by Calculated Risk on 1/16/2013 09:28:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.3 percent in December after having risen 1.0 percent in November when production rebounded in the industries that had been negatively affected by Hurricane Sandy in late October. For the fourth quarter as a whole, total industrial production moved up at an annual rate of 1.0 percent. Manufacturing output advanced 0.8 percent in December following a gain of 1.3 percent in November; production edged up at an annual rate of 0.2 percent in the fourth quarter. The output at mines rose 0.6 percent in December, and the output of utilities fell 4.8 percent as unseasonably warm weather held down the demand for heating. At 98.1 percent of its 2007 average, total industrial production in December was 2.2 percent above its year-earlier level. Capacity utilization for total industry moved up 0.1 percentage point to 78.8 percent, a rate 1.5 percentage points below its long-run (1972--2011) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 12 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.8% is still 1.5 percentage points below its average from 1972 to 2010 and below the pre-recession level of 80.6% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased in December to 98.1. This is 17.5% above the recession low, but still 2.6% below the pre-recession peak.

Both Industrial Production and Capacity Utilization were slightly above expectations.

All current manufacturing graphs

by Calculated Risk on 1/16/2013 08:39:00 AM

From the Bureau of Labor Statistics (BLS): Consumer Price Index - December 2012

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment. The gasoline index declined again in December, but other indexes, notably food and shelter, increased, resulting in the seasonally adjusted all items index being unchanged.
...
The index for all items less food and energy increased 0.1 percent in December, the same increase as in November. ... The index for all items less food and energy rose 1.9 percent over the last 12 months, the same figure as last month.

On a year-over-year basis, CPI is up 1.7 percent, and core CPI is up 1.9 percent.  Both below the Fed's target. This was at the consensus forecast of no change for CPI, and a 0.1% increase in core CPI.

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 1/15/2013 08:30:00 PM

Former Republican Senator Alan Simpson was on CNBC today. Here was the Q&A on the debt ceiling:

Maria Bartiromo: "Do you believe the GOP should be using the debt ceiling as leverage point to get the President to agree to the cuts?"

Alan Simpson: "I think that would be a grave mistake. I don’t think that would solve anything. I know they are going to try it, and how far you go with a game of chicken, I have no idea. But I can tell you … you can’t, you really can’t … This is stuff we’ve already indebted ourselves. If you’re a real conservative – a really honest conservative, without hypocrisy – you’d want to pay your debt. And that’s what this is, they are not running up anything new."

I disagree with Simpson on many issues, but I agree with this point. No honest conservative would vote against paying the bills.   So lets have a vote tomorrow.  Wednesday would be a good day to authorize paying the bills (aka raising the "debt ceiling") and put this nonsense behind us.

The real budget issues are the "sequester" and the "continuing resolution". See my earlier post: After the Debt Ceiling is increased ...  Make sure to check the graph of the deficit as a percent of GDP; it might surprise some people.

Wednesday economic releases:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, Consumer Price Index for December. The consensus is for no change in CPI in December and for core CPI to increase 0.1%.

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for December. The consensus is for a 0.2% increase in Industrial Production in December, and for Capacity Utilization to increase to 78.5%.

• At 10:00 AM, The January NAHB homebuilder survey. The consensus is for a reading of 48, up from 47 in December. Although this index has been increasing sharply, any number below 50 still indicates that more builders view sales conditions as poor than good.

• At 2:00 PM, the Federal Reserve Beige Book will be released. This is an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

by Calculated Risk on 1/15/2013 04:00:00 PM

Note: I've been following the Sacramento market to look for changes in the mix of house sales in a distressed area over time (conventional, REOs, and short sales). The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

Recently there has been a dramatic shift from REO to short sales, and the percentage of distressed sales has generally been declining (the percent distressed increased in December for seasonal reasons). This data would suggest some improvement in the Sacramento market.

Note on seasonal pattern: Conventional sales follow a seasonal pattern with more sales in the spring and summer than in the fall and winter. Distressed sales happen all year, so the percent of distressed sales typically increases in the winter.

In December 2012, 51.5% of all resales (single family homes and condos) were distressed sales. This was up from 47.6% last month, and down from 64.1% in December 2011. The is the lowest percentage of distressed sales for the month of December - and therefore the highest percentage of conventional sales - since the association started tracking the data.

The percentage of REOs stayed at 11.5%, the lowest since the Sacramento Realtors started tracking the data and the percentage of short sales increased to 40.0%, the highest percentage recorded.

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been an increase in conventional sales this year, and there were almost four times as many short sales as REO sales in December (the highest recorded). The gap between short sales and REO sales is increasing.

Total sales were down from December2011, but conventional sales were up 22% compared to the same month last year. This is exactly what we expect to see in an improving distressed market - flat or even declining overall sales as distressed sales decline, but an increase in conventional sales.

Active Listing Inventory for single family homes declined 57.1% from last December.

Cash buyers accounted for 39.9% of all sales (frequently investors), and median prices were up sharply year-over-year (the mix has changed).

This seems to be moving in the right direction, although the market is still in distress. A "normal" market would be mostly blue on the graph, and this market is a long way from "normal".

We are seeing a similar pattern in other distressed areas, with a move to more conventional sales, and a shift from REO to short sales.

by Calculated Risk on 1/15/2013 01:58:00 PM

This is another key market that I've been following closely. According to DataQuick, the "move-up market" is starting to "wake up". From DataQuick: Southland Closes 2012 With Higher Sales and Prices

Southern California's housing market ended 2012 with the highest December home sales in three years, the result of robust investment activity, a record level of cash buyers and more sales gains in move-up markets. ... A total of 20,274 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 5.1 percent from 19,285 sales in November, and up 5.3 percent from 19,247 sales in December 2011, according to San Diego-based DataQuick.

A rise in sales from November to December is normal for the season. Last month’s sales were the highest for the month of December since 22,328 homes sold in December 2009, though they were 17.2 percent below the December average of 24,488 sales since 1988, when DataQuick’s statistics begin. The low for December sales was 13,240 in 2007, while the high was 36,865 in 2003.
...
“Last year should also be remembered as the year the move-up market awoke. If these upward trends hold, which requires a sustained economic recovery, we should eventually see more inventory hit the market. More would-be sellers will be satisfied with what their homes can fetch, and fewer people will owe more than their homes are worth, freeing them up to move. The rise in inventory would at least tame price appreciation.” [said John Walsh, DataQuick president]

Last month foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 14.8 percent of the Southland resale market. That was down from 15.4 percent the month before and 32.4 percent a year earlier. Last month’s level was the lowest since foreclosure resales were 13.6 percent of the resale market in September 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 25.6 percent of Southland resales last month. That was down slightly from an estimated 26.5 percent the month before and 26.0 percent a year earlier. However, the number (rather than percentage) of short sales last month was up 7.4 percent from December 2011.

The median price is being impacted by the mix, with fewer low end distressed sales pushing up the median. This is why I focus on the repeat sales indexes.

The percent distressed is still high, but falling with 40.4% distressed. Note the shift from foreclosures to short sales (almost twice as many short sales as foreclosures in December).

The NAR is scheduled to report December existing home sales and inventory next week on Tuesday, January 22nd.