by Calculated Risk on 7/01/2013 11:05:00 AM

The Census Bureau reported that overall construction spending increased in May:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during May 2013 was estimated at a seasonally adjusted annual rate of $874.9 billion, 0.5 percent above the revised April estimate of $870.3 billion. The May figure is 5.4 percent above the May 2012 estimate of $830.4 billion.
...
Spending on private construction was at a seasonally adjusted annual rate of $605.4 billion, nearly the same as the revised April estimate of $605.7 billion. ...

In May, the estimated seasonally adjusted annual rate of public construction spending was $269.5 billion, 1.8 percent above the revised April estimate of $264.7 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 52% below the peak in early 2006, and up 41% from the post-bubble low.

Non-residential spending is 32% below the peak in January 2008, and up about 26% from the recent low.

Public construction spending is now 17% below the peak in March 2009 and was up slightly in May.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 23%. Non-residential spending is down slightly year-over-year. Public spending is down 4.7% year-over-year.

A few key themes:
1) Private residential construction is usually the largest category for construction spending, and is now the largest category once again.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time for a couple of years - mostly related to energy and power - but the key sectors of office, retail and hotels are still at very low levels.  I expect private non-residential to start to increase soon.

3) Public construction spending increased slightly in May - and it is possible public construction spending is near the bottom.  Public spending has declined to 2006 levels (not adjusted for inflation) and has been a drag on the economy for 4 years. In real terms, public construction spending has declined to 2001 levels.

by Calculated Risk on 7/01/2013 10:00:00 AM

The ISM manufacturing index indicated expansion in June. The PMI was at 50.9% in June, up from 49.0% in May. The employment index was at 48.7%, down from 50.1%, and the new orders index was at 51.9%, up from 48.8% in May.

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

Economic activity in the manufacturing sector expanded in June following one month of contraction, and the overall economy grew for the 49th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

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 50.9 percent, an increase of 1.9 percentage points from May's reading of 49 percent, indicating expansion in the manufacturing sector for the fifth time in the first six months of 2013. The New Orders Index increased in June by 3.1 percentage points to 51.9 percent, and the Production Index increased by 4.8 percentage points to 53.4 percent. The Employment Index registered 48.7 percent, a decrease of 1.4 percentage points compared to May's reading of 50.1 percent. Manufacturing employment contracted for the first time since September 2009, when the index registered 47.8 percent. The Prices Index registered 52.5 percent, increasing 3 percentage points from May, indicating that overall raw materials prices increased from last month. Comments from the panel generally indicate slow growth and improving business conditions."
emphasis added

Click on graph for larger image.

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

This was slightly above expectations of 50.5% and suggests manufacturing expanded in June.

by Calculated Risk on 7/01/2013 09:00:00 AM

From MarkIt: Markit U.S. Manufacturing PMI™ – final data

At 51.9, the final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) signalled only a modest manufacturing expansion in June. Having fallen from 52.3 in May, and dropping below the earlier flash estimate of 52.2, the PMI indicated the slowest rate of growth since last October.
...
Firms generally linked the increase in output to larger volumes of new work, though new order growth was little-changed from May’s modest pace. Much of the increase in new work originated domestically, with new export orders falling for the second month running and dropping at the sharpest rate since August 2009.
...
Employment in the manufacturing sector was broadly unchanged in June. This ended a 40-month sequence of increases. A number of firms commented that higher new order requirements were balanced with attempts to control costs.

“Manufacturing clearly down-shifted a gear between the first and second quarters, and is at risk of losing further momentum as we head into the second half of the year." [said Chris Williamson, Chief Economist at Markit]
...
Domestic demand is far from lively, but it is a deteriorating export scene that is causing the real problems. Export orders are being lost at the fastest rate since the height of the financial crisis in mid-2009."

The ISM PMI for June will be released at 10 AM today.

by Calculated Risk on 6/30/2013 10:14:00 PM

Monday:
• At 9:00 AM ET, the Markit US PMI Manufacturing Index for June will be released. The consensus is for the index to be unchanged at 52.3.

• At 10:00 AM, the ISM Manufacturing Index for June. The consensus is for an increase to 50.5 from 49.0 in May. Based on the regional surveys, a reading above 50 seems likely.

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

Weekend:
• Schedule for Week of June 30th

The Asian markets are red tonight with the Nikkei down 0.2%, and Shanghai Composite down 0.4%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 5 and DOW futures are down 25 (fair value).

Oil prices have mostly moved sideways recently with WTI futures at $96.07 per barrel and Brent at $101.70 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are down to about $3.50 per gallon. Based on Brent prices and the calculator at Econbrowser, I expect gasoline prices to fall a little more.

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 6/30/2013 06:18:00 PM

This is a common question, and I suggest using the Atlanta Fed's Jobs Calculator tool to estimate how many jobs per month will be needed to reach a certain unemployment level.

As an example, for the unemployment rate to decline to 7.3% in December (the high end of the Fed's forecast), with the participation rate staying steady at 63.4%, would require about 150,000 jobs per month for the next seven months.  This seems very possible.

If the participation rate increases to 63.6%, than the economy would need to add 210,000 jobs per month for the unemployment rate to fall to 7.3% in December (this is just an estimate).

You can put in your own assumptions to the calculator.

Another frequent question is when will the unemployment rate fall to 6.5% (the Fed's threshold, but not trigger, for raising the Fed's funds rate). If the participation rate stays steady, the unemployment rate will fall to 6.5% in December 2014 if the economy adds around 185,000 jobs per month.   This is consistent with the Fed not raising rates until 2015 or later.