by Calculated Risk on 10/25/2012 09:06:00 PM

Expectations for Q3 GDP are pretty low ... and moving lower. From the WSJ: GDP Estimates Move Lower Following Durables Report

The consensus estimate of economists surveyed by Dow Jones Newswires is that Friday’s report will show the economy grew at a seasonally adjusted annual rate of 1.8% in the July-to-September quarter. But after Thursday’s figures on business investment, some economists said they are bracing for a weaker GDP report than the consensus figure.

Wells Fargo — pointing out that shipments of core capital goods fell at an annual pace of 4.9% over three months — lowered its estimate of third-quarter GDP growth to an annual rate of 1.4% from 1.6%. J.P. Morgan Chase lowered its forecast to 1.6% from 1.8%.

“The downside risks are mounting to our already below-consensus estimate that GDP increased by only 1.3% in the third quarter,” Paul Ashworth, chief U.S. economist at London-based Capital Economics, said in a note to clients. “At 1.8%, the consensus forecast looks way to high.”

Friday:
• At 8:30 AM ET, the advance release for Q3 GDP will be released by the BEA. The consensus is that real GDP increased 1.9% annualized in Q3.

• At 9:55 AM, the Reuters/University of Michigan's Consumer sentiment index (final for October). The consensus is for no change from the preliminary reading of 83.1.


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

by Calculated Risk on 10/25/2012 04:17:00 PM

From economist Tom Lawler:

Several publicly-traded home builders posted results for the quarter ended September 30th this week, and the general theme was strong net orders, slightly lower cancellation rates, higher margins/lower concessions, and higher home sales prices. Below are some summary stats.

Average sales prices, of course, don’t necessarily reflect gains in “constant-quality” homes, but are affected by changes in the type of homes sold and the regional mix of homes sold. Nevertheless, most home builders appear to be selling homes at “effective” prices well above a year ago.

The combined order backlog of the five builders on September 30th, 2012 was 17,907, up 42.2% from last September.

	New Orders			Settlements
Qtr. Ended:	9/30/2012	9/30/2011	% Chg	9/30/2012	9/30/2011	% Chg
PulteGroup	4,544	3,564	27.5%	4,418	4,198	5.2%
NVR	2,558	2,218	15.3%	2,656	2,255	17.8%
The Ryland Group	1,507	1,008	49.5%	1,322	1,015	30.2%
Meritage Homes	1,204	906	32.9%	1,197	840	42.5%
M/I Homes	757	587	29.0%	746	582	28.2%
Total	10,570	8,283	27.6%	10,339	8,890	16.3%

	Average Closing Price
Qtr. Ended:	9/30/2012	9/30/2011	% Chg
PulteGroup	$279,000	$262,000	6.5%
NVR	$321,700	$308,900	4.1%
The Ryland Group	$264,000	$249,000	6.0%
Meritage Homes	$280,000	$259,000	8.1%
M/I Homes	$266,000	$238,000	11.8%
Total	$287,229	$270,558	6.2%

by Calculated Risk on 10/25/2012 02:28:00 PM

Apparently some people think if existing home sales go flat, or even decline, the housing recovery is in trouble ... or something ...

From Diana Olick at CNBC: Why Today's Housing Report Spooked Investors So Much

[T]he National Association of Realtors reported no change in signed contracts to buy existing homes in September. ...

It wasn't so much the slight disappointment in the monthly index, it was more the comment from the Realtors' chief economist Lawrence Yun:

"This means only minor movement is likely in near-term existing-home sales, but with positive underlying market fundamentals they should continue on an uptrend in 2013.”

Not exactly a rave.

We know we're coming off the bottom of the housing crash, but over the summer it felt to some like we were rocketing off the bottom. Now, not so much.
...
Existing home sales are coming off lows from last year, but last year was the hangover from the 2010 home buyer tax credit ...

"The year-over-year gain was the smallest of the year and comps against last year when the housing market was in a full blown double-dip mode," notes analyst Mark Hanson.

The number of existing home sales is just part of the story.

Let me repeat what I wrote earlier this year: Home Sales Reports: What Matters: "When we look at sales for existing homes, the focus should be on the composition between conventional and distressed. Total sales are probably close to the normal level of turnover, but the composition of sales is far from normal - sales are still heavily distressed sales. Over time, existing home sales will probably settle around 5 million per year, but the percentage of distressed sales will eventually decline. Those looking at the number of existing home sales for a recovery in housing are looking at the wrong number. Look at inventory and the percent of conventional sales."

Unfortunately I have little confidence in the NAR's estimate of conventional sales, but most local data shows a fairly strong increase in conventional sales (as opposed to short sales and foreclosures). As an example, the percent of conventional sales in Phoenix increased from 35.9% in September 2011 to 60.1% in September 2012. Now overall sales were down sharply - the Arizona Regional MLS reported sales in September were down 17.9% from September 2011, but conventional sales were up 37%. I think this is a positive.

Of course the key housing numbers for the economy and jobs are housing starts and new home sales. Also house prices matter too.   But the housing report this morning (pending home sales) was mostly irrelevant.

by Calculated Risk on 10/25/2012 11:00:00 AM

A few miscellaneous releases:

• From the NAR: September Pending Home Sales Show Slight Improvement

The Pending Home Sales Index, a forward-looking indicator based on contract signings, edged up 0.3 percent to 99.5 in September from 99.2 in August and is 14.5 percent above September 2011 when it was 86.9. The data reflect contracts but not closings.

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

• From the Kansas City Fed: Tenth District Manufacturing Activity Declined Slightly

Tenth District manufacturing activity declined slightly in October, and producers’ expectations for future activity fell considerably but remained slightly positive. Several producers commented on growing uncertainty related to the upcoming election and fiscal situation, which has put a hold on many customers’ orders and spending. Price indexes were mixed, with minimal changes overall.

The month-over-month composite index was -4 in October, down from 2 in September and 8 in August, and the lowest in over three years ... The employment index moved into negative territory for the first time this year, while the shipments index inched higher but still remained negative.

“We saw factories pull back this month for the first time in quite a while, which many firms attributed to the impact of the uncertain political and fiscal situation on customers’ willingness to order” said [Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City]. “Expectations also weakened considerably for production and employment but, encouragingly, factories’ capital spending plans for early next year remained largely intact.”

Another weak regional manufacturing survey.

• From the NAHB: Remodeling Market Index Climbs Five Points, Returns to 2005 Levels

The Remodeling Market Index (RMI) climbed to 50 in the third quarter of 2012, up from 45 in the previous quarter, according to the National Association of Home Builders (NAHB). Released today, the RMI is at its highest point since the third quarter of 2005, tracking the positive trends recently seen in the rest of the housing sector.
...
“The improvement in the RMI provides more evidence that the remodeling industry is making the orderly recovery from its low point in 2009 as we’ve been expecting,” said NAHB Chief Economist David Crowe. “Although remodeling projects over $25,000 are now showing some signs of strength, they are still lagging behind smaller property alterations and maintenance and repair jobs."

by Calculated Risk on 10/25/2012 09:58:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Economic Activity improved in September

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to 0.00 in September from –1.17 in August. All four broad categories of indicators that make up the index increased from August, and each one except the consumption and housing category made a positive contribution to the index in September.

The index’s three-month moving average, CFNAI-MA3, increased from –0.53 in August to –0.37 in September—its seventh consecutive reading below zero. September’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity improved, but growth was still below trend in September.

According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.