by Calculated Risk on 7/26/2015 07:49:00 PM

From Ben Leubsdorf and Jon Hilsenrath at the WSJ: Fed Officials May Offer More Clarity on Rates

Federal Reserve officials are likely to emerge from their policy meeting Wednesday with short-term interest rates still pinned near zero, though they could send fresh hints that they’re getting closer to raising rates. ...

This leaves the Fed with a slight signaling challenge at the meeting this week. How aggressively should officials tip their hands about the timing of a rate increase later this year? Fed officials don’t want to take financial markets by surprise by raising the benchmark federal-funds rate for the first time since 2006 with no forewarning. At the same time, they want to keep their options open so they can adjust their stance as the economy evolves.

CR Note: I don't expect an explicit signal at the FOMC meeting this week, instead I expect the FOMC to emphasize that they are data dependent - and that they would like to see further improvement in the labor market, and further evidence of inflation moving back towards 2%.

The September meeting could be interesting!

Weekend:
• Schedule for Week of July 26, 2015

Monday:
• At 8:30 AM, Durable Goods Orders for June from the Census Bureau. The consensus is for a 3.1% increase in durable goods orders.

• At 10:30 AM, Dallas Fed Manufacturing Survey for July.

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up slightly and DOW futures are up 20 (fair value).

Oil prices were down over the last week with WTI futures at $48.04 per barrel and Brent at $54.62 per barrel.  A year ago, WTI was at $103, and Brent was at $106 - so prices are down about 50% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.71 per gallon (down about $0.80 per gallon from a year ago).

by Calculated Risk on 7/26/2015 10:25:00 AM

From Lynn Cook at the WSJ: Sudden Drop in Crude-Oil Prices Roils U.S. Energy Firms’ Rebound

U.S. energy companies are planning more layoffs, asset sales and financial maneuvers to deal with a recent, sudden drop in U.S. crude-oil prices to under $50 a barrel, the lowest level in four months.
...
Nearly 50,000 energy jobs have been lost in the past three months on top of 100,000 employees laid off since oil prices started to tumble last fall, according to Graves & Co., a Houston energy consultancy.

Click on graph for larger image

This graph shows WTI and Brent spot oil prices from the EIA. (Prices Friday added).  According to Bloomberg, WTI was at $48.14 per barrel on Friday, and Brent at $54.62.

Prices are down about 50% year-over-year.

The second graph shows the prices over the last few years.

Some producers stopped cutting when prices started to rebound, but now prices are declining again - and there will probably be more layoffs in the oil sector.

Note: Several oil producing states are already in recession such as North Dakota, Oklahoma and Alaska, but overall lower oil prices will be a positive for the U.S. economy.

by Calculated Risk on 7/25/2015 08:15:00 AM

The key reports this week are Q2 GDP on Thursday, and Case-Shiller house prices on Tuesday.

The FOMC meets on Tuesday and Wednesday, and no change to policy is expected at this meeting.

----- Monday, July 27th -----
8:30 AM: Durable Goods Orders for June from the Census Bureau. The consensus is for a 3.1% increase in durable goods orders.

10:30 AM: Dallas Fed Manufacturing Survey for July.

----- Tuesday, July 28th -----
9:00 AM: S&P/Case-Shiller House Price Index for May. Although this is the May report, it is really a 3 month average of March, April and May prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the April 2015 report (the Composite 20 was started in January 2000).

The consensus is for a 5.6% year-over-year increase in the Comp 20 index for April. The Zillow forecast is for the National Index to increase 4.0% year-over-year in May.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for July.

10:00 AM: Q2 Housing Vacancies and Homeownership survey.

----- Wednesday, July 29th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Pending Home Sales Index for June. The consensus is for a 1.0% increase in the index.

2:00 PM: FOMC Meeting Announcement. No change is expected to policy.

----- Thursday, July 30th -----
8:30 AM: Gross Domestic Product, 2nd quarter 2015 (advance estimate); Includes historical revisions. The consensus is that real GDP increased 2.9% annualized in Q2.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 272 thousand from 255 thousand.

----- Friday, July 31st -----
8:30 AM: The Q2 Employment Cost Index

9:45 AM: Chicago Purchasing Managers Index for June. The consensus is for a reading of 50.0, up from 49.4 in May.

10:00 AM: University of Michigan's Consumer sentiment index (final for July). The consensus is for a reading of 94.1, up from the preliminary reading of 93.3.

by Calculated Risk on 7/24/2015 06:29:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for June 2015. In the past month, the indexes increased in 40 states, decreased in seven, and remained stable in three, for a one-month diffusion index of 66. Over the past three months, the indexes increased in 42 states, decreased in six, and remained stable in two, for a three-month diffusion index of 72.

Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In June, 40 states had increasing activity.

It appears we are seeing weakness in several oil producing states including Alaska, Oklahoma and North Dakota - and also in other energy producing states like West Virginia.


Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and is almost all green again.

Note: Blue added for Red/Green issues.

by Calculated Risk on 7/24/2015 03:31:00 PM

A few excerpts from a research note by economists at Nomura:

Q2 GDP, first estimate (Thursday): Economic activity in Q2 bounced back after slowing in Q1. However, some factors such as low energy prices and the strong dollar likely continued to weigh on business activity. We expect the BEA to report that the rebound in activity was concentrated in the consumer, housing and government sectors. As such we forecast a 2.8% increase in Q2 GDP, with real final sales growing by 3.1% as we expect inventory investment to subtract 0.3pp from GDP growth.

The annual revisions to GDP will also be released. Revisions will be mostly applied to data between 2012 and Q1 2015. The most notable features the annual revisions will introduce are 1) the average of GDP, gross domestic income and final sales, 2) an upgrade to its presentation of exports and imports, and 3) improvements to seasonal adjustment of certain GDP components. Furthermore, our work suggests that there is material residual seasonality in top-line GDP in Q1, as it tends to be below trend due to strong seasonal patterns in defense spending. Therefore, we might see some revision to the distribution of GDP growth in the first part of this year. As such, there is more uncertainty around the Q2 GDP estimate than usual.

Earlier on GDP: Merrill on the Annual GDP Revision and Q2 GDP