by Calculated Risk on 8/05/2013 10:00:00 AM

The July ISM Non-manufacturing index was at 56.0%, up from 52.2% in June. The employment index decreased in July to 53.2%, down from 54.7% in June. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: July 2013 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in July for the 43rd consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI™ registered 56 percent in July, 3.8 percentage points higher than the 52.2 percent registered in June. This indicates continued growth at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased substantially to 60.4 percent, which is 8.7 percentage points higher than the 51.7 percent reported in June, reflecting growth for the 48th consecutive month. The New Orders Index increased significantly by 6.9 percentage points to 57.7 percent, and the Employment Index decreased 1.5 percentage points to 53.2 percent, indicating growth in employment for the 12th consecutive month. The Prices Index increased 7.6 percentage points to 60.1 percent, indicating prices increased at a significantly faster rate in July when compared to June. According to the NMI™, 16 non-manufacturing industries reported growth in July. Respondents' comments are mostly positive about business conditions and the overall economy."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was above the consensus forecast of 53.0% and indicates faster expansion in July than in June.

by Calculated Risk on 8/05/2013 08:57:00 AM

LPS released their Mortgage Monitor report for June today. According to LPS, 6.68% of mortgages were delinquent in June, up from 6.08% in May. The increase was in short term delinquencies, and most of this increase was seasonal (delinquencies usually increase in June).

LPS reports that 2.93% of mortgages were in the foreclosure process, down from 4.09% in June 2012.

This gives a total of 9.61% delinquent or in foreclosure. It breaks down as:

• 1,983,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,345,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,458,000 loans in foreclosure process.

For a total of ​​4,785,000 loans delinquent or in foreclosure in June. This is down from 5,663,000 in June 2012.

Click on graph for larger image.

The first graph from LPS shows percent of loans delinquent and in the foreclosure process over time.

From LPS:

“June’s increase in delinquencies is representative of a documented seasonal phenomenon,” [LPS Applied Analytics Senior Vice President Herb Blecher] said. “Over the last 18 years, similar changes occurred in June for all but four of those years. And this month’s increase was felt across all 50 states -- from a roughly 14 percent month-over-month rise in 30-day delinquencies in Nevada to a nearly 32 percent upswing in Colorado. ...

“Of course, focusing solely on month-to-month shifts in mortgage performance can be like tracking the stock market on a daily basis,” Blecher continued. “You may see periodic spikes and dips, but without a longer-term perspective, you lack a clear picture of how the market is actually performing. Though June’s 9.9 percent spike was indeed significant -- and a reversal of five consecutive months of declines -- on a quarterly basis, the rise was much more moderate than the historical average. Since 1995, delinquency rates have risen from Q1 to Q2 in all but two years, with an average 7 percent increase. By comparison, the 2013 Q1 to Q2 increase was just 1.34 percent.”

The second graph compares the percent of loans in the foreclosure process in judicial and non-judicial foreclosure states.

From LPS:

Foreclosure inventories in judicial states are 26% off their peak vs. 50% in non-judicial ... Distressed inventory in the northeast remains close to peak

Foreclosure inventories peaked much earlier in non-judicial states, and have fallen quicker.

There is much more in the mortgage monitor.

by Calculated Risk on 8/04/2013 08:55:00 PM

Monday:
• Early: The LPS June Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

• At 10:00 AM, the ISM non-Manufacturing Index for July. The consensus is for a reading of 53.0, up from 52.2 in June. Note: Above 50 indicates expansion, below 50 contraction.

• At 2:00 PM, the July 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve. This might show some slight loosening in lending standards.

Weekend:
• Schedule for Week of August 4th

The Nikkei is down about 1.0%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 3 and DOW futures are down 20 (fair value).

Oil prices have increased this week with WTI futures at $106.19 per barrel and Brent at $108.42 per barrel. The spread between WTI and Brent is back (but still small).

