2.0 | 1.4 to 2.0 |
| June 2011 Projections | 2.3 to 2.5 | 1.5 to 2.0 | 1.5 to 2.0 |
| November 2011 Projections | ??? | ??? | ??? |
| Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Core Inflation1 | 2011 | 2012 | 2013 |
| Jan 2011 Projections | 1.0 to 1.3 | 1.0 to 1.5 | 1.2 to 2.0 |
| April 2011 Projections | 1.3 to 1.6 | 1.3 to 1.8 | 1.4 to 2.0 |
| June 2011 Projections | 1.5 to 1.8 | 1.4 to 2.0 | 1.4 to 2.0 |
| November 2011 Projections | ??? | ??? | ??? |
2) Possible Statement Changes. The incoming data has been marginally better since the September meeting, so we might see some wording changes. I don't expect the key sentence "The Committee ... currently anticipates that economic conditions ... are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013" to be changed any time soon.
There will probably be some changes to the first paragraph to mention the recent improvement in economic data. I expect the phrase "Household spending has been increasing at only a modest pace" to be upgraded a little.
In the second paragraph, the sentence "there are significant downside risks to the economic outlook, including strains in global financial markets" might also be upgraded a little. There might be some other minor upgrades, but overall the statement will probably be pretty similar to the September statement.
I expect the focus will be on the press briefing and the FOMC forecasts.
Yesterday:
• Summary for Week ending Oct 28th
• Schedule for Week of Oct 30th
Visible Existing Home Inventory continues to decline year-over-year in October
by Calculated Risk on 10/30/2011 09:27:00 AM
I've been using inventory numbers from HousingTracker / DeptofNumbers to track changes in inventory. Tom Lawler mentioned this back in June (Tom also discussed how the NAR estimates existing home inventory - they don't aggregate data from local boards!)
• In a few months, the NAR is expect to release revisions for their existing home sales and inventory numbers for the last few years. The sales revisions will be down (the NAR has pre-announced this), and the inventory is expected to be revised down too.
• Using the deptofnumbers.com for monthly inventory (54 metro areas), it appears inventory will be back to late 2005 / early 2006 levels this month. Unfortunately the deptofnumbers only started tracking inventory in April 2006.
Click on graph for larger image.
This graph shows the NAR estimate of existing home inventory through September (left axis) and the HousingTracker data for the 54 metro areas through October. The HousingTracker data shows a steeper decline in inventory over the last few years (as mentioned above, the NAR will probably revise down their inventory estimates in a few months).
The second graph shows the year-over-year change in inventory for both the NAR and HousingTracker.
HousingTracker reported that the October listings - for the 54 metro areas - declined 16.4% from last year. Inventory was down 16.7% year-over-year in September.
This is just "visible inventory" (inventory listed for sales). There is a large percentage of distressed inventory, and various categories of "shadow inventory" too.
Yesterday:
• Summary for Week ending Oct 28th
• Schedule for Week of Oct 30th
Saturday, October 29, 2011
Unofficial Problem Bank list increases to 985 Institutions
by Calculated Risk on 10/29/2011 09:23:00 PM
Note: this is an unofficial list of Problem Banks compiled only from public sources.
Here is the unofficial problem bank list for Oct 28, 2011. (table is sortable by assets, state, etc.)
Changes and comments from surferdude808:
The OCC finally released some information on its actions since September 23rd. This week, also, the FDIC released its actions through September. These releases contributed to many changes to the Unofficial Problem Bank List. In all, there were seven removals and 16 additions, which leaves the list with 985 institutions with assets of $406.6 billion. A year-ago, the list had 894 institutions with assets of $410.7 billion. For the month, there were 18 additions and 19 removals with 11 from failure, seven from action termination, and one unassisted merger. It was the fourth consecutive month for the list to have fewer institutions since its month-end peak of 1,001 in June, but the serial monthly decline was only a single institution.Earlier:
Among the seven removals this week is the failed All American Bank, Des Plaines, IL ($38 million). Other removals were from action termination including Marathon National Bank of New York, Astoria, NY ($818 million); West Pointe Bank, Oshkosh, WI ($371 million); Ojai Community Bank, Ojai, CA ($125 million Ticker: OJCB); Parkway Bank, Rogers, AR ($116 million); Regal Financial Bank, Seattle, WA ($101 million); and First National Bank and Trust, Barron, WI ($44 million).
Among the 16 additions are United Central Bank, Garland, TX ($2.6 billion); Falcon International Bank, Laredo, TX ($841 million); Valley Community Bank, Pleasanton, CA ($196 million Ticker: VCBC); and Americas United Bank, Glendale, CA ($106 million Ticker: AUNB). It looks like the OCC issued its first formal action against a thrift on September 15 to Stephens Federal Bank, Toccoa, GA ($196 million).
Other changes include the FDIC issuing Prompt Corrective Action orders against Fidelity Bank, Dearborn, MI ($867 million Ticker: DEAR); and Heartland Bank, Leawood, KS ($129 million Ticker: MBR).
• Summary for Week ending Oct 28th
• Schedule for Week of Oct 30th
Lawler to Census on Housing Data: "Splainin" Needed Not Just on Vacancy Rate
by Calculated Risk on 10/29/2011 04:31:00 PM
This is a very long article from economist Tom Lawler. The introduction is below. Here is the entire article in word format (typos and all).
