by Calculated Risk on 12/15/2010 03:47:00 PM

In addition to the CPI release this morning from the BLS, the Cleveland Fed released the median CPI and the trimmed-mean CPI:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.1% (1.0% annualized rate) in November. The 16% trimmed-mean Consumer Price Index increased 0.1% (1.1% annualized rate) during the month. ...

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (1.5% annualized rate) in November. The CPI less food and energy increased 0.1% (1.2% annualized rate) on a seasonally adjusted basis.

Over the last 12 months, the median CPI rose 0.5%, the trimmed-mean CPI rose 0.8%, the CPI rose 1.1%, and the CPI less food and energy rose 0.8%

So these three measures: core CPI, median CPI and trimmed-mean CPI, all increased less than 1% over the last 12 months.

Click on graph for larger image in graph gallery.

This graph shows these three measure of inflation on a year-over-year basis.

They all show that inflation has been falling, and that measured inflation is up less than 1% year-over-year.

Note: The Cleveland Fed has a discussion of a number of measures of inflation: Measuring Inflation

The indexes for rent and owners' equivalent rent both increased in November.

It appears that rents have bottomed and are starting to increase again (this fits with earlier reports of falling vacancy rates and rising rents). I don't expect rents to push up inflation very much (I think core inflation will stay low for some time with all the slack in the system), but rising rents suggests that the excess rental housing units are being absorbed - a necessary step for an eventual recovery in residential investment.

More from Mark Thoma on inflation expectations at Economist's View: (Lack of) Inflation Watch

by Calculated Risk on 12/15/2010 01:34:00 PM

Here is the roll call vote. On to the House ...

by Calculated Risk on 12/15/2010 01:01:00 PM

When I started this blog in January 2005, one of my goals was to alert people to the housing bubble, and to discuss the possible consequences of the then approaching housing bust. Residential investment has historical been one of the best leading indicators for the economy, and I was deeply concerned a major housing bust - both in terms of activity and house prices - would take the economy into recession.

There were others sounding the alarm - Robert Shiller, Tom Lawler, Dean Baker, Doris "Tanta" Dungey, and others. There was discussion of loose lending standards (including, but not limited to subprime), lack of regulatory supervision, agency problems with the originate-to-distribute model, and more. And although we might have disagreed on the exact causes of the bubble, as far as I know none of the people who are commonly credited with identifying the bubble, and predicted the bust, blamed it primarily on Fannie and Freddie or the Community Reinvestment Act (CRA).

When the Financial Crisis Inquiry Commission was announced, I was skeptical if they'd be willing to address the willful lack of regulatory supervision, and the role of Wall Street in the crisis. This morning, Shahien Nasiripour at the HuffPo wrote: Financial Crisis Panel In Turmoil As Republicans Defect; Plan To Blame Government For Crisis

The Republicans, led by the commission's vice chairman, former congressman and chair of the House Ways and Means Committee Bill Thomas, will likely focus their report on the explosive growth of subprime mortgages and the heavy role played by the federal government in pushing mortgage giants Fannie Mae and Freddie Mac to purchase and insure them. They'll also likely focus on the Community Reinvestment Act, a 1977 law that encourages banks to lend to underserved communities, these people said.
...
During a private commission meeting last week, all four Republicans voted in favor of banning the phrases "Wall Street" and "shadow banking" and the words "interconnection" and "deregulation" from the panel's final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.

How depressing.

If Nasiripour story is correct, the explanations offered by these four individuals are blatantly false. Lets name names: Bill Thomas, Peter Wallison, Keith Hennessey and Douglas Holtz-Eakin. These are all subprime thinkers.

by Calculated Risk on 12/15/2010 10:00:00 AM

The National Association of Home Builders (NAHB) reports the housing market index (HMI) was unchanged at 16 in December. Confidence remains very low ... any number under 50 indicates that more builders view sales conditions as poor than good.

Click on graph for larger image in new window.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the December release for the HMI and the October data for starts (November housing starts will be released tomorrow).

This shows that the HMI and single family starts mostly move in the same direction - although there is plenty of noise month-to-month.

Press release from the NAHB: Builder Confidence Remains Flat in December

Builder confidence in the market for newly built, single-family homes remained unchanged in December from the previous month at 16 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.
...
Two out of three components of December's HMI remained unchanged from the previous month, including the component gauging current sales conditions (which remained at 16) and the component gauging sales expectations in the next six months (which was flat at 25). The component gauging traffic of prospective buyers fell a single point, to 11.

by Calculated Risk on 12/15/2010 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.4 percent in November after a decline of 0.2 percent in October. The rate of change for industrial production was revised down in October but up in September; the net effect of the revisions from June to October left the level of industrial production in October about the same as was previously reported. ... At 93.9 percent of its 2007 average, total industrial production in November was 5.4 percent above its level a year earlier. The capacity utilization rate for total industry rose to 75.2 percent, a rate 5.4 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 10.3% from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 75.2% 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 increased in November, but production is still 6.8% below the pre-recession levels at the end of 2007.

This was slightly above consensus expectations of a 0.3% increase in Industrial Production, and an increase to 75.0% for Capacity Utilization. The increases in Industrial Production and Capacity Utilization have slowed significantly since May.

by Calculated Risk on 12/15/2010 08:30:00 AM

• From the Financial Times: Spain threatened with fresh downgrade

Moody’s ... has said it may downgrade Spanish government bonds because of the country’s likely difficulty in raising large sums of money next year, the problems of its savings banks and the debts incurred by its autonomous regions.
excerpt with permission

This has pushed the yields on Spain 10-year bonds to a new record high of 5.52%.

• From the NY Fed: Empire State Manufacturing Survey

The Empire State Manufacturing Survey indicates that conditions improved in December for New York State manufacturers. After dropping sharply into negative territory in November, the general business conditions index bounced back above zero, climbing 22 points to 10.6. The new orders and shipments indexes also rose above zero, while the unfilled orders index remained negative. The inventories index was negative, indicating that inventory levels were lower over the month. The indexes for both prices paid and prices received were positive and higher than last month, suggesting that prices rose, while employment indexes were negative, indicating that employment declined.

This was the one regional survey that indicated contraction in November.

• From the BLS: Consumer Price Index increased 0.1 percent in November

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.1 percent before seasonal adjustment.
...
The index for all items less food and energy rose 0.1 percent in November [Core CPI], its first increase since July. The index for shelter rose 0.1 percent in November, the same increase as the previous month. The rent index rose 0.2 percent, its largest increase since March 2009, while the index for owners' equivalent rent rose 0.1 percent ...