by Calculated Risk on 6/27/2014 02:38:00 PM

Here is a new indicator that I'm following that appears to be a leading indicator for industrial production.

From the American Chemistry Council: Leading Economic Indicator Continues Upward Trend Despite Impacts of Global Unrest

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), continued its upward growth this month, with a 0.5 percent gain from May. Measured on a three-month moving average (3MMA), the CAB’s 0.5 percent gain beat the average first quarter monthly gains of 0.3 percent. Though the pace of growth has slowed significantly, gains in June have brought the CAB up a solid 4.3 percent over this time last year.

“Overall, we are seeing signs of continued growth in the U.S. economy, and trends in construction-related chemistry show a market which has not yet reached its full potential,” said Dr. Kevin Swift, chief economist at ACC. “However, unrest in Iraq is already affecting chemical equity prices, and the potential for an energy price shock is worrying,” he added.
emphasis added

Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

And this suggests continued growth.

by Calculated Risk on 6/27/2014 11:45:00 AM

The automakers will report June vehicle sales on Tuesday, July 1st.  Sales in May were at 16.71 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in June will be above 16 million (SAAR) again.

Note:  There were only 24 selling days in June this year compared to 26 last year.  

Here are a few forecasts:

From WardsAuto: Forecast Calls for Strong June Sales

A new WardsAuto forecast calls for strong U.S. light-vehicle sales in June, with competition in the midsize car segment and healthy inventories across all segments fueling growth. ... The projected 16.4 million-unit seasonally adjusted annual rate would be less than May’s 87-month-high 16.7 million SAAR ...

From J.D. Power: J.D. Power and LMC Automotive Report: New-Vehicle Sales Continue Year-over-Year Growth

Total light-vehicle sales in June 2014 are expected to approach 1.4 million units, a 5 percent increase from June 2013. The pace of fleet volume growth continues to be lower than retail, with a 1 percent increase year over year, accounting for 19 percent of total sales in June. ... [16.3 million SAAR]

From TrueCar: June SAAR to Hit 16.4 Million Vehicles, According to TrueCar; 2014 New Vehicle Sales Expected to be up 1.0 Percent Year-Over-Year

Seasonally Adjusted Annualized Rate ("SAAR") of 16.4 million new vehicle sales is up 3.2 percent from June 2013 and down 1.8 percent over May 2014.

Another solid month for auto sales.

by Calculated Risk on 6/27/2014 09:55:00 AM

Click on graph for larger image.

The final Reuters / University of Michigan consumer sentiment index for June increased to 82.5 from the May reading of 81.9, and was up from the preliminary June reading of 81.2.

This was above the consensus forecast of 82.0. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011, and another smaller spike down last October and November due to the government shutdown.

by Calculated Risk on 6/26/2014 08:39:00 PM

The Case-Shiller house price indexes for April were released Tuesday. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close.  

From Zillow: Case-Shiller Indices Will Continue to Show More Marked Slowdowns

he Case-Shiller data for April 2014 came out this morning (research brief here), and based on this information and the May 2014 Zillow Home Value Index (ZHVI, released June 22), we predict that next month’s Case-Shiller data (May 2014) will show that the non-seasonally adjusted (NSA) 20-City Composite Home Price Index and the NSA 10-City Composite Home Price Index increased by 9.6 percent and 9.7 percent on a year-over-year basis, respectively. The seasonally adjusted (SA) month-over-month change from April to May will be 0.4 percent for both the 20-City Composite Index and the 10-City Composite Home Price Index (SA). All forecasts are shown in the table below. Officially, the Case-Shiller Composite Home Price Indices for May will not be released until Tuesday, July 29.

So the Case-Shiller index will probably show another strong year-over-year gain in May, but lower than in April (10.8% year-over-year).

Zillow May 2014 Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	May 2013	169.47	170.00	156.06	156.52
Case-Shiller (last month)	Apr 2014	183.28	186.46	168.71	171.73
Zillow Forecast	YoY	9.7%	9.7%	9.6%	9.6%
	MoM	1.4%	0.4%	1.4%	0.4%
Zillow Forecasts1		185.9	186.8	171.1	172.0
Current Post Bubble Low		146.45	149.86	134.07	137.14
Date of Post Bubble Low		Mar-12	Feb-12	Mar-12	Jan-12
Above Post Bubble Low		26.9%	24.7%	27.6%	25.4%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 6/26/2014 06:02:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in May to 2.10% from 2.15% in April. Freddie's rate is down from 2.85% in May 2013, and this is the lowest level since January 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Note: Fannie Mae will report their Single-Family Serious Delinquency rate for May on Monday, June 30th.

Click on graph for larger image

Although this indicates progress, the "normal" serious delinquency rate is under 1%. 

The serious delinquency rate has fallen 0.75 percentage points over the last year - and at that rate of improvement, the serious delinquency rate will not be below 1% until late 2015. 

Note: Very few seriously delinquent loans cure with the owner making up back payments - most of the reduction in the serious delinquency rate is from foreclosures, short sales, and modifications. 

So even though distressed sales are declining, I expect an above normal level of distressed sales for perhaps 2 more years (mostly in judicial foreclosure states).