by Calculated Risk on 11/01/2012 02:02:00 PM

The BEA released the underlying details for the Q3 Advance GDP report.

The first graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased slightly, but from a very low level.

Investment in offices is down about 59% from the peak (as a percent of GDP). With the high office vacancy rate, investment will probably not increase significantly (as a percent of GDP) for several years.

Click on graph for larger image.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 61% from the peak (note that investment includes remodels, so this will not fall to zero).

Lodging investment peaked at 0.32% of GDP in Q2 2008 and is down about 74%.

The second graph is for Residential investment (RI) components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories (dormitories, manufactured homes).

Usually the most important components are investment in single family structures followed by home improvement.

Investment in single family structures is finally increasing after mostly moving sideways for almost three years (the increase in 2009-2010 was related to the housing tax credit).

Investment in home improvement was at a $155 billion Seasonally Adjusted Annual Rate (SAAR) in Q3 (just under 1.0% of GDP), still above the level of investment in single family structures of $131 billion (SAAR) (or 0.8% of GDP). In the next year or two, single family structure investment will overtake home improvement as the largest category of residential investment.

Brokers' commissions increased slightly in Q3 as a percent of GDP. And investment in multifamily structures increased in Q3. This is a small category, and even though investment is increasing, the positive impact on GDP will be relatively small.

These graphs show there is currently very little investment in offices, malls and lodging. And residential investment is starting to pickup, but from a very low level.

All Housing Investment and Construction graphs

by Calculated Risk on 11/01/2012 11:54:00 AM

Three key construction spending themes:

• Private residential construction spending is still very low, but increasing. Residential construction declined sharply for four years following the peak of the housing bubble, and then move mostly sideways for another three years.

• Private non-residential construction spending picked up last year mostly due to energy spending (power and electric), but spending on office buildings, hotels and malls is still very low.

• Public construction spending is down 4% year-over-year and has been declining for several years.

The Census Bureau reported that overall construction spending increased in September:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during September 2012 was estimated at a seasonally adjusted annual rate of $851.6 billion, 0.6 percent above the revised August estimate of $846.2 billion. The September figure is 7.8 percent above the September 2011 estimate of $790.3 billion.

Private construction spending increased and public spending declined:

Spending on private construction was at a seasonally adjusted annual rate of $580.5 billion, 1.3 percent above the revised August estimate of $572.8 billion. ... In September, the estimated seasonally adjusted annual rate of public construction spending was $271.1 billion, 0.8 percent below the revised August estimate of $273.4 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 58% below the peak in early 2006, and up 29% from the post-bubble low. Non-residential spending is 29% below the peak in January 2008, and up about 29% from the recent low.

Public construction spending is now 17% below the peak in March 2009 and at the post-bubble low.

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

On a year-over-year basis, private residential construction spending is now up 21%. Non-residential spending is also up 9% year-over-year mostly due to energy spending (power and electric). Public spending is down 4% year-over-year.

All Housing Investment and Construction Graphs

by Calculated Risk on 11/01/2012 10:00:00 AM

The ISM manufacturing index indicated expansion in October. PMI was at 51.7% in October, up from 51.5% in September. The employment index was at 52.1%, down from 54.7%, and the new orders index was at 54.2%, up from 52.3%.

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

Economic activity in the manufacturing sector expanded in October for the second consecutive month following three months of slight contraction, and the overall economy grew for the 41st consecutive month, say the nation's supply executives in the latest 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 51.7 percent, an increase of 0.2 percentage point from September's reading of 51.5 percent, indicating growth in manufacturing at a slightly faster rate. The New Orders Index registered 54.2 percent, an increase of 1.9 percentage points from September, indicating growth in new orders for the second consecutive month. The Production Index registered 52.4 percent, an increase of 2.9 percentage points, indicating growth in production following two months of contraction. The Employment Index registered 52.1 percent, a decrease of 2.6 percentage points, and the Prices Index registered 55 percent, reflecting a decrease of 3 percentage points. Comments from the panel this month reflect continued concern over a fragile global economy and soft orders across several manufacturing sectors."

Click on graph for larger image.

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

This was slightly above expectations of 51.0% and suggests manufacturing expanded in October.

by Calculated Risk on 11/01/2012 08:30:00 AM

The DOL reports:

In the week ending October 27, the advance figure for seasonally adjusted initial claims was 363,000, a decrease of 9,000 from the previous week's revised figure of 372,000. The 4-week moving average was 367,250, a decrease of 1,500 from the previous week's revised average of 368,750.

The previous week was revised up from 369,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.



Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 367,250. This is about 4,000 above the cycle low for the 4-week average of 363,000 in March.

Weekly claims were slihgtly lower than the consensus forecast of 365,000.



And here is a long term graph of weekly claims:

Mostly moving sideways this year, but near the cycle bottom.

SPECIAL NOTE: Due to Hurricane Sandy, we will probably see an increase in initial unemployment claims over the next few weeks.

All current Employment Graphs

by Calculated Risk on 11/01/2012 08:23:00 AM

ADP reported that employment in the U.S. nonfarm private business sector increased by 158,000 from September to October, on a seasonally adjusted basis.

This was above the consensus forecast for private sector jobs added, and is a little surprising given the change in methodology.  Note:  The BLS reports on Friday, and the consensus is for an increase of 125,000 payroll jobs in October, on a seasonally adjusted (SA) basis.

ADP hasn't been very useful in predicting the BLS report (maybe the new method will work better), but this suggests a stronger than consensus report.