by Calculated Risk on 11/16/2010 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production was unchanged in October after having fallen 0.2 percent in September. ... The capacity utilization rate for total industry was flat at 74.8 percent, a rate 6.6 percentage points above the low in June 2009 and 5.8 percentage points below its average from 1972 to 2009.

Click on graph for larger image in new window.

This graph shows Capacity Utilization. This series is up 9.7% from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 74.8% is still far below normal - and well below the pre-recession levels of 81.2% in November 2007.

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

The second graph shows industrial production since 1967.

Industrial production was unchanged in October, and production is still 7.3% below the pre-recession levels at the end of 2007.

This was below consensus expectations of a 0.3% increase in Industrial Production, and an increase to 74.9% for Capacity Utilization.

by Calculated Risk on 11/15/2010 11:35:00 PM

An overview from the NY Times: Europe Fears That Debt Crisis Is Ready to Spread

European officials, increasingly concerned that the Continent’s debt crisis will spread, are warning that any new rescue plans may need to cover Portugal as well as Ireland to contain the problem they tried to resolve six months ago.
...
Of paramount concern to policy makers in Europe is Spain, which is struggling to close its own deficit of 9 percent of G.D.P. at a time when unemployment is more than 20 percent and the economy is failing to grow.

Officials of both Ireland and Portugal are saying they are not asking for help - Ireland is funded until mid-2011. So this crisis might simmer for some time ...

by Calculated Risk on 11/15/2010 07:40:00 PM

Notes: this data is not seasonally adjusted. There is a very distinct seasonal pattern for imports, but not for exports. LA area ports handle about 40% of the nation's container port traffic.

The following graph shows the loaded inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.

Click on graph for larger image in new window.

Loaded inbound traffic was up 15% compared to October 2009.

Loaded outbound traffic was up 12% from October 2009.

For imports, there is a clear seasonal pattern and frequently a double peak - first in late summer, and then in October as retailers build inventory for the holiday season - so this was an unusual decrease in October compared to September.

For exports there is no clear seasonal pattern, and exports increased to just above the level in May. This suggests that the trade deficit with China (and other Asian countries) might have declined slightly in October (seasonally adjusted).

by Calculated Risk on 11/15/2010 05:05:00 PM

From Jon Prior at HousingWire: S&P predicts more home price declines through 2011

Standard & Poor's analysts believe home prices will drop between 7% and 10% through 2011 ...

"Low mortgage rates ...influence on home buying activities has been limited due to the weak housing market and a lack of demand," S&P credit analyst Erkan Erturk said. ...

Prices will continue to be pressed down as long as the market works through a backlog of distressed properties that remains elevated.

This gives me an excuse to update the graph on house prices and months-of-supply. The following graph shows existing home months-of-supply (left axis), and Case-Shiller composite 20 house prices (right axis, inverted).

Click on graph for larger image in new window.

House prices are through August using the composite 20 index (a three month average of June, July and August). Months-of-supply is through September. The preliminary data indicates that months-of-supply was still in double digits in October.

This is one of the reasons I expect house prices to fall another 5% to 10% - and it looks like S&P is now forecasting about the same price declines.

Note: there have been periods with high months-of-supply and rising house prices (see: Lawler: Again on Existing Home Months’ Supply: What’s “Normal?” ) so this is just a guide.

by Calculated Risk on 11/15/2010 02:35:00 PM

This is interesting because these forecasters are still catching up with the slowdown.

From the Philly Fed: Forecasters Predict Further Slowdown in Economic Recovery

The pace of recovery in output and employment in the U.S. economy looks a little slower now than it did three months ago, according to 43 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The panel expects real GDP to grow at an annual rate of 2.2 percent this quarter, down from the previous estimate of 2.8 percent. [CR Note: I'll take the under for Q4]
...
The forecasters predict real GDP will grow 2.5 percent in 2011, 2.9 percent in 2012, and 3.0 percent in 2013.
...
The forecasters also predict weaker recovery in the labor market. Unemployment is projected to be an annual average of 9.7 percent in 2010, before falling to 9.3 percent in 2011, 8.7 percent in 2012, and 7.9 percent in 2013. These estimates are higher than the projections in the last survey. On the employment front, the forecasters have revised downward the growth in jobs over the next four quarters. The forecasters see nonfarm payroll employment growing at a rate of 86,600 jobs per month this quarter and 104,200 jobs per month next quarter.
...
The current outlook for the headline and core measures of CPI and PCE inflation in 2011 and 2012 is lower than it was in the last survey.

The real GDP projections and the unemployment rate forecasts are a little inconsistent. If GDP grows at these rates, the unemployment rate will probably be higher than these projections through 2013.

by Calculated Risk on 11/15/2010 10:14:00 AM

From the NY Fed:

The Empire State Manufacturing Survey indicates that conditions deteriorated in November for New York State manufacturers. For the first time since mid-2009, the general business conditions index fell below zero, declining 27 points to -11.1. The new orders index plummeted 37 points to -24.4, and the shipments index also fell below zero. The indexes for both prices paid and prices received declined, with the latter falling into negative territory. The index for number of employees remained above zero but was well below its October level, and the average workweek index dropped to -13.0.

I'll have more when the Philly Fed index is released on Thursday, but this was far below the expectations of a reading of 15.

And from the Census Bureau: September 2010 Manufacturing and Trade Inventories and Sales report

Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,402.9 billion, up 0.9 percent (±0.1%) from August 2010 and up 6.3 percent (±0.4%) from September 2009.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.27.

Expectations were for a 0.8% increase in inventories.