by Calculated Risk on 12/02/2010 10:00:00 AM

From the NAR:
Strong Rebound in Pending Home Sales

The Pending Home Sales Index,* a forward-looking indicator, rose 10.4 percent to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009 ... The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

This suggests existing home sales in November and December will be somewhat higher than in October.

This also suggests months-of-supply will fall below double digits in November and December, but will remain elevated putting downward pressure on house prices.

Note: in the calculation of months-of-supply, the NAR uses the seasonally adjusted sales rate, but they do not seasonally adjust inventory. Since inventory declines every November and December, the months-of-supply would decline even if the sales rate stayed steady. Since it appears sales will increase slightly (based on pending home sales), and inventory will seasonally decline, the months-of-supply will fall. For more, see: Housing Supply: What do all the numbers mean?

by Calculated Risk on 12/02/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Nov. 27, the advance figure for seasonally adjusted initial claims was 436,000, an increase of 26,000 from the previous week's revised figure of 410,000. The 4-week moving average was 431,000, a decrease of 5,750 from the previous week's revised average of 436,750.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 5,750 to 431,000.

This is the lowest level for the 4-week moving average since August 2008. The level is still high, but the decline in the 4-week average is good news.

by Calculated Risk on 12/01/2010 11:26:00 PM

• The Federal Reserve released details of borrowing by financial firms, and others during the financial crisis. Here are some articles:

From the NY Times: Fed Papers Show Breadth of Emergency Measures

From Bloomberg: Fed Names Recipients of $3.3 Trillion of Aid During U.S. Financial Crisis

From Bloomberg: European Banks Dominated Use of Fed’s Commercial Paper Program

• ADP reported Private Employment increased by 93,000 in November, the largest gain in three years and well above expectations of 68,000 private sector jobs.

• U.S. Light Vehicle Sales were at 12.26 million SAAR in November

• The ISM Manufacturing Index decreased slightly to 56.6 in November.

• European bond yields declined. The Ireland 10-year bond yield fell to 8.94% from 9.36% yesterday. The yield on Portugal 10-year bonds fell to 6.65% from just over 7%, and the yield of Spain's 10-year bonds declined to 5.29% from 5.5%.

• The Asian markets are up all green tonight (up about 1% to 2%)

• Here are the graph galleries for auto sales, ISM index, and construction spending.

Best to all.

by Calculated Risk on 12/01/2010 08:13:00 PM

Usually Michael Pettis writes about China and economics. Today he wrote about Europe and politics: The rough politics of European adjustment. This is a lengthy piece, and here are a few excerpts:

I am now going to veer off into a very different realm, that of politics. I don’t in any sense pretend to be an expert on the subject, but one of the things that surprises me is that as far as I know (perhaps because I am looking in the wrong places) and in spite of very clear historical precedent, very few analysts, even the greatest euro-skeptics, are wondering about of the changes in electoral politics that are likely to take place in Europe over the next few years as a consequence of the euro adjustment.
...
Political radicalism in these countries will rise inexorably as a consequence of rising class conflict. As Keynes pointed out as far back as 1922, the process of adjusting the currency and debt will primarily be one of assigning the costs to different economic groups, and this is never an easy or conflict-free exercise. Of course the less stable a government becomes as a consequence of this adjustment, the more likely it is to prefer very short-term solutions.
...
[T]he distribution of these costs is not determined by economic theory but rather by political interests. That is why I said last week that political radicalism in Europe will almost certainly rise and the process of governing will become increasingly unstable. It is through the political process that the costs of adjustment will be assigned to the different groups, and when the costs are likely to be so high, the squabbling over the assignment of those costs is likely to be quite brutal.
...
I am not suggesting that politics will get nearly as crazy or as radicalized as they did in the 1930s. There are much more robust mechanisms today for transferring and sharing adjustment costs, and I assume (hope) we learned enough from the 1930s to recognize that asking one side or the other to pay the full cost is not likely to be good for anyone. But it is hard to imagine that the kinds of disruptive political sectarianism that we saw in some European countries as recently as 20 or 30 years ago cannot revive.

P.S. I appreciate the mention, but he meant Naked Capitalism.

by Calculated Risk on 12/01/2010 03:56:00 PM

Based on an estimate from Autodata Corp, light vehicle sales were at a 12.26 million SAAR in November. That is up 13.2% from November 2009, and up slightly from the October 2010 sales rate.

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 November (red, light vehicle sales of 12.26 million SAAR from Autodata Corp).

This is the highest sales rate since September 2008, excluding Cash-for-clunkers in August 2009.

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

Note: dashed line is current estimated sales rate. The current sales rate is still near the bottom of the '90/'91 recession - when there were fewer registered drivers and a smaller population.

This was above most forecasts of around 12.0 million SAAR.

by Calculated Risk on 12/01/2010 02:05:00 PM

• Fed's Beige Book showed the "economy continued to improve":

Reports from the twelve Federal Reserve Districts indicate that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November.
...
Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries.
...
Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks.

• In a research note today, "A Brighter US Economic Outlook", Goldman Sachs upped their 2011 real GDP forecast (this is the first time their outlook is above consensus in five years):

We have raised our sights for 2011, calling for real GDP growth to average 2.7% for the year versus 2.0% previously. We expect growth to pick up further in 2012—to 3.6% on average for the year—though judgments that far out are clearly tentative. ... Although our revised outlook implies a meaningful drop in the jobless rate, it will remain high by historical standards, ending 2012 at about 8½%.

On the conference call, Goldman highlighted several downside risks: Spillover from Europe, falling housing prices and possible premature fiscal tightening.

Note: I took the "over" during the weekend: The recent improvement in economic news . This forecast is still for sluggish growth and the unemployment rate is unacceptably high.

• Barry Eichengreen writes a scathing review of the Irish "rescue". Reprinted at the Irish Economy blog: Ireland’s Reparations Burden

The Irish “program” solves exactly nothing – it simply kicks the can down the road. ... This is not politically sustainable, as anyone who remembers Germany’s own experience with World War I reparations should know. A populist backlash is inevitable.

• The Federal Reserve released details of borrowing by financial firms, and others during the financial crisis.