RSS Feed by Calculated Risk on 1/23/2011 02:33:00 PM
Sunday, January 23, 2011
FOMC Preview
There will be a two day meeting of the Federal Open Market Committee (FOMC) on Tuesday and Wednesday of the coming week. The FOMC statement will be released on Wednesday around 2:15 PM ET, and I expect no changes to the Fed Funds rate, or to the program to reinvest principal payments, or to the Large Scale Asset Purchase program (LSAP, aka "QE2").
The only questions are: 1) will the statement will be more positive than in December, and 2) how many members, if any, will dissent.
• The key portions of the December statement will remain the same. I don't expect the sentence "likely to warrant exceptionally low levels for the federal funds rate for an extended period" to be changed any time soon. There might be some minor changes to the first paragraph to mention the recent improvement in economic data, but the second and third paragraphs will probably remain the same as in December:
... Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. ...• The voting committee members will change this month, and there may be more dissenting votes. The regional Federal Reserve Bank presidents serve one-year terms as voting members of the FOMC on a rotating basis (the NY Fed president is a permanent voting member).
... The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. ...
This means Kansas City Fed president Thomas M. Hoenig will not be a voting member this year. Hoenig was the lone dissenting vote at every meeting in 2010.
Regional voting members this year include Charles L. Evans, Chicago, Richard W. Fisher, Dallas, Narayana Kocherlakota, Minneapolis and Charles I. Plosser, Philadelphia. Both Plosser "The Scope and Responsibilities of Monetary Policy" and Fisher "The Limits of Monetary Policy" have expressed reservations about QE2. So there might be two dissenting votes this week.
Summary for Week ending January 22nd
by Calculated Risk on 1/23/2011 05:05:00 AM
Note: here is the busy economic Schedule for Week of January 23rd.
Below is a summary of the previous week, mostly in graphs.
• December Existing Home Sales: 5.28 million SAAR, 8.1 months of supply
Click on graph for larger image in graph gallery.
This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.
Sales in December 2010 (5.28 million SAAR) were 12.3% higher than last month, and were 2.9% lower than December 2009.
The second graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Inventory is not seasonally adjusted, so it really helps to look at the YoY change.
Although inventory decreased from November to December, inventory increased 8.4% YoY in December. This is the largest year-over-year increase in inventory since January 2008 and this is something to watch closely over the next few months.
The bottom line: Sales rebounded in December to just above Tom Lawler's forecast. This was probably due to a combination of low mortgage rates, falling house prices - especially for distressed properties, and investor buying at the low end.
Inventory remains very high, and the year-over-year increase in inventory is very concerning.
• Housing Starts Declined in December
Total housing starts were at 529 thousand (SAAR) in December, down 4.3% from the revised November rate of 553 thousand, and up 11% from the all time record low in April 2009 of 477 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959).
Single-family starts decreased 9.0% to 417 thousand in December - the lowest level since early 2009.
This graph shows total and single unit starts since 1968. This shows the huge collapse following the housing bubble, and that housing starts have mostly been moving sideways for two years - with slight ups and downs due to the home buyer tax credit.
There was an increase in permits, especially for multi-family units.
• AIA: Architecture Billings Index highest since December 2007
The American Institute of Architects (AIA) reported the December ABI score was 54.2, up from a reading of 52.0 in November. This graph shows the Architecture Billings Index since 1996. The index showed expansion in December (above 50) and this is the highest level since December 2007.
Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions.
According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So this indicator suggests the drag from CRE investment will end mid-year or so.
• NAHB Builder Confidence Remains Unchanged In January
The National Association of Home Builders (NAHB) reported the housing market index (HMI) was unchanged at 16 in January.
This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the January release for the HMI and the November data for starts.
This shows that the HMI and single family starts mostly move in the same direction although there is plenty of noise month-to-month. The HMI has mostly moved sideways - with some minor ups and downs - for over 2 years at a very depressed level.
• Other Economic Stories ...
• NMHC: Is the recovery real for apartments?
• Apartments: "Consensus has a high price"
• From the NY Fed Empire State Manufacturing Index shows "conditions improved" in January
• From the Philly Fed: January 2011 Business Outlook Survey
• From David Leonhardt at Economix: The Deficit We Want
• A hint of good employment news?
• Unofficial Problem Bank list increases to 937 Institutions
Best wishes to all!
Saturday, January 22, 2011
Schedule for Week of January 23rd
by Calculated Risk on 1/22/2011 06:27:00 PM
The key economic report for the coming week is the Q4 advance GDP report to be released on Friday. There are also two important housing reports to be released early in the week: Case-Shiller house prices on Tuesday, and New Home sales on Wednesday. There is also a two day FOMC meeting ending on Wednesday.
Morning: Moody's/REAL Commercial Property Price Index (CPPI) for November.
9:00 AM: S&P/Case-Shiller Home Price Index for November. Although this is the November report, it is really a 3 month average of September, October and November. The consensus is for prices to decline about 1.0% in November; the fifth straight month of house price declines.
This graph shows the seasonally adjusted Composite 10 and Composite 20 indices through October (the Composite 20 was started in January 2000).Prices are falling again, although still above the lows set in early 2009. The Composite 20 index should be close to the post-bubble low in November.
10:00 AM Regional and State Employment and Unemployment (Monthly) for December 2010
10:00 AM: Richmond Fed Survey of Manufacturing Activity for January. The consensus is for the index to be slightly lower than last month at 22 (above zero is expansion).
10:00 AM: 10:00 FHFA House Price Index for November. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).
