by Calculated Risk on 5/27/2014 10:30:00 AM

Manufacturing activity in the Richmond region increased "mildly" at the same rate in May as in April, and activity increased in the Dallas region at a "slower pace" in May.

From the Richmond Fed: Manufacturing Sector Activity Increased Mildly; Hiring Continued to Strengthen

Overall, manufacturing conditions improved. The composite index for manufacturing held steady at a reading of 7 during the past two months. The index for shipments gained four points, ending at 10, while the index for new orders softened seven points, finishing at a reading of 3. Manufacturing employment picked up this month; the May indicator advanced six points to a reading of 10.
emphasis added

And from the Dallas Fed: Texas Manufacturing Grows but at a Slower Pace

Texas factory activity increased again in May, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 24.7 to 11, indicating output grew but not strongly as in April.

The new orders index fell sharply to 3.8, hitting its lowest level this year. ... The general business activity index remained elevated but moved down from 11.7 to 8. ... Labor market indicators reflected a tapering of growth in employment levels and workweek length. The May employment index dropped to 2.9, its lowest reading in nearly a year.

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

All of the regional surveys showed expansion in May, and it seems likely the ISM index will increase again in May.  The ISM index for May will be released Monday, June 2nd.

by Calculated Risk on 5/27/2014 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for March ("March" is a 3 month average of January, February and March prices).

This release includes prices for 20 individual cities, and two composite indices (for 10 cities and 20 cities) and the Q1 National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Prices Rise in March According to the S&P/Case-Shiller Home Price Indices

Data through March 2014, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices ... show the 10-City and 20-City Composite Indices gained 0.8% and 0.9% month-over-month. In the first quarter of 2014, the National Index gained 0.2%. Nineteen of the 20 cities showed positive returns in March – New York was the only city to decline. Dallas and Denver reached new index peaks.

In March, the National and Composite Indices saw their annual rates of gain slow significantly. ... The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 10.3% gain in the first quarter of 2014 over the first quarter of 2013. The 10- and 20-City Composites posted year-over-year increases of 12.6% and 12.4% in March 2014.

“The year-over-year changes suggest that prices are rising more slowly,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “Annual price increases for the two Composites have slowed in the last four months and 13 cities saw annual price changes moderate in March. The National Index also showed decelerating gains in the last quarter. Among those markets seeing substantial slowdowns in price gains were some of the leading boom-bust markets including Las Vegas, Los Angeles, Phoenix, San Francisco and Tampa.

“Despite signs of decelerating prices, all cities were higher than a year ago and all but New York were higher in March than in February. However, only Denver and Dallas have set new post-crisis highs and they experienced relatively lower peak levels than other cities. Four locations are fairly close to their previous highs: Boston (8%), Charlotte (9%), Portland (13%) and San Francisco (15%).

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 17.8% from the peak, and up 1.2% in March (SA). The Composite 10 is up 24.3% from the post bubble low set in Jan 2012 (SA).

The Composite 20 index is off 17.0% from the peak, and up 1.2% (SA) in March. The Composite 20 is up 25.0% from the post-bubble low set in Jan 2012 (SA).

The second graph shows the Year over year change in both indices.

The Composite 10 SA is up 12.6% compared to March 2013.

The Composite 20 SA is up 12.4% compared to March 2013.

Prices increased (SA) in 18 of the 20 Case-Shiller cities in March seasonally adjusted.  (Prices increased in 19 of the 20 cities NSA) Prices in Las Vegas are off 43.8% from the peak, and prices in Denver and Dallas are at new highs (SA).

This was above the consensus forecast for a 11.9% YoY increase. I'll have more on house prices later.

by Calculated Risk on 5/26/2014 07:19:00 PM

Tuesday:
• At 8:30 AM ET, Durable Goods Orders for April from the Census Bureau. The consensus is for a 0.8% decrease in durable goods orders.

• At 9:00 AM, the FHFA House Price Index for March. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.5% increase.

• Also at 9:00 AM, the S&P/Case-Shiller House Price Index for March. Although this is the March report, it is really a 3 month average of January, February and March. The consensus is for a 11.9% year-over-year increase in the Composite 20 index (NSA) for March. The Zillow forecast is for the Composite 20 to increase 11.9% year-over-year, and for prices to increase 0.8% month-to-month seasonally adjusted.

• At 10:00 AM, Conference Board's consumer confidence index for May. The consensus is for the index to increase to 83.0 from 82.3.