In looking at the “disparities” between recent Census 2010 housing data and other Census “housing” reports, many folks have focused the most on differences in the Census 2010 vacancy rates and the Housing Vacancy Survey vacancy rates, and the possible implications of these disparities on measuring the “excess” supply of housing. Indeed, Census officials, reacting to numerous stories on this issue (thank CR for this), agreed that they had “some splainin’” to do, and said that they are “actively investigating” the differences in Census 2010, ACS 2010, and HVS 2010 vacant housing unit estimates, and plan to report the results of this research at the 2012 Federal Committee on Statistical Methodological Research Conference this coming January.
In looking at the advance program for that conference, the session devoted to this topic is labeled “Evaluation of Gross Vacancy Rates from the Decennial Census Versus Current Surveys.”
Census officials have been “mum,” however, about other “honkingly big” differences between Census 2010 and both the CPS/HVS and the CPS/ASEC, including big differences in household growth by age group, and sizable differences in homeownership rates by age group. There has also been no discussion about the growth in the housing stock as measured by Census 2010 and Census 2000 compared to other Census estimates of total housing production, and how the apparent “net loss” in the housing stock related to various factors (demolitions, disasters, conversions, etc.) last decade was MASSIVELY lower than that implied by the biennial “Component of Inventory Change” (CINCH) report using American Housing Survey Data (all aspects of which are inconsistent both with decennial Census data and ACS data).
Officials have also not said much if anything about how some of these disparities are not new, but in fact have been evident as far back as at least 2000. Stated another way, the “measurement” issues are not just a “point in time,” issue, but there are time series issues as well, which make macroeconomic “analysis” of the housing market [difficult].
CR comment: The entire article is here and a must read for anyone using Census data to analyze the housing market. Hopefully we will have better data to work with in the future!
Earlier:
• Summary for Week ending Oct 28th
• Schedule for Week of Oct 30th
Schedule for Week of Oct 30th
by Calculated Risk on 10/29/2011 12:49:00 PM
Earlier:
• Summary for Week ending Oct 28th
The key report this week will be the employment situation report for October on Friday. Also the FOMC statement and Fed Chairman Ben Bernanke's press briefing on Wednesday, will be closely watched.
Other key reports include the October ISM manufacturing index on Tuesday, auto sales also on Tuesday, and the ISM non-manufacturing index on Thursday.
9:45 AM: Chicago Purchasing Managers Index for October. The consensus is for a decrease to 58.0, down from the strong 60.4 in September.
10:30 AM: Dallas Fed Manufacturing Survey for October. The consensus is for contraction of -5.0 from expansion of 5.9 in September. This is the last of the regional Fed manufacturing surveys for October, and the results have been mixed - but generally better than for September.
10:00 AM: Construction Spending for September. The consensus is for a 0.3% increase in construction spending.
10:00 AM ET: ISM Manufacturing Index for October. The consensus is for a slight increase to 52.0 from 51.6 in September.
All day: Light vehicle sales for October. Light vehicle sales are expected to increase to 13.2 million (Seasonally Adjusted Annual Rate), from 13.1 million in September.
This graph shows the Edmunds.com September estimate for light vehicle sales of 13.4 million SAAR.Edmunds is forecasting 13.4 million:
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.
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been especially weak since early August, although this doesn't include cash buyers.
8:15 AM: The ADP Employment Report for October. This report is for private payrolls only (no government). The consensus is for 100,000 payroll jobs added in October, up from the 91,000 reported in September.
10:00 AM: Q3 Housing Vacancies and Homeownership report from the Census Bureau. As a reminder: Be careful with the Housing Vacancies and Homeownership report. This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates. Unfortunately the report is based on a fairly small sample, and does not track the decennial Census data.
12:30PM: FOMC Meeting Announcement. No changes are expected to interest rates. The Fed will release its quarterly economic forecasts prior to the press briefing. The Fed growth forecasts are expected to be revised down once again. I'll post a preview on Sunday.
2:15 PM: Fed Chairman Ben Bernanke holds a press briefing following FOMC announcement.
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a slight decrease to 400,000 from 402,000 last week. The 4-week average has declined recently, but is still above 400,000.
10:00 AM ET: Manufacturers' Shipments, Inventories and Orders for September. The consensus is for a 0.2% decrease in orders.
10:00 AM: ISM non-Manufacturing Index for October. The consensus is for a no change at 53.0 in October, the same as in September. Note: Above 50 indicates expansion, below 50 contraction.
8:30 AM: Employment Report for October.
The consensus is for an increase of 90,000 non-farm payroll jobs in October, down from the 103,000 jobs added in September. However the September report was boosted by returning Verizon workers - excluding those workers, this would be an improvement over September, but still a very weak jobs report.This graph shows the net payroll jobs per month (excluding temporary Census jobs) since the beginning of the recession. The consensus forecast for October is in blue.
The consensus is for the unemployment rate to remain at 9.1% in October.
This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through September. Through the first nine months of 2011, the economy has added 1.074 million total non-farm jobs or just 119 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.6 million fewer payroll jobs than at the beginning of the 2007 recession. The economy has added 1.341 million private sector jobs this year, or about 149 thousand per month.
There are a total of 13.992 million Americans unemployed and 6.24 million have been unemployed for more than 6 months. Very grim.
