by Calculated Risk on 3/28/2013 11:00:00 AM

This is the last of the regional manufacturing surveys for March, and the Kansas City region was the only area showing contraction. From the Kansas City Fed: Tenth District Manufacturing Survey Fell at a Slower Rate

The Federal Reserve Bank of Kansas City released the March Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity fell at a slower rate, but producers were considerably more optimistic about future months.

“Factory activity rebounded somewhat in March, although overall levels still remain sluggish. Contacts continued to cite uncertainty about healthcare costs and the overall economy as reasons for lower growth,” said Wilkerson. “However, the outlook for future activity was notably more positive than in previous months.”

The month-over-month composite index was -5 in March, up from -10 in February ... The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. ... The production index increased from -11 to -1, and the shipments and new order indexes recorded levels of 0, the highest value in seven months. In contrast, the employment index posted its lowest level since July 2009, and the new orders for exports index also fell.

Most future factory indexes improved considerably in March. The future composite index jumped from 4 to 14, and the future production, shipments, new orders, and order backlog indexes also increased. The future employment index rose from 2 to 12, its highest level in six months.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (dashed green, through March), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through February (right axis).

The average of the five regional surveys was at the highest level since April 2012.

The ISM index for March will be released Monday, April 1st, and these surveys suggest a positive reading.

by Calculated Risk on 3/28/2013 08:42:00 AM

The DOL reports:

In the week ending March 23, the advance figure for seasonally adjusted initial claims was 357,000, an increase of 16,000 from the previous week's revised figure of 341,000. The 4-week moving average was 343,000, an increase of 2,250 from the previous week's revised average of 340,750.

This report included the annual revision.

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 increased to 343,000 - still near the post-recession low.

Weekly claims were above the 340,000 consensus forecast.  Note: This might be the beginning of unemployment claims being impacted by the "sequestration" budget cuts.

by Calculated Risk on 3/27/2013 09:39:00 PM

The banks open in Cyprus tomorrow with strict capital controls, from Reuters: G4S Readies Guards as Cypriot Banks Prepare to Open

The Central Bank said banks would open their doors at midday (6 a.m. EST) on Thursday after nearly two weeks when Cypriots could only get cash through limited ATM withdrawals.

A central bank official said Cypriots would be allowed to withdraw no more than 300 euros ($380) a day.

Yiangos Demetriou, head of internal audit at the Central Bank, said ... that the controls would allow unlimited use of credit cards within Cyprus, but set a limit of 5,000 euros per month abroad. He said the measures would last four days but could be reviewed.

I doubt the controls will last only four days. The more important question is what happens to the economy and employment in Cyprus. The unemployment rate is already 14.7% in Cyprus and could double over the next couple of years.

Note: SIFMA recommends 2:00 PM market close on Thursday in observance of the Good Friday Holiday.

Thursday economic releases:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 340 thousand from 336 thousand last week. The "sequester" budget cuts might start impacting weekly claims soon.

• Also at 8:30 AM, the BEA will release their third estimate of Q4 GDP. The consensus is that real GDP increased 0.6% annualized in Q4, revised up from 0.1% in the second estimate.

• At 9:45 AM, the Chicago Purchasing Managers Index for March. The consensus is for a decrease to 56.1, down from 56.8 in February.

• At 11:00 AM, the Kansas City Fed regional Manufacturing Survey for March will be released. This is the last of the regional surveys, and the consensus is for a reading of minus 3, up from minus 10 in February (below zero is contraction).

by Calculated Risk on 3/27/2013 05:07:00 PM

I've been watching inventory closely, and in February I wrote: "if inventory keeps falling sharply, we might see stronger house price gains in 2013 than originally expected ...". Since then I've pointed out several analysts who have increased their house price forecasts for 2013.

Nick Timiraos at the WSJ lists more analysts today: Home Prices Seen Making Stronger Gains in 2013

Ivy Zelman, chief executive of research firm Zelman & Associates, said Wednesday she was now expecting prices to rise by 7% this year, up from earlier estimates of 6%, 5%, and 3%. ... She’s also calling for a 5% gain next year because she says the supply shortages and growing demand that fueled last year’s turnaround show no signs of easing.

John Burns, who runs a real-estate consulting firm in Irvine, Calif., is calling for a 9% gain in home prices this year, up from a 5% forecast late last year.

Among those who have revised up their forecasts in the last month are analysts at Morgan Stanley, Bank of America, Capital Economics and J.P. Morgan, which have taken their forecasts to 6-8%, from earlier predictions of 3-6%.

The key is inventory. In recent weeks, we've seen some increase in inventory (more than the usual seasonal increase), but inventory levels are still very low. Right now, unless inventory increases significantly over the next few months, it looks like prices will increase at about the same rate as in 2012.

Although there are reasons for the low inventory - homeowners with negative equity can't sell, strong investor buying at the low end, homeowners not wanting to "sell at the bottom" to list a few - eventually higher prices will lead to more inventory coming on the market and smaller price increases.

by Calculated Risk on 3/27/2013 02:31:00 PM

From economist Tom Lawler:

While Fannie Mae still hasn’t released its 2012 10-K, FHFA released its quarterly “Foreclosure Prevention Report” for Q4/2012, which includes data on foreclosure prevention activity, foreclosures, short sales/DILs, loan modifications, credit performance, and Real Estate Owned (REO) activity at Fannie Mae and Freddie Mac. ...

Here is a chart showing the SF REO Inventory of Fannie, Freddie, FHA, Private-Label Securities, and FDIC-Insured Institutions. For the latter, I assume that the average carrying value is 50% higher than that of the average for Fannie and Freddie.

Click on graph for larger image.

SF REO inventories for these combined sectors were down 23.4% in 2012.

CR Note: Total REO is about half the level in 2008.  In 2008 most of the REO was Private-Label Securities.  The peak in 2010 was related to more foreclosure activity at Fannie, Freddie and the FHA.

The second graph is for just Fannie, Freddie and the FHA REO.

REO at the "Fs" peaked in 2010, and is down about 35% since then.