by Calculated Risk on 3/01/2013 10:00:00 AM

The ISM manufacturing index indicated expansion in February. PMI was at 54.2% in February, up from 53.1% in January. The employment index was at 52.6%, down from 54.0%, and the new orders index was at 57.8%, up from 53.3% in January.

From the Institute for Supply Management: February 2013 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in February for the third consecutive month, and the overall economy grew for the 45th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

Click on graph for larger image.

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

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 54.2 percent, an increase of 1.1 percentage points from January's reading of 53.1 percent, indicating expansion in manufacturing for the third consecutive month. This month's reading reflects the highest PMI™ since June 2011, when the index registered 55.8 percent. The New Orders Index registered 57.8 percent, an increase of 4.5 percent over January's reading of 53.3 percent, indicating growth in new orders for the second consecutive month. As was the case in January, all five of the PMI™'s component indexes — new orders, production, employment, supplier deliveries and inventories — registered in positive territory in February. In addition, the Backlog of Orders, Exports and Imports Indexes all grew in February relative to January."

This was above expectations of 52.8% and suggests manufacturing expanded at a faster pace in February.

Final consumer sentiment for February:

The final Reuters / University of Michigan consumer sentiment index for February increased to 77.6. The preliminary reading was 76.3, and the January reading was 73.8.

This was above the consensus forecast of 76.0, but still low. There are a number of factors that impact sentiment including unemployment, gasoline prices and, for 2013, the payroll tax increase, the default threat from Congress and the "sequester" spending cuts. People will slowly adjust to the payroll tax increase, and the threat of default is now behind us ... and sentiment has improved a little ... but the sequester cuts might hurt sentiment in March.

by Calculated Risk on 3/01/2013 08:48:00 AM

The BEA released the Personal Income and Outlays report for January:

Personal income decreased $505.5 billion, or 3.6 percent ... in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $18.2 billion, or 0.2 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in January, the same increase as in December. ... PCE price index -- the price index for PCE increased less than 0.1 percent in January, in contrast to a decrease of less than 0.1 percent in December. The PCE price index, excluding food and energy, increased 0.1 percent, compared with an increase of less than 0.1 percent.
...
Personal saving -- DPI less personal outlays -- was $283.9 billion in January, compared with $797.4 billion in December. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 2.4 percent in January, compared with 6.4 percent in December.

The following graph shows real Personal Consumption Expenditures (PCE) through January (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE. Personal spending increased about as expected in January.

Ignore the sharp decline in income and decline in the saving rate - that decline was because some people took income in December to avoid higher taxes in 2013.

by Calculated Risk on 2/28/2013 07:53:00 PM

There are several key economic releases on Friday. First, the Personal Income and Outlays report for January will be released. This will give some idea of how consumer spending is holding up following the payroll tax increase at the beginning of the year. Note that Personal Income will be off sharply in January since some people took income in December to avoid higher taxes in 2013. Don't be shocked by a large one month decline in income!

Another key release is light vehicles sales for February. The automakers will release results all day, and I'll post an estimate of the seasonally adjusted annual sales rate around 4 PM ET. Strong auto sales in February, combined with the ongoing housing recovery, would be a positive sign for the economy going forward.

As always, the ISM manufacturing index could move the markets. The regional surveys have been mixed, although the Markit Flash PMI was fairly strong, and the Chicago PMI increased in February.

Friday economic releases:
• At 8:30 AM ET, Personal Income and Outlays for January. The consensus is for a 2.1% decrease in personal income in January, and for 0.2% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:55 AM, Reuter's/University of Michigan's Consumer sentiment index (final for February). The consensus is for a reading of 76.0.

• At 10:00 AM, ISM Manufacturing Index for February. The consensus is for PMI to decline to 52.8%. (above 50 is expansion).

• Also at 10:00 AM, Construction Spending for January. The consensus is for a 0.6% increase in construction spending.

• All day: Light vehicle sales for February. The consensus is for light vehicle sales to be at 15.2 million SAAR in February (Seasonally Adjusted Annual Rate) down from 15.3 SAAR in January.

by Calculated Risk on 2/28/2013 05:51:00 PM

From Freddie Mac: Freddie Mac Fourth Quarter 2012 Financial Results

Net income for the fourth quarter of 2012 was $4.5 billion, compared to $2.9 billion for the third quarter of 2012. The increase primarily reflects a shift from a provision for credit losses in the third quarter to a benefit for credit losses in the fourth quarter due to a decrease in the volume of newly delinquent single-family loans and continued improvement in national home prices, as well as a higher income tax benefit primarily driven by the favorable resolution of tax matters with the Internal Revenue Service (IRS). These favorable impacts were partially offset by higher net security impairments.
...
Freddie Mac does not require a draw from Treasury for the fourth quarter of 2012 because the company had positive net worth at December 31, 2012. The company’s $8.8 billion net worth at December 31, 2012 reflects $4.9 billion in net worth at September 30, 2012 and fourth quarter comprehensive income of $5.7 billion, partially offset by the $1.8 billion quarterly dividend payment to Treasury on the company’s senior preferred stock.

On Real Estate Owned (REO), Freddie acquired 82,818 properties in 2012, and disposed of 94,296, and the total REO fell to 49,077 at the end of the year.

From Freddie:

In 2012, REO dispositions continued to exceed the volume of REO acquisitions. We believe our single-family REO acquisition volume in 2012 and 2011 was less than it otherwise would have been due in part to the length of the single-family foreclosure timeline, particularly in states where judicial foreclosures (those conducted under the supervision of the court) are required.

During 2012, our REO property inventory declined most in the West region primarily due to increased disposition activity and strengthening home prices in California.

The North Central region comprised 42 percent of our REO property inventory at December 31, 2012. We continue to have a significant number of properties in our REO inventory that we are unable to list because they are occupied or in states with a redemption period, particularly in Michigan, Minnesota and Illinois. States with redemption periods require a period of time after foreclosure during which the borrower may reclaim the property.

Click on graph for larger image.

This graph shows REO inventory for Freddie.

For FDIC insured institutions, the FDIC reports the dollar value of REOs, and the dollar value declined again in Q4. After Fannie announces results I'll post a graph of REO for the F's (Fannie, Freddie, and the FHA).

by Calculated Risk on 2/28/2013 03:15:00 PM

From the National Restaurant Association: Restaurant Performance Index Hit Five-Month High in January as Operators’ Optimism Grew

Driven by a more optimistic outlook among restaurant operators, the National Restaurant Association's Restaurant Performance Index (RPI) rose to its highest level in five months. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.6 in January, up 1.0 percent from December and its highest level since August 2012. In addition, January represented the first time in four months that the RPI rose above 100, which signifies expansion in the index of key industry indicators.

“Although the current situation indicators were mixed in January, restaurant operators were decidedly more optimistic about sales growth and the economy in the months ahead,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Operators’ outlook for same-store sales, capital spending and the overall economy all improved, which propelled the Expectations Index to its highest level in eight months.”
...
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 99.7 in January – up 0.6 percent from December’s level. Although restaurant operators reported net positive same-store sales results in January, softness in the customer traffic and labor indicators outweighed the performance, which resulted in a Current Situation Index reading below 100 for the fifth consecutive month.

Click on graph for larger image.

The index increased to 100.6 in January, up from 99.7 in December (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month.