by Calculated Risk on 7/15/2015 02:10:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of Atlanta and based on information collected before July 3, 2015. "

All twelve Federal Reserve Districts indicated that economic activity expanded from mid-May through June. Activity in New York, Philadelphia, and Kansas City grew at a modest pace, while Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco saw moderate growth. Compared with the previous report, growth remained steady in Cleveland, and Boston reported conditions were stable or improving. Boston, Philadelphia, Atlanta, Kansas City, and Dallas reported that contacts were optimistic about future growth, while Chicago and San Francisco cited optimism coming from specific sectors. ...

Manufacturing activity was uneven across Districts from mid-May through June. Philadelphia, Richmond, Atlanta, and Chicago reported that business activity increased. Boston reported mostly positive conditions, and St. Louis indicated that plans for manufacturing activity were positive since the previous report. In contrast, Cleveland, Kansas City, and Dallas reported a decline in activity.

And on real estate:

Reports on residential and commercial real estate markets were positive. Home sales increased for most Districts, although Philadelphia and Dallas reported sales were mixed, and New York reported a decline in sales volume. Most Districts noted home price appreciation. Residential construction activity varied across most of the country. Commercial real estate activity increased at a modest pace for several Districts, while non-residential construction, especially multifamily, was strong in many Districts.
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by Calculated Risk on 7/15/2015 09:23:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.3 percent in June but fell at an annual rate of 1.4 percent for the second quarter of 2015. In June, manufacturing output was unchanged: The output of motor vehicles and parts fell 3.7 percent, but production elsewhere in manufacturing rose 0.3 percent. The indexes for mining and utilities advanced 1.0 percent and 1.5 percent, respectively. At 105.7 percent of its 2007 average, total industrial production in June was 1.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.2 percentage point in June to 78.4 percent, a rate that is 1.7 percentage points below its long-run (1972–2014) average.
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Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 11.5 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.4% is 1.7% below the average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased 0.3% in June to 105.1. This is 26.2% above the recession low, and 4.9% above the pre-recession peak.

This was above expectations of a 0.2% increase, and prior months were revised up.  Much of the recent weakness has been due to lower oil prices - overall a solid report.

by Calculated Risk on 7/15/2015 08:34:00 AM

From Fed Chair Janet Yellen: Semiannual Monetary Policy Report to the Congress

Looking forward, prospects are favorable for further improvement in the U.S. labor market and the economy more broadly. Low oil prices and ongoing employment gains should continue to bolster consumer spending, financial conditions generally remain supportive of growth, and the highly accommodative monetary policies abroad should work to strengthen global growth. In addition, some of the headwinds restraining economic growth, including the effects of dollar appreciation on net exports and the effect of lower oil prices on capital spending, should diminish over time. As a result, the FOMC expects U.S. GDP growth to strengthen over the remainder of this year and the unemployment rate to decline gradually.

As always, however, there are some uncertainties in the economic outlook. Foreign developments, in particular, pose some risks to U.S. growth. Most notably, although the recovery in the euro area appears to have gained a firmer footing, the situation in Greece remains difficult. And China continues to grapple with the challenges posed by high debt, weak property markets, and volatile financial conditions. But economic growth abroad could also pick up more quickly than observers generally anticipate, providing additional support for U.S. economic activity. The U.S. economy also might snap back more quickly as the transitory influences holding down first-half growth fade and the boost to consumer spending from low oil prices shows through more definitively.
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by Calculated Risk on 7/15/2015 07:00:00 AM

Note: Results for holiday weeks - and the following week - can be very volatile.

From the MBA: Refi Applications Up, Purchase Applications Down in Latest MBA Weekly Survey

Mortgage applications decreased 1.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 10, 2015. The prior week’s results included an adjustment for the July 4th holiday. ...

The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 8 percent from one week earlier. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 17 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) remained unchanged from 4.23 percent, with points increasing to 0.39 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
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Click on graph for larger image.


The first graph shows the refinance index.

With higher rates, refinance activity is very low.

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 17% higher than a year ago.

by Calculated Risk on 7/14/2015 06:34:00 PM

From the WSJ: White House Cuts Growth Forecast for 2015, 2016

The White House said it sees U.S. growth rising by just 2% this year before rebounding to 2.9% in 2016—down from its earlier forecast of 3% growth for both 2015 and 2016 released in February—after the economy stalled during the first quarter.
...
The White House estimates that the annual budget deficit will fall to $455 billion this year, down 22% from its estimate of $583 billion in February.
...
It sees the unemployment rate falling to 5.3% this year and 4.9% next year, down from forecasts of 5.4% and 5.1%, respectively, published in February.

Due to demographics, 2% really is the new 4%.  But there is good news on the deficit and unemployment!

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

• At 8:30 AM, the Producer Price Index for June from the BLS. The consensus is for a 0.3% increase in prices, and a 0.1% increase in core PPI.

• Also at 8:30 AM, the NY Fed Empire State Manufacturing Survey for July. The consensus is for a reading of 3.5, up from -2.0 last month (above zero is expansion).

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for June. The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to be unchanged at 78.1%.

• At 10:00 AM, Testimony by Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.