by Calculated Risk on 8/29/2012 09:51:00 PM

A few excerpts from Michelle Meyer at Merrill Lynch: Home is where the heart is

The turn in home prices, although modest at the start, will help to boost consumer confidence. Simply believing that prices have stopped falling should provide a sense of relief to households. It will also allow households to have greater mobility, generating a more efficient labor market and greater churn in the housing stock.
...
While the housing market is far from normal, the bottoming in home prices marks an important shift for the economy. Home-price appreciation will slowly start to support household balance sheets and improve confidence, creating a positive feedback loop with the credit market and broader economy. It is gradual and fragile, but we believe it has finally begun.

I made a similar argument a few weeks ago: The economic impact of a slight increase in house prices.

On Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 370 thousand from 372 thousand.

• Also at 8:30 AM, the BEA will release the Personal Income and Outlays report for July. The consensus is for a 0.3% increase in personal income in July, and for 0.4% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 11:00 AM, the Kansas City Fed regional Manufacturing Survey for August will be released. The consensus is for an a reading of 5, unchanged from 5 in July (above zero is expansion). This is the last of the regional surveys for August, and all of them have been weak.



A question for the August economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 8/29/2012 04:44:00 PM

From ATA: ATA Truck Tonnage was Unchanged in July

The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index was unchanged in July after increasing 1.1% in June. (June’s gain was slightly smaller than the 1.2% increase ATA reported on July 25.) In July, the SA index stayed at 118.8 (2000=100). Compared with July 2011, the SA index was 4.1% higher, which was the largest year-over-year gain since February 2012. Year-to-date, compared with the same period last year, tonnage was up 3.7%.
...
“July’s reading reflects an economy that has lost some steam, but hasn’t stalled,” ATA Chief Economist Bob Costello said. “Certainly there has been some better economic news recently, but I continue to believe we will see some deceleration in tonnage during the second half of the year, if for nothing else but very tough comparisons on a robust August through December period in 2011.” ... Costello kept his tonnage outlook for 2012 to the 3% to 3.5% range as reported last month.

Note from ATA:

Trucking serves as a barometer of the U.S. economy, representing 67% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.2 billion tons of freight in 2011. Motor carriers collected $603.9 billion, or 80.9% of total revenue earned by all transport modes.

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index. The index is above the pre-recession level and up 3.7% year-over-year - but has been moving mostly sideways in 2012.

by Calculated Risk on 8/29/2012 02:07:00 PM

Fed's Beige Book:

Reports from the twelve Federal Reserve Districts suggest economic activity continued to expand gradually in July and early August across most regions and sectors. Six Districts indicated the local economy continued to expand at a modest pace and another three cited moderate growth; among the latter, Chicago noted that the pace of growth had slowed from the prior period.

This is a downgrade from the previous beige book that reported "modest to moderate" growth.

And on real estate:

Housing markets across most Districts exhibited signs of improvement, with sales and construction continuing to increase. Dallas reported significant levels of buyer traffic, Richmond noted strong pending sales, and Minneapolis and St. Louis mentioned increases in building permits. New York, Philadelphia, and Chicago indicated improvements as well, but characterized the progress as slow and modest. Declines in inventory levels were reported in Boston, New York, Philadelphia, Atlanta, Dallas, and San Francisco; these declining inventories put some upward pressure on prices according to Boston, Atlanta, and Dallas. A reduction in the stock of distressed properties was mentioned in New York, Richmond, and San Francisco. In Philadelphia and Kansas City, the possibility of shadow inventory entering the market remains a concern. In general, outlooks were positive, with continued increases in activity expected, although the projected gains were more modest in Boston, Cleveland, and Kansas City.

Commercial real estate market conditions held steady or improved in nearly all Districts in recent weeks.

"Prepared at the Federal Reserve Bank of Boston and based on information collected on or before August 20, 2012."

Another downgrade ... from "moderate growth" two reports ago, to "modest to moderate" in the last report ... and now "expand gradually". On the positive side, there were more positive comments about residential real estate.

by Calculated Risk on 8/29/2012 11:00:00 AM

From the NY Fed: Overall Delinquency Rates Down as Americans Paying More Debt on Time

In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York today announced that delinquency rates for mortgages (6.3 percent), credit cards (10.9 percent), and auto loans (4.2 percent) decreased from the previous quarter. However, rates for student loans (8.9 percent) and home equity lines of credit (HELOC) (4.9 percent) increased from March.

Household indebtedness declined to $11.38 trillion, a $53 billion decline from the first quarter of 2012. Outstanding household debt has decreased $1.3 trillion since its peak in Q3 2008. The reduction was led by a decline in real estate-related debt like mortgages and HELOC. More information about how Americans are paying down their debt is available in our corresponding blog post.

"The continuing decrease in delinquency rates suggests that consumers are managing their debts better," said Wilbert van Der Klaauw, vice president and economist at the New York Fed. "As they continue to pay down debt and take advantage of low interest rates, Americans are moving forward with rebalancing their household finances."

... Mortgage originations, which we measure as the appearance of new mortgages on consumer credit reports, rose to $463 billion.

Here is the Q2 report: Quarterly Report on Household Debt and Credit

Mortgage balances shown on consumer credit reports continued to fall, and now stand at $8.15 trillion, a 0.5% decrease from the level in 2012Q1. Home equity lines of credit (HELOC) balances dropped by $23 billion (3.7%). Household debt balances excluding mortgages and HELOCS increased by 0.4% in the second quarter to $2.6 trillion, boosted by increases of $14 billion in auto loans and $10 billion in student loans.
...
About 256,000 individuals had a new foreclosure notation added to their credit reports between March 31 and June 30, a slowdown of 12% since the first quarter and the lowest number seen since mid-2007. ... Foreclosures are down 55% from its peak in Q2 of 2009, which coincided with the bottom of the recession.

Here are two graphs:

Click on graph for larger image.

The first graph shows aggregate consumer debt decreased in Q2. This was mostly due to a decline in mortgage debt.

However student debt is still increasing. From the NY Fed:

Student loan debt rose $10 billion to $914 billion. ... Since the peak in household debt in 2008Q3, student loan debt has increased by $303 billion, while other forms of debt fell a combined $1.6 trillion.

The second graph shows the percent of debt in delinquency. In general, the percent of delinquent debt is declining, but what really stands out is the percent of debt 90+ days delinquent (Yellow, orange and red).

From the NY Fed:

Overall delinquencies improved in 2012Q2. As of June 30, 9.0% of outstanding debt was in some stage of delinquency, compared with 9.3% at the end of 2012Q1. About $1.02 trillion of debt is delinquent, with $765 billion seriously delinquent (at least 90 days late or “severely derogatory”).

There are a number of credit graphs at the NY Fed site.

by Calculated Risk on 8/29/2012 10:05:00 AM

From the NAR: July Pending Home Sales Rebound

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.4 percent to 101.7 in July from 99.3 in June and is 12.4 percent above July 2011 when it was 90.5. The data reflect contracts but not closings.

The PHSI in the Northeast increased 0.5 percent to 77.0 in July and is 13.4 percent higher than a year ago. In the Midwest the index grew 3.4 percent to 97.4 in July and is 20.2 percent above July 2011. Pending home sales in the South rose 5.2 percent to an index of 111.7 in July and are 15.6 percent above a year ago. In the West the index slipped 1.7 percent in July to 109.9 but is 1.3 percent higher than July 2011.

This was above the consensus forecast of a 1.0% increase for this index and is the highest level in two years (since the expiration of the housing tax credit).

Contract signings usually lead sales by about 45 to 60 days, so this is for sales in August and September.