by Calculated Risk on 12/14/2014 11:00:00 AM

On Friday I posted FOMC previews from Goldman Sachs, Merrill Lynch and Nomura economists. Here is what I expect on Wednesday:

• The key focus will be on Fed Chair Janet Yellen's press conference and the FOMC projections.

• There will be some wording changes (see below) and the FOMC statement will probably be a little shorter. In October, the word count declined to 707 words, from 895 in September. Last year, in December 2013, the statement had 867 words. Ten years ago, in December 2004, the statement had only 316 words!

• On the projections, I expect GDP to be revised up slightly for 2014 (to around 2.3%), for the unemployment rate to be revised down to 5.8% for Q4, for inflation to be revised down - and for core inflation to be mostly unchanged.  The key will be changes to the projections for 2015 and beyond.

• Possible wording changes include:

1) some change to the "considerable time" phrase, possibly emphasizing the FOMC will be patient before raising rates.

2) some concern about less inflation, perhaps changing the word "diminished" in the phrase "the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year" to "increased recently". Note: Earlier this year, when inflation picked up a little, Yellen said: "The CPI index has been a bit on the high side, but I think the data that we’re seeing is noisy." So the FOMC might remain patient on inflation again - and Fed Chair Yellen will address this in the press conference.

Note: I don't expect any change to this key sentence: "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

For fun: the over/under on the word count is probably around 700 words, and I'll take the under!

by Calculated Risk on 12/13/2014 01:11:00 PM

The key economic report this week is November housing starts on Tuesday.

For manufacturing, the November Industrial Production and Capacity Utilization report, and the December NY Fed (Empire State), Philly Fed, and Kansas City Fed surveys, will be released this week. 

For prices, CPI will be released on Wednesday.

The FOMC meets on Tuesday and Wednesday.

----- Monday, December 15th -----
8:30 AM: NY Fed Empire Manufacturing Survey for December. The consensus is for a reading of 12.0, up from 10.2 in November (above zero is expansion).

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for November.

This graph shows industrial production since 1967.

The consensus is for a 0.7% increase in Industrial Production, and for Capacity Utilization to increase to 79.4%.

10:00 AM: The December NAHB homebuilder survey. The consensus is for a reading of 59, up from 58 in November.  Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Tuesday, December 16th -----
8:30 AM: Housing Starts for November.

Total housing starts were at 1.009 million (SAAR) in October. Single family starts were at 696 thousand SAAR in October.

The consensus is for total housing starts to increase to 1.038 million (SAAR) in November.

----- Wednesday, December 17th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Consumer Price Index for November. The consensus is for a 0.1% decrease in CPI in October, and for core CPI to increase 0.1%.

During the day: The AIA's Architecture Billings Index for November (a leading indicator for commercial real estate).

2:00 PM: FOMC Meeting Announcement.  The FOMC is expected to make no change to policy, however the phrase "considerable period" will probably be changed in the statement.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Janet Yellen holds a press briefing following the FOMC announcement.

----- Thursday, December 18th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 295 thousand from 294 thousand.

10:00 AM: the Philly Fed manufacturing survey for December. The consensus is for a reading of 25.0, down from 40.8 last month (above zero indicates expansion).

----- Friday, December 19th -----
10:00 AM: Regional and State Employment and Unemployment (Monthly) for November 2014

11:00 AM: the Kansas City Fed manufacturing survey for December.

by Calculated Risk on 12/13/2014 08:09:00 AM

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

Here is the unofficial problem bank list for Dec 12, 2014.

Changes and comments from surferdude808:

As anticipated, there were few changes to the Unofficial Problem Bank List this week. After the removal of one bank, the list count is 406 institutions with assets of $123.9 billion. A year ago, the list held 641 institutions with assets of $219.4 billion.

The Ohio State Bank, Marion, OH ($85 million) was removed after if found a merger partner. Next week, we anticipate the OCC will provide an update on its enforcement action activities.

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 406.

by Calculated Risk on 12/12/2014 07:51:00 PM

Some excerpts from a research note by economists Sven Jari Stehn and David Mericle at Goldman Sachs:

The economic dataflow has been solid since the October FOMC meeting. ... News on inflation, however, has been mixed. On the one hand, actual inflation measures have firmed a bit since October. But, on the other hand, oil prices have continued to decline and market-implied measures of inflation expectations have dropped further.

We expect modest upgrades to Fed officials’ projections and to the description of growth and the labor market in the FOMC statement, while the inflation forecasts are likely to come down a bit. These expectations for the economic projections would suggest that the “dots” remain broadly unchanged.

We expect the FOMC to modify its “considerable time” forward guidance. One possibility would be to state that the committee will be “patient” in raising the funds rate until it is clear that the economy is on the path to achieving the FOMC’s goals. ... Our forecast for updated guidance is a close call, however, as the committee would want to avoid a tightening of financial conditions in light of the mixed inflation news. We would therefore expect the committee to indicate that the change in guidance is not meant to convey an expectation of an earlier liftoff than previously communicated, either in the statement itself or in Chair Yellen’s press conference.

An area of particular interest for the press conference will be any discussion of the post-liftoff guidance, as recent Fed communication has raised the prospect that views might be starting to shift away from the “shallow glide path.” Our forecast remains for the first hike in September 2015, followed by a steeper path of the funds rate than current market pricing.

The meeting is next Tuesday and Wednesday.

by Calculated Risk on 12/12/2014 05:18:00 PM

From HotelNewsNow.com: STR: US results for week ending 6 December

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 30 November through 6 December 2014, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy rose 3.1 percent to 57.1 percent. Average daily rate increased 4.5 percent to finish the week at US$114.73. Revenue per available room for the week was up 7.7 percent to finish at US$65.48.
emphasis added

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotels are now in the slow period of the year.

Click on graph for larger image.

The red line is for 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and since mid-June, the occupancy rate has been a little higher than for the same period in 2000.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com