by Calculated Risk on 7/25/2013 09:02:00 PM

Next week the BEA will release comprehensive revisions to GDP for prior years. From Merrill Lynch on the GDP revisions next week:

The release of 2Q GDP on July 31 will be anything but a typical report. The Bureau of Economic Analysis (BEA) will be announcing the results of its comprehensive benchmark revision which we believe will reveal significant adjustments to GDP, personal income, the savings rate and corporate profits. Here are the main takeaways ...

• The level of GDP will be revised higher over the history of the sample, likely in the order of 3.0pp. We believe the revision will be pro-cyclical and therefore make the recessions look modestly deeper and the recoveries appear stronger. In particular, already-released revisions to source data imply an upward revision to 2012.

• Personal income will also be revised higher. However, it will likely be adjusted to be less volatile, likely smoothing the most recent business cycles.

• The saving rate will be revised higher, likely in the order of 2 to 3pp. This could boost the current rate from 3.2% to as high as 6%. We think the revision will be notable over the past cycle, showing greater precautionary saving in response to the financial crisis. The revisions will make the data more comparable to the Flow of Funds (FOF) accounts and help to align the savings rate measured by the FOF and NIPA.

• An upward revision to GDP growth will bring the trend in GDP more in line with the recovery in jobs. It therefore implies an upward revision to the level of productivity, but in particular we look for an upward revision to productivity growth in 2012.

• Corporate profits are likely to be little changed (with a risk of a small downward revision), but the revised series should be less volatile.

• The PCE deflator will be subject to revisions as well, but we have little information regarding the direction or the magnitude. In past benchmarks, the revisions to the deflator have been marginal.

Overall, the revisions will reveal a stronger household sector, which is wealthier and thriftier than previously believed. It will also show that the economy fared better over the past year than was initially reported, implying greater momentum heading into this year.

Friday:
• At 9:55 AM ET, the Reuter's/University of Michigan's Consumer sentiment index (final for July). The consensus is for a reading of 84.0, up from the preliminary reading of 83.9, but down from the June reading of 84.1.

by Calculated Risk on 7/25/2013 05:43:00 PM

Just a thought, I haven't seen any discussion on this ... the pivot to austerity in early 2010 is widely viewed as a major mistake (as opposed to staying focused on employment). Larry Summers was the Director of the National Economic Council until December 2010, so he probably played a key role in the austerity pivot.

In 2010, Fed Chairman Ben Bernanke was already warning about premature tightening:

"Economic conditions provide little scope for reducing deficits significantly further over the next year or two; indeed, premature fiscal tightening could put the recovery at risk. Over the medium- and long-term, however, the story is quite different."

This has been a familiar comment from Bernanke over the last few years: less austerity now, and put the long run deficit on a sustainable path.  Unfortunately this advice has fallen on deaf ears.

A key question for Mr. Summers is what role he played in the premature pivot to austerity.

Also, from FT Alphaville: Larry Summers on QE

Lawrence Summers made dismissive remarks about the effectiveness of quantitative easing at a conference in April, raising the possibility of a big shift in US monetary policy if he becomes chairman of the Federal Reserve.

... the people who have discussed policy with him say Mr Summers regards fiscal policy as a more effective tool than monetary policy. “More of what will determine things going forward will have to do with fiscal policy and that there is less efficacy from quantitative easing than is supposed,” he said in his Santa Monica remarks.

by Calculated Risk on 7/25/2013 02:21:00 PM

From Freddie Mac today: Mortgage Rates Calm Further

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates easing for the second consecutive week helping to alleviate concerns over a slowdown in the housing market and amid recent strong homes sales data for June. ...

30-year fixed-rate mortgage (FRM) averaged 4.31 percent with an average 0.8 point for the week ending July 25, 2013, down from last week when it averaged 4.37 percent. Last year at this time, the 30-year FRM averaged 3.49 percent.

15-year FRM this week averaged 3.39 percent with an average 0.8 point, down from last week when it averaged 3.41 percent. A year ago at this time, the 15-year FRM averaged 2.80 percent.

The 30 year mortgage rate hit 4.51% in the Freddie Mac survey two weeks ago, and is now down to 4.31%. This is still up sharply from 3.35% in early May.

by Calculated Risk on 7/25/2013 11:05:00 AM

From the Kansas City Fed: Tenth District Manufacturing Survey Rose Moderately

The Federal Reserve Bank of Kansas City released the July 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 rose moderately, although producers' expectations for future activity eased somewhat.

“We saw several positive things in this month's survey. Production and shipments rebounded after being disrupted by storms last month," said Wilkerson. "And while some firms remain hesitant to expand, overall capital spending and hiring plans remain positive.”

The month-over-month composite index was 6 in July, up from -5 in June and 2 in May ... Most other month-over-month indexes also improved. The production index increased from -17 to 21, its highest level since June 2011, and the shipments and new orders indexes also rose markedly. ... In contrast, the order backlog index edged lower from -4 to -7, and the employment index also eased slightly

So far all of the regional surveys - except Richmond - showed improvement in July. The Dallas Fed regional survey will be released next Monday, and the ISM index for July will be released Thursday, August 1st.

Most of the regional surveys (and the Markit Flash PMI) suggest stronger expansion in the ISM index for July.

by Calculated Risk on 7/25/2013 10:15:00 AM

According to the First Look report for June to be released today by Lender Processing Services (LPS), the percent of loans delinquent increased in June compared to May, and declined about 8% year-over-year. Also the percent of loans in the foreclosure process declined further in June and were down 29%% over the last year.

LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) increased to 6.68% from 6.08% in May. Note: Some of the increase in short term delinquencies in June is seasonal, although the uptick this year was larger than normal.   The normal rate for delinquencies is around 4.5% to 5%.

The percent of loans in the foreclosure process declined to 2.93% in June from 3.05% in May. 

The number of delinquent properties, but not in foreclosure, is down about 8% year-over-year (274,000 fewer properties delinquent), and the number of properties in the foreclosure process is down 29% or 903,000 properties year-over-year.

LPS will release the complete mortgage monitor for June in early August.

LPS: Percent Loans Delinquent and in Foreclosure Process
	June 2013	May 2013	June 2012
Delinquent	6.68%	6.08%	7.14%
In Foreclosure	2.93%	3.05%	4.09%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,983,000	1,708,000	2,012,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,345,000	1,335,000	1,590,000
Number of properties in foreclosure pre-sale inventory:	1,458,000	1,525,000	2,061,000
Total Properties	4,785,000	4,569,000	5,663,000