by Calculated Risk on 3/19/2015 10:08:00 AM

From the Philly Fed: March Manufacturing Survey

Manufacturing activity in the region increased at a modest pace in March, according to firms responding to this month’s Manufacturing Business Outlook Survey. The survey’s current indicators for general activity and new orders were positive and remained near their low readings in February.
...
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, at 5.0, was virtually unchanged from its reading of 5.2 in February ...

Although the current employment index, at just 3.5, was virtually unchanged from last month, the index remains well below its average reading of about 14 over the second half of last year. ...
emphasis added

This was below the consensus forecast of a reading of 7.0 for March.

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The light blue line is an average of the NY Fed (Empire State) and Philly Fed surveys through March. The ISM and total Fed surveys are through February.  Note: Areas with oil production (Texas and some in Kansas City region), have been especially weak.

The average of the Empire State and Philly Fed surveys declined in March, and this suggests a slightly weaker ISM report for March.

by Calculated Risk on 3/19/2015 08:33:00 AM

The DOL reported:

In the week ending March 14, the advance figure for seasonally adjusted initial claims was 291,000, an increase of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 289,000 to 290,000. The 4-week moving average was 304,750, an increase of 2,250 from the previous week's revised average. The previous week's average was revised up by 250 from 302,250 to 302,500.

There were no special factors impacting this week's initial claims.

The previous week was revised up to 290,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 304,750.

This was slightly below the consensus forecast of 293,000, and the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 3/18/2015 07:01:00 PM

From Tim Duy: Yellen Strikes a Dovish Tone

The FOMC concluded its two-day meeting today, and the results were largely as I had anticipated. The Fed took note of the recent data, downgrading the pace of activity from "solid" to "moderated." They continue to expect inflation weakness to be transitory. The risks to the outlook are balanced. And "patient" was dropped; April is still off the table for a rate hike, but data dependence rules from that point on.

Growth, inflation and unemployment forecasts all came down. Especially important was the decrease in longer-run unemployment projections. The Fed's estimates of NAIRU are falling, something almost impossible to avoid given the stickiness of wage growth in the face of falling unemployment. The forecast changes yielded a downward revision to the Fed's interest rate projections. In addition, the strong dollar was clearly on the Fed's mind. Federal Reserve Chair Janet Yellen often referred to the dollar and its impact on growth in the press conference, much more than I expected.
...
Bottom Line: Yellen does it again - she moves the Fed both closer to and further from the first rate hike of this cycle. By moving toward the markets on the path of rate hikes, the Fed acknowledges that they are eager to let this recovery run on. Moreover, they proved that they are in fact data dependent by moving policy in the direction of the data. Overall, Yellen has managed the transition away from what the Fed came to see as excessive forward guidance just about as well as could be expected.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 293 thousand from 289 thousand.

• At 10:00 AM, the Philly Fed manufacturing survey for February. The consensus is for a reading of 7.0, up from 5.2 last month (above zero indicates expansion).

by Calculated Risk on 3/18/2015 04:00:00 PM

From housing economist Tom Lawler:

Based on local realtor/MLS reports from across the country, I project that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.87 million in February, up 1.0% from January’s pace and up 4.5% from last February’s pace.

On the inventory front, local realtor/MLS reports suggest that the inventory of existing homes for sale at the end of February was little changed From January, which if true would mean that this inventory was down 1.6% from last February. Finally, local realtor/MLS suggest that the NAR’s median existing SF home sales price last month was up about 6.7% from a year earlier.

While not enough local realtors/MLS either report data on new pending sales or report accurate/consistent data on new pending sales for me to produce a “national” estimate, most or the realtors/MLS that do report such data showed significantly faster YOY growth in pending sales in February compared to January.

CR Note: The NAR is scheduled to release February existing home sales on Monday, March 23, 2015, at 10 AM ET.

by Calculated Risk on 3/18/2015 02:19:00 PM

Statement here "Patient" was removed, unlikely rate hike in April, "growth has moderated".

As far as the "Appropriate timing of policy firming",  participant views were unchanged (15 participants expect the first rate hike in 2015, and 2 in 2016), but "dots" moved down (fewer rate hikes).

The FOMC projections for inflation are still on the low side through 2017.

Yellen press conference here.

On the projections, GDP for 2015 was revised down, the unemployment rate was revised down again, and inflation projections were revised down (include core inflation).

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2015	2016	2017
Mar 2015 Meeting Projections	2.3 to 2.7	2.3 to 2.7	2.0 to 2.5
Dec 2014 Meeting Projections	2.6 to 3.0	2.5 to 3.0	2.3 to 2.5
Sept 2014 Meeting Projections	2.6 to 3.0	2.6 to 2.9	2.3 to 2.5

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 5.5% in February, so the unemployment rate projection for Q4 2015 was revised lower. 

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2015	2016	2017
Mar 2015 Meeting Projections	5.0 to 5.2	4.9 to 5.1	4.8 to 5.1
Dec 2014 Meeting Projections	5.2 to 5.3	5.0 to 5.2	4.9 to 5.3
Sept 2014 Meeting Projections	5.4 to 5.6	5.1 to 5.4	4.9 to 5.3

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of January, PCE inflation was up only 0.2% from January 2014, and core inflation was up 1.3%.   PCE inflation wa revised down for 2015, and will be well below the FOMC's 2% target.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2015	2016	2017
Mar 2015 Meeting Projections	0.6 to 0.8	1.7 to 1.9	1.9 to 2.0
Dec 2014 Meeting Projections	1.0 to 1.6	1.7 to 2.0	1.8 to 2.0
Sept 2014 Meeting Projections	1.6 to 1.9	1.7 to 2.0	1.9 to 2.0

PCE core inflation was up only 1.3% in January.  Core PCE inflation was revised down for 2015 and 2016.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2015	2016	2017
Mar 2015 Meeting Projections	1.3 to 1.4	1.5 to 1.9	1.8 to 2.0
Dec 2014 Meeting Projections	1.5 to 1.8	1.7 to 2.0	1.8 to 2.0
Sept 2014 Meeting Projections	1.6 to 1.9	1.8 to 2.0	1.9 to 2.0