by Calculated Risk on 8/01/2012 11:31:00 AM

Catching up ... This morning the Census Bureau reported that overall construction spending increased in June:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during June 2012 was estimated at a seasonally adjusted annual rate of $842.1 billion, 0.4 percent above the revised May estimate of $838.3 billion. The June figure is 7.0 percent above the June 2011 estimate of $786.8 billion.

Private construction spending increased while public spending was flat:

Spending on private construction was at a seasonally adjusted annual rate of $567.9 billion, 0.7 percent above the revised May estimate of $564.2 billion. ... In June, the estimated seasonally adjusted annual rate of public construction spending was $274.2 billion, nearly the same as the revised May estimate of $274.1 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 61% below the peak in early 2006, and up 19.4% from the recent low. Non-residential spending is 27% below the peak in January 2008, and up about 33% from the recent low.

Public construction spending is now 16% below the peak in March 2009 and near the post-bubble low.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, both private residential and non-residential construction spending are positive, but public spending is down on a year-over-year basis. The year-over-year improvements in private non-residential is mostly related to energy spending (power and electric).

The solid year-over-year increase in private residential investment is a positive for the economy (the increase in 2010 was related to the tax credit). However the recent improvement in residential construction is being somewhat offset by declines in public construction spending.
All Housing Investment and Construction Graphs

by Calculated Risk on 8/01/2012 10:00:00 AM

This is the second consecutive month of contraction (below 50) in the ISM index since the recession ended in 2009. PMI was at 49.8% in July, up slightly from 49.7% in June. The employment index was at 52.0%, down from 56.6%, and new orders index was at 48.0%, up slightly from 47.8%.

From the Institute for Supply Management: June 2012 Manufacturing ISM Report On Business®

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 49.8 percent, an increase of 0.1 percentage point from June's reading of 49.7 percent, indicating contraction in the manufacturing sector for the second consecutive month, following 34 consecutive months of expansion. The New Orders Index registered 48 percent, an increase of 0.2 percentage point from June and indicating contraction in new orders for the second consecutive month, but at a slightly slower rate. Both the Production Index and the Employment Index remained in growth territory, registering 51.3 percent and 52 percent, respectively. The Prices Index for raw materials registered 39.5 percent, an increase of 2.5 percentage points from the June reading of 37 percent, indicating lower prices on average for the third consecutive month. A growing number of comments from the panel this month reflect a slowdown in their businesses and general concern over increasing economic uncertainty."

Click on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was below expectations of 50.1%. This suggests manufacturing contracted in July for the second consecutive month.

This was another weak report.

by Calculated Risk on 8/01/2012 08:20:00 AM

ADP reports:

Employment in the U.S. nonfarm private business sector increased by 163,000 from June to July, on a seasonally adjusted basis. The estimated gain from May to June was revised down slightly, from the initial estimate of 176,000 to 172,000.

Employment in the private, service-providing sector expanded 148,000 in July after rising a revised 151,000 in June. The private, goods-producing sector added 15,000 jobs in July. Manufacturing employment rose 6,000 this month, following a revised increase of 9,000 in June.

This was above the consensus forecast of an increase of 120,000 private sector jobs in July. The BLS reports on Friday, and the consensus is for an increase of 100,000 payroll jobs in July, on a seasonally adjusted (SA) basis.

ADP hasn't been very useful in predicting the BLS report, but this suggests a stronger than consensus report.

by Calculated Risk on 8/01/2012 07:00:00 AM

From the MBA: Refinance Applications Increase Again to Three-Year High in Latest MBA Weekly Survey

The Refinance Index increased 0.8 percent from the previous week to its highest level since the week ending April 17, 2009. The slight increase in refinance activity was muted by a 6 percent drop in government refinance applications, while conventional refinance activity increased about 2 percent over the week. The seasonally adjusted Purchase Index decreased about 2 percent from one week earlier.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.75 percent from 3.74 percent, with points increasing to 0.51 from 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index. The purchase index has been mostly moving sideways over the last two years.

Note: Yesterday Zillow reported record low mortgage rates in their survey: "The 30-year fixed mortgage rate on Zillow(R) Mortgage Marketplace is currently 3.34 percent, down one basis point from 3.35 percent at the same time last week."

The second graph shows the refinance index.

The refinance index is at the highest level in three years.

by Calculated Risk on 7/31/2012 09:38:00 PM

Wednesday will be a busy day with most of the focus on the FOMC announcement, auto sales and the ISM manufacturing index:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. Expect more refinancing activity and record low mortgage rates.

• At 8:15 AM, the ADP Employment Report for June will be released. This report is for private payrolls only (no government). The consensus is for 120,000 payroll jobs added in June, down from the 176,000 reported last month.

• At 10:00 AM, the ISM Manufacturing Index for July will be released. The consensus is for an increase to 50.1, up from 49.7 in June. (below 50 is contraction).

• Also at 10:00 AM, construction spending for June will be released. The consensus is for a 0.5% increase in construction spending.

• At 2:15 PM, the FOMC announcement will be released. Expectations range from doing nothing, to extending the period that the FOMC expects "exceptionally low levels for the federal funds rate" through 2015, to launching QE3. The FOMC is under pressure with unemployment forecast to remain very high for years, and inflation below the target rate - and projected to remain below the target rate for several years.

• At around 4:00 PM, the SAAR rate for auto sales will be released. The automakers will report sales during the day, and light vehicle sales are expected to decrease to 14.0 million from 14.1 million in June SAAR.