by Calculated Risk on 7/01/2015 10:59:00 AM

Earlier today, the Census Bureau reported that overall construction spending increased in May:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during May 2015 was estimated at a seasonally adjusted annual rate of $1,035.8 billion, 0.8 percent above the revised April estimate of $1,027.0 billion. The May figure is 8.2 percent above the May 2014 estimate of $957.6 billion.

Both Private and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $752.4 billion, 0.9 percent above the revised April estimate of $745.6 billion. ...

In May, the estimated seasonally adjusted annual rate of public construction spending was $283.4 billion, 0.7 percent above the revised April estimate of $281.5 billion.
emphasis added

Note: Non-residential for offices and hotels is generally increasing, but spending for oil and gas has been declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because oil prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.

As an example, construction spending for private lodging is up 30% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 24% year-over-year.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending has been increasing recently, and is 47% below the bubble peak.

Non-residential spending is only 5% below the peak in January 2008 (nominal dollars).

Public construction spending is now 13% below the peak in March 2009 and about 7% above the post-recession low.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 8%. Non-residential spending is up 13% year-over-year. Public spending is up 3% year-over-year.

Looking forward, all categories of construction spending should increase in 2015. Residential spending is still very low, non-residential is starting to pickup (except oil and gas), and public spending has probably hit bottom after several years of austerity.

This was above the consensus forecast of a 0.5% increase, and spending for January through April was revised up.  A solid report.

by Calculated Risk on 7/01/2015 10:06:00 AM

The ISM manufacturing index suggested expansion in June. The PMI was at 53.5% in June, up from 52.8% in May. The employment index was at 55.5%, up from 51.7% in May, and the new orders index was at 56.0%, up from 55.8%.

From the Institute for Supply Management: June 2015 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in June for the 30th consecutive month, and the overall economy grew for the 73rd 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 June PMI® registered 53.5 percent, an increase of 0.7 percentage point over the May reading of 52.8 percent. The New Orders Index registered 56 percent, an increase of 0.2 percentage point from the reading of 55.8 percent in May. The Production Index registered 54 percent, 0.5 percentage point below the May reading of 54.5 percent. The Employment Index registered 55.5 percent, 3.8 percentage points above the May reading of 51.7 percent, reflecting growing employment levels from May at a faster rate. Inventories of raw materials registered 53 percent, an increase of 1.5 percentage points from the May reading of 51.5 percent. The Prices Index registered 49.5 percent, the same reading as in May, indicating lower raw materials prices for the eighth consecutive month. Comments from the panel indicate mostly stable to improving business conditions, with the notable exception relating to the oil and gas markets. Also noted is the negative effect on egg prices and availability due to the avian flu outbreak."
emphasis added

Click on graph for larger image.

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

This was above expectations of 53.2%, and indicates slightly faster expansion in June. Solid internals.

by Calculated Risk on 7/01/2015 08:19:00 AM

From ADP:

Private sector employment increased by 237,000 jobs from May to June according to the June ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
Goods-producing employment rose by12,000 jobs in June, after adding 11,000 in May. The construction industry had another solid month in June adding 19,000 jobs, down from 28,000 last month. Meanwhile, manufacturing added 7,000 jobs in June, after losing 2,000 in May.

Service-providing employment rose by 225,000 jobs in June, a strong rise from 192,000 in May. The ADP National Employment Report indicates that professional/business services contributed 61,000 jobs in June, almost double May’s 32,000. Trade/transportation/utilities grew by 50,000, the same as the previous month. The 19,000 new jobs added in financial activities was an increase from last month’s 12,000.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “The U.S. job machine remains in high gear. The current robust pace of job growth is double that needed to absorb the growth in the working age population. The only blemish in the job market is the loss of jobs in the energy sector. Most encouraging is the healthy rate of job growth among the nation’s smallest companies.”

This was above the consensus forecast for 220,000 private sector jobs added in the ADP report. 

The BLS report for June will be released tomorrow, Thursday, and the consensus is for 228,000 non-farm payroll jobs added in June.

by Calculated Risk on 7/01/2015 07:00:00 AM

From the MBA: Mortgage Applications Drop in Latest MBA Weekly Survey as Rates Increase

Mortgage applications decreased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 26, 2015. ...

The Refinance Index decreased 5 percent from the previous week to its lowest level since December 2014. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 5 percent compared with the previous week and was 14 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.26 percent, its highest level since October 2014, from 4.19 percent, with points decreasing to 0.33 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

With higher rates, refinance activity is at the lowest level since December 2014.

2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 14% higher than a year ago.

by Calculated Risk on 6/30/2015 06:48:00 PM

Statement by the IMF on Greece

Press Release No.15/310
June 30, 2015
Mr. Gerry Rice, Director of Communications at the International Monetary Fund (IMF), made the following statement today regarding Greece’s financial obligations to the IMF due today:

“I confirm that the SDR 1.2 billion repayment (about EUR 1.5 billion) due by Greece to the IMF today has not been received. We have informed our Executive Board that Greece is now in arrears and can only receive IMF financing once the arrears are cleared.

“I can also confirm that the IMF received a request today from the Greek authorities for an extension of Greece’s repayment obligation that fell due today, which will go to the IMF’s Executive Board in due course.”

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, the ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 220,000 payroll jobs added in June, up from 200,000 in May.

• At 10:00 AM, the ISM Manufacturing Index for June. The consensus is for an increase to 53.2 from 52.8 in May. The ISM manufacturing index indicated expansion at 52.8% in May. The employment index was at 51.7%, and the new orders index was at 55.8%.

• Also at 10:00 AM, Construction Spending for May. The consensus is for a 0.5% increase in construction spending.

• All day, Light vehicle sales for June. The consensus is for light vehicle sales to decrease to 17.2 million SAAR in June from 17.7 million in May (Seasonally Adjusted Annual Rate).