by Calculated Risk on 6/02/2014 10:06:00 AM

2nd UPDATE: The ISM has announced an error in their release this morning. The index increased to 55.4%, not decreased to 53.2% as reported below.  (initial correction was to 56.0%)

The ISM manufacturing index suggests slower expansion in May than in April. The PMI was at 53.2% in May, down from 54.9% in April. The employment index was at 51.9%, down from 54.7% in March, and the new orders index was at 53.3%, down from 55.1% in April.

From the Institute for Supply Management: May 2014 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in May for the 12th consecutive month, and the overall economy grew for the 60th 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® (ISM®) Manufacturing Business Survey Committee. "The May PMI® registered 53.2 percent, a decrease of 1.7 percentage points from April's reading of 54.9 percent, indicating expansion in manufacturing for the 12th consecutive month. The New Orders Index registered 53.3 percent, a decrease of 1.8 percentage points from the 55.1 percent reading in April, indicating growth in new orders for the 12th consecutive month. The Production Index registered 55.2 percent, 0.5 percentage point below the April reading of 55.7 percent. Employment grew for the 11th consecutive month, registering 51.9 percent, a decrease of 2.8 percentage points below April's reading of 54.7 percent. Comments from the panel reflect generally steady growth, but note some areas of concern regarding raw materials pricing and supply tightness and shortages."
emphasis added

Click on graph for larger image.

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

This was below expectations of 55.5%.

by Calculated Risk on 6/02/2014 08:05:00 AM

Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division) released their Mortgage Monitor report for April today. According to BKFS, 5.62% of mortgages were delinquent in April, up from 5.52% in March. BKFS reports that 2.02% of mortgages were in the foreclosure process, down from 3.17% in April 2013.

This gives a total of 7.64% delinquent or in foreclosure. It breaks down as:

• 1,634,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,187,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 1,016,000 loans in foreclosure process.

For a total of ​​3,837,000 loans delinquent or in foreclosure in April. This is down from 4,699,000 in April 2013.

Click on graph for larger image.

This graph from BKFS shows the number of modified loans that face interest rate resets by date of modification.  From BKFS:

An analysis of mortgage performance data showed that, as of April, there were approximately 2 million modified mortgages facing interest rate resets. Furthermore, more than 40 percent of those loan modifications are currently underwater.

“We have seen a continual reduction in the number of underwater borrowers at the national level for some time now, but modified loans show a different picture,” said Kostya Gradushy, Black Knight’s manager of Loan Data and Customer Analytics. “While the national negative equity rate as of April stands at 9.4 percent of active mortgages, the share of underwater modified loans facing interest rate resets is much higher -- over 40 percent. In addition, another 18 percent of modified borrowers have 9 percent equity or less in their homes. Given that the data has shown quite clearly that equity -- or the lack thereof -- is one of the primary drivers of mortgage defaults, these resets may indeed pose an increased risk in the years ahead."
emphasis added

There is much more in the mortgage monitor.

by Calculated Risk on 6/01/2014 08:21:00 PM

From Jon Hilsenrath at the WSJ: Heloc Payment Jump to Take Bite Out of Consumer Spending

At issue are home-equity lines of credit, known as Helocs, which allow homeowners to tap their equity to fund home improvement, college tuitions and other expenses. Those loans typically let borrowers make interest-only payments for the first 10 years before requiring principal payments as well.

That reckoning will come this year for an estimated 817,000 borrowers owing more than $23 billion in Helocs, more than double last year's level, according to estimates by Equifax, the credit-reporting firm, and the Office of the Comptroller of the Currency. An average of about $50 billion in loans will reset in each of the next three years.

Weekend:
• Schedule for Week of June 1st

Monday:
• At 10:00 AM ET, the ISM Manufacturing Index for May. The consensus is for an increase to 55.5. The ISM manufacturing index indicated expansion in April at 54.9%. The employment index was at 54.7%, and the new orders index was at 55.1%.

• Also at 10:00 AM: Construction Spending for April. The consensus is for a 0.7% increase in construction spending.

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

Oil prices were mixed over the last week with WTI futures at $102.97 per barrel and Brent at $109.52 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.65 per gallon (at about 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 6/01/2014 11:57:00 AM

From the National Restaurant Association: Restaurant Performance Index Gained 0.3 Percent in April as Sales and Customer Traffic Continued to Rise

Fueled by improving same-store sales and customer traffic and a positive outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) rose for the second consecutive month. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.7 in April, up 0.3 percent from March and the strongest level since May 2013. In addition, the RPI stood above 100 for the 14th consecutive month, which signifies expansion in the index of key industry indicators.

“The recent rise in the RPI was fueled by improvements in same-store sales and customer traffic, which are back on a positive trajectory after the winter soft patch,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, restaurant operators have an optimistic outlook for business conditions in the months ahead, which is reflected by the expectations component of the RPI rising to its highest level in two years.”
...
For the second consecutive month, a majority of restaurant operators reported higher same-store sales. ... Restaurant operators reported a net gain in customer traffic levels for the second straight month, after registering declines in the previous three months.
emphasis added

Click on graph for larger image.

The index increased to 101.7 in April, up from 101.4 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 - and this is a fairly solid reading.

by Calculated Risk on 5/31/2014 05:11:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for May 30, 2014.

Changes and comments from surferdude808:

As expected, the FDIC provided an update on its enforcement actions through April 2014 and released industry results for 1q2014. Unexpectedly, there was a bank failure for the third consecutive week, which last occurred in October/November 2012. For the week, there were six removals and three additions that leave the Unofficial Problem Bank List at 496 institutions with assets of $154.1 billion. Asset figures were updated through 1q2014. For the first time since the list has been published, updated quarterly asset figures led to an increase in assets of $794 million. Usually, problem banks shrink their balance sheet as a tactic to increase their capital ratios. A year ago, the list held 761 institutions with assets of $277.2 billion. During May 2014, the list declined by 17 institutions after 16 action terminations, three failures, one merger and three additions.

Actions were terminated against Macon Bank, Inc., Franklin, NC ($789 million); State Bank of Countryside, Countryside, IL ($589 million); Freedom Bank, Inc., Belington, WV ($150 million); Savoy Bank, New York, NY ($103 million); and First Security Trust Bank, Inc., Florence, KY ($82 million).

Slavie Federal Savings Bank, Bel Air, MD ($140 million) was the ninth institution to fail this year. Also, Slavie Federal was the ninth institution to fail in Maryland since the on-set of the Great Recession.

Added this week were GSL Savings Bank, Guttenberg, NJ ($100 million); Grant County Deposit Bank, Williamstown, KY ($79 million); and Columbus Junction State Bank, Columbus Junction, IA ($56 million). The last time three institutions were added during a week was back on October 4, 2013. The FDIC also issued a Prompt Correction Action order against State Bank of Herscher, Herscher, IL ($149 million) and Highland Community Bank, Chicago, IL ($64 million).

The FDIC told us there are now officially 411 problem institutions with assets of $126 billion. The spread between the official and unofficial count narrowed to 85 from 99 last quarter and assets to $28 billion from $29 billion. Next week will likely be quiet nor do we think there will be a failure for a fourth consecutive week.

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 496.