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are starting to decline again.  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 8/04/2013 05:02:00 PM

Following the release of the comprehensive revision for GDP, here is an update to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

Two of the indicators are back (or close) to pre-recession levels (GDP and Personal Income less Transfer Payments), and two indicators are still below the pre-recession peaks (employment and industrial production).

Click on graph for larger image.

The first graph is for real GDP through Q2 2013.

Real GDP returned to the pre-recession peak in Q2 2011, and has hit new post-recession highs for nine consecutive quarters.

At the worst point - in Q2 2009 - real GDP was off 4.3% from the 2007 peak (before the revision, GDP was reported off 4.7% at the worst point).

This graph shows real personal income less transfer payments as a percent of the previous peak through the June report.

Before the revisions, this measure was off 11.2% at the trough in October 2009.  With the revisions, this indicator was "only" off 8.2% at the worst point (the recession wasn't as bad as originally reported).

Real personal income less transfer payments surged in December due to a one time surge in income as some high income earners accelerated earnings to avoid higher taxes in 2013 (I've left December out going forward).   Real personal income less transfer payments declined sharply in January (as expected), and are now close to the pre-recession peak.

The third graph is for industrial production through June 2013.

Industrial production was off 16.9% at the trough in June 2009, and was initially one of the stronger performing sectors during the recovery.

However industrial production is still 1.7% below the pre-recession peak.  This indicator might return to the pre-recession peak in in 2014.

The final graph is for employment and is through July 2013.  This is similar to the graph I post every month comparing percent payroll jobs lost in several recessions.

Payroll employment is still 1.5% below the pre-recession peak and will probably be back to pre-recession levels in 2014.

by Calculated Risk on 8/04/2013 10:25:00 AM

We now have data to update all four charts that I'm using to track when the Fed will start tapering the QE3 purchases.

At the June FOMC press conference, Fed Chairman Ben Bernanke said:

"If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year. And if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear. In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7%, with solid economic growth supporting further job gains, a substantial improvement from the 8.1% unemployment rate that prevailed when the committee announced this program."

Click on graph for larger image.

The first graph is for GDP.

The current forecast is for GDP to increase between 2.3% and 2.6% from Q4 2012 to Q4 2013.

The first and second quarters were below the FOMC projections (red), and GDP will have to pickup in the 2nd half of 2013 for the Fed to start tapering QE3 purchases in December.

GDP would have to increase at a 3.2% annual rate in the 2nd half to reach the FOMC lower projection, and at a 3.8% rate to reach the higher projection.

The second graph is for the unemployment rate.

The current forecast is for the unemployment rate to decline to 7.2% to 7.3% in Q4 2013.

We now have data through July, and so far the unemployment rate is tracking in the middle of the forecast. 

If the participation rate ends the year at 63.6% (level for the year), then job growth will have to pickup up a little in the 2nd half to meet the FOMC projections.  See the Atlanta Fed's Jobs Calculator tool to estimate how many jobs per month will be needed to reach a certain unemployment level.

This graph is for PCE prices.

The current forecast is for prices to increase 0.8% to 1.2% from Q4 2012 to Q4 2013.

So far PCE prices are below this projection - and this projection is significantly below the FOMC target of 2%. Clearly the FOMC expects inflation to pickup, and a key is if the recent decline in inflation is "transitory".

PCE prices would have to increase at a 1.8% annual rate in the 2nd half to reach the upper FOMC projection.

This graph is for core PCE prices.

The current forecast is for core prices to increase 1.2% to 1.3% from Q4 2012 to Q4 2013.

So far core PCE prices are below this projection - and, once again, this projection is significantly below the FOMC target of 2%.

With the exception of the unemployment rate, it would be a stretch to say the incoming data has been "broadly consistent" with the June FOMC projections.  Clearly the economy will have to pickup before the FOMC would start to taper QE3 purchases in December. (September tapering seems less likely now since the key data has been worse than forecast, but still not impossible).