by Calculated Risk on 2/25/2013 08:37:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Economic Growth Moderated in January

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.32 in January from +0.25 in December. Three of the four broad categories of indicators that make up the index decreased from December, and only two of the four categories made positive contributions to the index in January.

The index’s three-month moving average, CFNAI-MA3, increased to +0.30 in January from +0.23 in December. Given the substantial upward revisions for November and December, January’s CFNAI-MA3 marked the third consecutive reading above zero. Additionally, January’s reading suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.
emphasis added

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 "moderated" in January, and growth was somewhat above its historical trend (using the three-month average).

According to the Chicago Fed:

What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

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.

by Calculated Risk on 2/24/2013 09:58:00 PM

I'm frequently asked about the "Sequester". Next week the "Sequester" budget cuts will begin if government does not take any action, and over the next 7 months the sequester will require $85 billion in cuts, about half from defense programs. This is one of those really dumb policies that is hard to stop. The cuts will not be catastrophic, but as we've discussed, the deficit will decline sharply this year already, and we really don't need additional deficit reduction in the near term. Here are a couple of articles on the cuts:

From the WaPo: The big sequester gamble: How badly will the cuts hurt? and White House releases state-by-state breakdown of sequester’s effects

Monday:
• At 8:30 AM ET, the Chicago Fed National Activity Index for January will be released. This is a composite index of other data.

• At 10:30 AM, the Dallas Fed Manufacturing Survey for February will be released. The consensus is a decrease to 4.0 from 5.5 in January (above zero is expansion).

Weekend:
• Summary for Week Ending Feb 22nd
• Schedule for Week of Feb 24th

The Asian markets are mostly up tonight with the Nikkei up 1.9%, and Shanghai Composite up 0.3%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 2 and DOW futures are down 20 (fair value).

Oil prices have moved down a little recently with WTI futures at $93.00 per barrel and Brent at $113.82 per barrel.

by Calculated Risk on 2/24/2013 07:36:00 PM

From CNN: Gas prices jump, but not as high, survey finds

Over the past two weeks, prices at the pump have jumped 20 cents, adding to a total rise of nearly 54 cents over the past nine weeks, according to the Lundberg Survey.

... And now, prices may even start to drop, says publisher Trilby Lundberg.

"I don't mean that gasoline prices cannot go up further from here," she said Sunday. "But the chief causes of the rise are out of the picture."

Crude oil prices are now going down, and wholesale prices -- which marketers and retailers pay -- are "starting to tumble," she said.

In Los Angeles prices are around $4.30 per gallon. 

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are up over 50 cents per gallon from the low last December, and up 20 cents over the last two weeks. But it does appear the price increases have slowed.

If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 2/24/2013 02:18:00 PM

Note: The automakers will report February vehicle sales this coming Friday, March 1st. The consensus is for sales of around 15.2 million SAAR.

From Edmunds.com: Despite Rising Gas Prices, February Auto Sales Strong at Estimated 15.5 Million SAAR, says Edmunds.com

Edmunds.com ... forecasts that 1,198,538 new cars and trucks will be sold in the U.S. in February for an estimated Seasonally Adjusted Annual Rate (SAAR) this month of 15.5 million light vehicles. The projected sales [NSA] will be a 14.9 percent increase from January 2013, and a 4.3 percent increase from February 2012.

“Car sales are persevering despite economic factors on people’s minds like rising gas prices and the implementation of the payroll tax,” says Edmunds.com Senior Analyst Jessica Caldwell. “Pent-up demand and widespread access to credit are keeping up car sales momentum.”

The following table shows annual light vehicle sales, and the change from the previous year.  Light vehicle sales have seen double digit growth for three consecutive years.  The 2013 forecast was from Edmunds.com, but it appears sales were above expectations in January and February - and the annual forecast will probably be increased.

Light Vehicle Sales
	Sales (millions)	Annual Change
2005	16.9	0.5%
2006	16.5	-2.6%
2007	16.1	-2.5%
2008	13.2	-18.0%
2009	10.4	-21.2%
2010	11.6	11.1%
2011	12.7	10.2%
2012	14.4	13.4%
20131	15.0	3.7%
1Forecast

by Calculated Risk on 2/24/2013 10:23:00 AM

Some interesting details on institutional buyers from the Newsobserver.com: California billionaire bets on rentals with Wake home-buying spree (ht Sebastian)

[C]ompanies have raised billions from pension funds, private equity firms and other institutional investors to fuel their buying sprees. To date, these companies have focused their attention mainly on markets with large inventories of distressed homes, particularly in Arizona, Florida, Nevada and California.

What’s noteworthy about American Homes 4 Rent’s buying binge in Wake County [North Carolina] is that it isn’t just targeting distressed properties, or even existing homes. About a third of its purchases have been new homes acquired directly from homebuilders.
...
Institutional investors have invested at least $5.4 billion for purchase of single-family rentals nationwide during the past 18 months, according to Barclays, and an additional $8 billion is expected to be invested within the next couple of years. American Homes 4 Rent’s buying spree is being financed in part by a $600 million investment from the Alaska Permanent Fund, a $45 billion fund that invests royalties the state collects from oil companies.

American Homes 4 Rent is targeting homes with about 2,000 square feet that are less than 15 years old and are located in neighborhoods with better-than-average schools. The company paid around $65 to $75 per square foot for the first 1,500 homes it acquired, according to the meeting minutes, and it expects vacancy rates of 5 percent or less in its portfolio.

American Homes 4 Rent hopes to charge monthly rents equal to about 1 percent of the purchase price, and provide returns of about 6.5 percent a year to the Alaska Permanent Fund, according to the board’s meeting minutes. In three to seven years, if the housing market recovers, the portfolio could be sold or be converted into a publicly traded real estate investment trust ...
emphasis added

There is much more in the article. It is interesting that the institutional investors are moving beyond distressed properties, and even buying new homes in some areas.

Yesterday:
• Summary for Week Ending Feb 22nd
• Schedule for Week of Feb 24th