by Calculated Risk on 5/31/2013 06:37:00 PM

From the FDIC: North Shore Bank, FSB, Brookfield, Wisconsin, Assumes All of the Deposits of Banks of Wisconsin, Kenosha, Wisconsin

As of March 31, 2012, Banks of Wisconsin had approximately $134.0 million in total assets and $127.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $26.3 million. ... Banks of Wisconsin is the 14th FDIC-insured institution to fail in the nation this year, and the first in Wisconsin.

The FDIC has slowed down on closing banks, but they are still on pace to close 30+ banks this year.

by Calculated Risk on 5/31/2013 03:18:00 PM

From the National Restaurant Association: Restaurant Performance Index Hits 10-Month High as Operators’ Business Expectations Improve

Driven by higher same-store sales and an improving outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) hit a 10-month high in April. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.0 in April, up 0.4 percent from a level of 100.6 in March. In addition, April represented the third time in the last four months that the RPI topped the 100 level, which signifies expansion in the index of key industry indicators.

“Growth in the Restaurant Performance Index was due largely to restaurant operators’ healthier outlook for the business environment in the coming months,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In particular, there was a dropoff in the proportion of operators who expect conditions to worsen in the months ahead, which suggests a broadening of the perspective that the expansion is firmly entrenched.”
...
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.1 in April – up 0.3 percent from a level of 99.8 in March. April represented the first time in eight months that the Current Situation Index rose above 100, which signifies expansion in the current situation indicators.

Click on graph for larger image.

The index increased to 101.0 in April from 100.6 in March. (above 100 indicates expansion).

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

by Calculated Risk on 5/31/2013 12:35:00 PM

Here is the summary of the 2013 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.  And a brief excerpt:

What is the Outlook for Future Social Security and Medicare Costs in Relation to GDP? One instructive way to view the projected costs of Social Security and Medicare is to compare the costs of scheduled benefits for the two programs with the gross domestic product (GDP), the most frequently used measure of the total output of the U.S. economy (Chart A). Under the intermediate assumptions employed in the reports and throughout this Summary, costs for both programs increase substantially through 2035 when measured this way because: (1) the number of beneficiaries rises rapidly as the baby-boom generation retires; and (2) the lower birth rates that have persisted since the baby boom cause slower growth of the labor force and GDP. Social Security’s projected annual cost increases to about 6.2 percent of GDP by 2035, declines to 6.0 percent by 2050, and remains between 6.0 and 6.2 percent of GDP through 2087. Under current law, projected Medicare cost rises to 5.6 percent of GDP by 2035, largely due to the rapid growth in the number of beneficiaries, and then to 6.5 percent in 2087, with growth in health care cost per beneficiary becoming the larger factor later in the valuation period.


In 2012, the combined cost of the Social Security and Medicare programs equaled 8.7 percent of GDP. The Trustees project an increase to 11.8 percent of GDP in 2035 and 12.7 percent of GDP in 2087. Although Medicare cost (3.6 percent of GDP) is smaller than Social Security cost (5.0 percent of GDP) in 2012, the gap closes gradually until 2056, when Medicare is projected to be the more costly program. During the final decade of the long-range projection period, Medicare cost is modestly larger than Social Security cost.

The increase in Social Security as a percent of GDP has always been expected.  The larger concern is the increase in Medicare.  According to the report, the OASI trust fund will be depleted in 2035 (then the program will either run a deficit or a pay the portion received in payroll taxes).  The current large trust fund was a result of payroll tax increases under President Reagan to have the baby boomers prepay their social security on the recommendation of the Greenspan commission.   The eventual depletion of the trust fund was expected. 

As the Columbia Journalism Review noted, any publication that says the fund is "bankrupt" or "on track for insolvency" gets an "F" for reporting (I've already seen a few).

by Calculated Risk on 5/31/2013 10:00:00 AM

Click on graph for larger image.

• The final Reuters / University of Michigan consumer sentiment index for May increased to 84.5 from the April reading of 76.4, and up from the preliminary reading of 83.7. This is the highest level since July 2007.

This was above the consensus forecast of 83.7. Sentiment has generally been improving following the recession - with plenty of ups and downs - and one big spike down when Congress threatened to "not pay the bills" in 2011.

• From the Chicago ISM:

May 2013:

The Chicago Purchasing Managers reported April's Chicago Business Barometer sprung 9.7 to 58.7, the highest since March 2012 and in sharp contrast to April's 3-1/2 year low. All Business Activity measures surged in May, reversing weakness seen in most categories in March and April.

PMI: Increased to 58.7 from 49.0. (Above 50 is expansion).

Employment increased to 56.9, up from 48.7.

New orders increased to 58.1 from 53.2.

This was well above the consensus estimate of 50.0.

by Calculated Risk on 5/31/2013 08:46:00 AM

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

Personal income decreased $5.6 billion, or less than 0.1 percent ... in April, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $20.5 billion, or 0.2 percent. In March, personal income increased $36.2 billion, or 0.3 percent ... and PCE increased $14.2 billion, or 0.1 percent, based on revised estimates.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in April, compared with an increase of 0.2 percent in March. ... The price index for PCE decreased 0.3 percent in April, compared with a decrease of 0.1 percent in March. The PCE price index, excluding food and energy, increased less than 0.1 percent, compared with an increase of 0.1 percent.
...
Personal saving -- DPI less personal outlays -- was $306.9 billion in April, compared with $301.4 billion in March. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 2.5 percent in April, the same as in March.

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

Click on graph for larger image.

This graph shows real PCE by month for the last few years. The dashed red lines are the quarterly levels for real PCE.  

Some of the decline in spending is probably related to lower gasoline prices in April - and that is actually a positive (gasoline prices rebounded in May though).    Also PCE was revised up for January (slightly), February and March.

A key point is that the PCE price index was only up 0.7% year-over-year (1.1% for core PCE).   Core PCE increased at a 0.1% annualized rate in April keeping the pressure off the Fed to taper asset purchases.