by Calculated Risk on 10/01/2009 10:44:00 PM

A couple late night articles:

The Ylan Mui at the WaPo reviews the recent economic data: New Economic Reports Show We're Still Hurting (ht Ann)

The fragile economic recovery has relied heavily on government stimulus spending, but new data show that as the money runs out, a sustained rebound may be elusive.

A similar theme from The Economist: After the storm

Despite a welcome return to growth, the world economy is far from returning to “normal” activity. Unemployment is still rising and much manufacturing capacity remains idle. Many of the sources of today’s growth are temporary and precarious. The rebuilding of inventories will not boost firms’ output for long. Across the globe spending is being driven by government largesse, not animal spirits. Massive fiscal and monetary stimulus is cushioning the damage to households’ and banks’ balance-sheets, but the underlying problems remain. In America and other former bubble economies, household debts are worryingly high, and banks need to bolster their capital. That suggests consumer spending will be lower and the cost of capital higher than before the crunch. The world economy may see a few quarters of respectable growth, but it will not bounce back to where it would have been had the crisis never happened.

Recoveries are usually led by a pickup in consumer spending and residential investment. Although consumer spending was strong in August, the numbers were distorted by the cash-for-clunkers program, and I expect weak growth for consumer spending through most of next year as households save more and rebuild their balance sheets.

And for residential investment, there is still too much excess existing home inventory, and possibly a large shadow inventory. I will write more on the outlook for consumer spending and residential investment soon.

As The Economists notes, rebuilding inventories will be a transitory boost for the economy, and that leaves government spending and exports. That doesn't sound like an Immaculate Recovery.

by Calculated Risk on 10/01/2009 06:40:00 PM

The BLS jobs report will be released tomorrow morning. The consensus is for 170 thousand net jobs lost and the unemployment rate rising to 9.8%. That seems a little optimistic given the recent data flow.

Lots of data today:

Weekly Unemployment Claims: 551,000

August PCE and Saving Rate Note: August was distorted by cash-for-clunkers (see auto post).

ISM Manufacturing shows expansion in September

Construction Spending increases in August

Light Vehicle Sales 9.2 Million (SAAR) in September

And a few other interesting articles:

Another article on strategic defaults, from Bloomberg: Leaving Affordable Mortgage May Become Winning Gambit

So-called strategic defaults, in which homeowners stop paying their mortgages while remaining current on other debts, rose 128 percent to 588,000 last year, according to Experian PLC ...

The classic definition of a "strategic default" is a borrower who can afford their mortgage, but stops paying it because they owe far more than their home is worth. This measurement from Experian is very different and includes many people who can no longer afford their mortgage. Long ago borrowers paid their mortgages first - to keep their homes - but that was when people actually had money invested in their homes. (sorry for the snark).

On failed banks, from Jonathan Weil at Bloomberg: Banks Have Us Flying Blind on Depth of Losses

There was a stunning omission from the government’s latest list of “problem” banks, which ran to 416 lenders, a 15-year high, as of June 30. One outfit not on the list was Georgian Bank, the second-largest Atlanta-based bank, which supposedly had plenty of capital.
...
The cost of Georgian’s failure confirms that the bank’s asset values were too optimistic.
...
Georgian also reported a 12-fold jump in nonperforming loans to $306.4 million from $24.7 million three months earlier, mostly construction loans. Georgian’s numbers made it seem as if the surge arose from nowhere.
...
What wasn’t made public until Sept. 25, the day it closed, was that Georgian Bank had agreed to a cease-and-desist order with the FDIC on Aug. 31 after flunking an agency examination.

I believe it would be helpful if the FDIC released the Cease & Desist orders on a more timely basis.

From Bloomberg: Recession Rising Like Phoenix With Area Delinquencies Surging (ht Mike In Long Island)

Delinquencies in the Phoenix area on loans backed by office, industrial, retail and apartment properties have risen more than five-fold since March, according to data compiled by Bloomberg.
...
“The problems in commercial real estate are just getting started and they will dampen what is already going to be a weak economic recovery,” said Jim Rounds, senior vice president and senior economist at Elliott D. Pollack. “In Arizona, the recession is probably going to last to the middle of the next calendar year.”

Live by real estate. Die by real estate.

by Calculated Risk on 10/01/2009 03:38:00 PM

Click on graph for larger image in new window.

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for September (red, light vehicle sales of 9.22 million SAAR from AutoData Corp).

This is the third lowest vehicle sales this year.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Obviously sales were boosted significantly by the "Cash-for-clunkers" program in August and some in July. Although this wasn't as bad as some of the lower forecasts, it was still below most estimates.

Note: the answer to the earlier poll was 746 thousand (not seasonally adjusted sales).

by Calculated Risk on 10/01/2009 02:44:00 PM

We are now in the Fall business travel season ...

From HotelNewsNow.com: Norfolk-Virginia Beach posts RevPAR growth in STR weekly numbers

Overall, in year-over-year measurements, the industry’s occupancy fell 7.2 percent to end the week at 59.8 percent. Average daily rate dropped 10.1 percent to finish the week at US$100.30. RevPAR for the week decreased 16.6 percent to finish at US$59.94.

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 10.2% from the same period in 2008.

The average daily rate is down 10.1%, and RevPAR is off 16.6% from the same week last year.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

The goods news is the comparisons will become easier soon since business travel fell off a cliff last October. However occupancy rates below 60% are crushing. For comparison, occupancy rates for October in 2006 and 2007 were close to 68%.

by Calculated Risk on 10/01/2009 12:05:00 PM

Note: graphs will be posted around 4 PM ET.

Update: Percentage comparisons are to Sept 2008.

From MarketWatch: Ford total U.S. Sept. sales decline 5.1%

Ford Motor Co. said Thursday that U.S. auto sales for September dropped 5.1% to 114,655 vehicles from 116,734 a year ago.

UPDATES: GM U.S. Sept. sales drop 45% (compared to Sept 2008)

Chrysler sales off 42%.

Toyota U.S. Sept. sales off 12.7%

Once all the reports are released, I'll post a graph of the estimated total September sales (SAAR: seasonally adjusted annual rate). The range of estimates for September have been very wide ...

For fun, here are the results of a poll in the comments (Monthly, not SAAR):

620,000 end of the world 6% (3 votes)
650,000 black hole 40% (20 votes)
700,000 detectable pulse 42% (21 votes)
740,000 trend sans C4C 6% (3 votes)
800,000 post Viagra pause 2% (1 vote)
960,000 all clear same as Sept 2008 2% (1 vote)
1,000,000 (puts pinky to corner of mouth) 2% (1 vote)
Total votes: 50