• Also at 10:00 AM, Richmond Fed Survey of Manufacturing Activity for May. The consensus is for a reading of 9, up from 7 in April.

• Also at 10:00 AM, Dallas Fed Manufacturing Survey for May. This is the last of the regional Fed manufacturing surveys for May.

Weekend:
• Schedule for Week of May 25th

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 4 and DOW futures are up 40 (fair value).

Oil prices were up over the last week with WTI futures at $104.27 per barrel and Brent at $110.32 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.63 per gallon (might have peaked, and slightly below the level of a year ago).  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 5/26/2014 01:42:00 PM

Reader MC sent me the following graph and asked "This chart looks highly questionable for a number of reasons. Any thoughts?"

Usually I ignore this nonsense, but I have a little extra time today - and this is an egregious example of "Graph Fail"


Click on graph for larger image.

Here is the apparent source of the graph.

The graph is constructed from the start of the 1982 and 2009 recoveries, and the graph subtracts the change in the Civilian noninstitutional population, 16 years and over, from the change in total non-farm payroll jobs.

This is just another way to ignore the change in demographics and the participation rate (that I've written about for years - and most research shows the decline in the participation rate is primarily due to changing demographics). 

Here is a quick look at demographics: This graph shows the population in each 5 year age group in November 1982 (red) and June 2009 (blue).  This is the start of each recovery.  Note: Not Seasonally Adjusted, Source: BLS.

In November 1982 (red), the two largest groups were in the "20 to 24" and "25 to 29" age groups. These people were just entering the prime working age!  Is anyone surprised there was an increase in the overall participation rate during the '80s?

In June 2009 (blue), the two largest groups were in the "45 to 49" and "50 to 54" age groups . The older group was moving into a lower participation age group.  And look at all those people in the 75+ group in 2009!  That is good news - people are living longer - but most of these people are not participating in the labor force (the 75+ participation rate was 8.3% in April 2014).

And there are other long term demographic trends.  As an example, in November 1982, 54.7% of the "16 to 19" age group participated in the labor force, and in 2009, only 38.5% participated (this is a long term trend and is mostly because more young people are staying in school - more good news).

So just ignore this graph. It is a Graph Fail!.

Note: The 1981 recession was primarily caused by then Fed Chairman Paul Volcker tightening monetary policy to fight inflation, and the recovery was directly related to the Fed easing policy. The 2007 recession was a direct result of the housing bubble and bust, and resulting financial crisis (all research shows recoveries from financial crisis are very difficult).

by Calculated Risk on 5/25/2014 03:13:00 PM

The automakers will report May vehicle sales on Tuesday, June 3rd.  Sales in April were close to 16.0 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in May will be above 16 million (SAAR). 

Here are a few forecasts:

From WardsAuto: May Sales to Continue Upward Trend

A new WardsAuto forecast calls for U.S. light-vehicle deliveries to best April’s strong showing, with modest increases to incentives and a full post-holiday sales week on the calendar boosting the retail outlook. ... The projected 16.1 million-unit seasonally adjusted annual rate would be slightly higher than [in April].

From J.D. Power: J.D. Power and LMC Automotive Report: May New-Vehicle Retail Sales Continue Growth Trend; Strong Memorial Day Weekend Expected

The strong retail performance is expected to lift total light-vehicle sales to 1.5 million units in May 2014 ... [16.1 million SAAR]

From TrueCar: May SAAR to Hit 16.1 Million Vehicles, According to TrueCar; 2014 New Vehicle Sales Expected to be up 5.5 Percent Year-Over-Year

Seasonally Adjusted Annualized Rate ("SAAR") of 16.1 million new vehicle sales is up 6 percent from May 2013 and up 1.1 percent over April 2014.

The sales growth rate will probably slow this year and auto sales will contribute less to GDP growth in 2014 than the previous four years. Here is a table showing annual sales and the growth rate since 2000.

Light Vehicle Sales
	Sales (millions)	Annual Change
2000	17.4	2.7%
2001	17.1	-1.3%
2002	16.8	-1.8%
2003	16.6	-1.1%
2004	16.9	1.4%
2005	16.9	0.5%
2006	16.5	-2.6%
2007	16.1	-2.5%
2008	13.2	-18.0%
2009	10.4	-21.2%
2010	11.6	11.1%
2011	12.7	10.2%
2012	14.4	13.4%
2013	15.5	7.6%
20141	16.1	3%
1LMC Automotive Forecast