10:00 AM: Conference Board's consumer confidence index for January. The consensus is for an increase to 54.2 from 52.5 last month.
9:00 PM: 2011 State of the Union Address
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index increased slightly at the end of last year, and has declined slightly early this year.
10:00 AM: New Home Sales for December from the Census Bureau. The consensus is for an increase in sales to 300 thousand (SAAR) in December from 290 thousand in November.
This graph shows New Home Sales since 1963. The dashed line is the current sales rate.New home sales collapsed in May and have averaged only 289 thousand (SAAR) over the last seven months. Prior to the last seven months, the record low was 338 thousand in Sept 1981.
2:15 PM: FOMC Meeting Announcement. No changes are expected to either interest rates or QE2.
8:30 AM: The initial weekly unemployment claims report will be released. The number of initial claims has been trending down over the last few months. The consensus is for a slight increase to 409 thousand compared to 404 thousand last week.
8:30 AM ET: Chicago Fed National Activity Index (December). This is a composite index of other data.
8:30 AM: Durable Goods Orders for December from the Census Bureau. The consensus is for a 1.5% decrease in durable goods orders after decreasing 1.3% in November.
10:00 AM: Pending Home Sales Index for December. The consensus is for a 1% increase in contracts signed. It usually takes 45 to 60 days to close, so this will provide an early indication of closings in February.
11:00 AM: Kansas City Fed regional Manufacturing Survey for January. The index was at 21 in December.
8:30 AM: Q4 GDP (advance release). This is the advance release from the BEA, and the consensus is that real GDP increased 3.5% annualized in Q4.
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for January). The consensus is for an increase to 73.1 from the preliminary reading of 72.7.
Best Wishes to All!
EU's Juncker: Not Taboo for Greece and others to buy-back debt
by Calculated Risk on 1/22/2011 02:39:00 PM
From Reuters: Don't rule out debt buy-back idea: Juncker (ht Rajesh)
European leaders should not shy away from a proposal to buy back the bonds of troubled euro member states but should not rely too much on rich countries, Eurogroup Chief Jean-Claude Juncker said.I'm not sure if this proposal will go anywhere, but many analysts like the idea of Greece buying their debt with money from EFSF.
"It would be wrong to create taboos but we cannot overstretch the strong countries," Juncker said in an interview with German magazine Der Spiegel seen by Reuters on Saturday ahead of publication.
Unofficial Problem Bank list increases to 937 Institutions
by Calculated Risk on 1/22/2011 08:42:00 AM
Note: this is an unofficial list of Problem Banks compiled only from public sources.
Here is the unofficial problem bank list for Jan 21, 2011.
Changes and comments from surferdude808:
The OCC finally released its actions through the middle of December 2010 as we have been waiting for the past two weeks. By and large, the OCC actions were the conversion of Formal Agreements to Consent Orders for six national banks with only one new entrant. The major changes this week result from the publication of nine actions issued by the Illinois Department of Financial & Professional Regulation. We applaud the transparency of the Illinois Department as they are the only state banking authority that publishes its safety & soundness enforcement actions against banks.
This week there are 11 additions and seven removals. The changes result in the Unofficial Problem Bank List having 937 institutions with assets of $409.4 billion, compared with 933 institutions and assets of $410.4 billion last week.
The seven removals include the four failures this week -- United Western Bank, Denver, CO ($2.1 billion Ticker: UWBK); CommunitySouth Bank and Trust, Easley, SC ($441 million Ticker: CBSO); The Bank of Asheville, Asheville, NC ($195 million Ticker: WFSC); and Enterprise Banking Company, McDonough, GA ($101 million). The other removals are Pacific Valley Bank, Salinas, CA ($172 million Ticker: PVBK), which announced in a press release that the FDIC had terminated its Consent Order and two problem banks that were acquired in unassisted transactions in December 2010 -- First National Bank of Chester County, West Chester, PA ($1.1 billion); and ShoreBank, Pacific, Ilwaco, WA ($180 million).
The new additions from the OCC and OTS are Amfirst Bank, National Association, McCook, NE ($254 million); and The Oculina Bank, Fort Pierce, FL ($133 million), respectively. The Illinois Department issued actions against Edens Bank, Wilmette, IL ($259 million); and eight banking subsidiaries of Metropolitan Bank Group, Inc. -- Archer Bank, Chicago, IL ($608 million); North Community Bank, Chicago, IL ($502 million); Plaza Bank, Norridge, IL ($374 million); Metropolitan Bank and Trust Company, Chicago, IL ($323 million); Chicago Community Bank, Chicago, Il ($297 million); The First Commercial Bank, Chicago, IL ($278 million); Citizens Community Bank of Illinois, Berwyn, IL ($218 million); and Community Bank of DuPage, Downers, IL ($61 million).
Next week, we anticipate for the FDIC to release its actions for December 2010, until then try to practice safe banking.
Friday, January 21, 2011
Report: Fannie-Freddie Report to be released mid-February
by Calculated Risk on 1/21/2011 09:17:00 PM
From Nick Timiraos at the WSJ: Fannie-Freddie Report Likely to Be Late
The administration now plans to release the report by mid-February ... once a final report is released it is likely to contain two or three proposals for what should replace Fannie and Freddie ...There is no easy solution. Some limited and explicit guarantee is probably what will happen.
One of the proposals will outline a way for the government to continue backing certain mortgage-backed securities, while another will discuss how to structure a market with no government guarantees. ... any transition period could take between 15 and 20 years, according to Barclays.
