by Calculated Risk on 6/27/2011 08:30:00 AM

Note: sorry for typos.

The BEA released the Personal Income and Outlays report for May:

Personal income increased $36.2 billion, or 0.3 percent ... Personal consumption expenditures (PCE) increased $4.6 billion, or less than 0.1 percent.
...
Real PCE decreased 0.1 percent, the same decrease as in April.

The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image in graph gallery.

PCE increased less than 0.1% in May, but real PCE decreased 0.1% as the price index for PCE increased 0.2 percent in May. The graph shows that real PCE declined in the first two month of Q2.

Note: The PCE price index, excluding food and energy, increased 0.3 percent.

The personal saving rate was at 5.0% in May.

Personal saving -- DPI less personal outlays -- was $591.1 billion in May, compared with $568.0 billion in April. Personal saving as a percentage of disposable personal income was 5.0 percent in May, compared with 4.9 percent in April.

This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the May Personal Income report.

The saving rate has declined recently even as growth for real personal consumption expenditures has slowed. Part of this is due to higher overall inflation and higher oil / gasoline prices.

This would have been the first monthly decline in real PCE since January 2010 - except April was revised down too. This puts real PCE growth in Q2 on pace for only about 1% (an average of Q2 over Q1) - the slowest pace since Q4 2009.

by Calculated Risk on 6/26/2011 11:39:00 PM

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
• Schedule for Week of June 26th

The Asian markets are red tonight with the Nikkei off almost 1%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 is off about 2.7 points, and Dow futures are off about 30 points.

Oil: WTI futures are down to $90.60 and Brent is down to $104.47.

Of course we will be watching Greece again tomorrow: The Greek 2 year yield is at 28.3% and the ten year yield is at 16.8%.

Best to all.

by Calculated Risk on 6/26/2011 06:45:00 PM

Although I expect the recovery to remain sluggish and choppy, I do think some of the recent slowdown was temporary, and I expect some pickup in U.S. economic activity in Q3. There are downside risks to this forecast, such as spillover from the European financial crisis, another surge in oil and gasoline prices (or a supply shock), and more rapid fiscal tightening in the U.S. - to name a few risks.

Even though most of the U.S. data will be weak, there might be a few hints of improvement this week, although events overseas might overshadow U.S. economic data once again.

There are several regional manufacturing surveys that will be released this week (Richmond, Dallas and Kansas City), and all will probably show weakness similar to the Philly and Empire State surveys. The Chicago PMI will probably be weak too, and the closely watched ISM manufacturing survey might show contraction (below 50) for the first time since July 2009.

Also the Personal Income and Outlays report for May (to be released Monday) will probably show the first monthly decline in real PCE since early last year. So there will be plenty of "bad news".

However auto sales should be a little better in June than in May, although the supply chain issues are still impacting sales. And falling oil and gasoline prices might lead to a little more positive consumer sentiment - and a pickup in consumer spending in June and July.

On housing, the monthly mortgage delinquency reports from LPS and Fannie Mae will probably show a lower serious delinquency rate (continuing the recent trend). And even though expectations are for the Pending Home Sales index to show a 2% decline in May, housing economist Tom Lawler expects an increase in this index (based on limited data).

And on house prices, expectations are for the Case-Shiller index (NSA) to show a 0.3% decline in April, about half the decline reported in March. However several house prices indexes showed an increase in April:

• From CoreLogic: CoreLogic® Home Price Index Shows First Month-over-Month Increase since mid-2010

• FNC reported:

Despite broad economic and job market weakness, home prices have increased for the first time since the withdrawal of the homebuyer tax credits a year ago.

Based on the latest data on non-distressed home sales (existing and new homes), FNC’s Residential Price Index™ (RPI) indicated that single-family home prices in April were up from March at a seasonally unadjusted rate of 0.5%.

• The FHFA (GSEs only): FHFA House Price Index Rises 0.8 Percent in April; First Monthly Increase Since May 2010

• And Radar Logic went further and predicted the Case-Shiller index will show an increase for April:

Last month, we predicted that the S&P/Case-Shiller 10-City composite for March 2011 would be about 152 and the 20-City composite would be roughly 138. In fact, the 10-City composite was 151.66 and the 20-City composite was 138.16.

This month, we expect the April 2011 10-City composite index to be about 153 and the 20-City index to be roughly 140.

EDITED for clarity: Seasonally April is usually slightly stronged than March, even though March is still a weak month (The NSA index will be below the SA index). However this means the NSA index would show a larger increase than the SA index. That might be a little confusing since S&P reports the NSA index, and I report the SA numbers.

It looks like the sharp house price declines are over for the summer months. I still think prices will fall further in real terms over the next couple of years (inflation adjusted), but I think we are close to the bottom nationally in nominal terms.

Overall most of the news flow will still be negative this week.

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
• Schedule for Week of June 26th

by Calculated Risk on 6/26/2011 01:44:00 PM

From the WSJ: French Banks Submit Plan for Greek Debt Rollover

French banks will propose on Monday ... for private creditors to halve their exposure to Greece by rolling over only about 50% of the Greek government bonds they hold ... Under the proposal, financial institutions would effectively reduce their exposure but tie their hands to Greece for a long period by committing to buy up to 30-year bonds ...

Since some analysts were expecting haircuts of up to 70 percent, rolling over half their debt would be a huge positive for the banks.

The Greek parliament is expect to vote on the new austerity package on Wednesday or Thursday. The German finance minister, Wolfgang Schaeuble, made it clear that the next bailout tranche was contingent on Greece passing the austerity package. From Reuters: No Greek budget cuts, no bailout aid -German FinMin (ht jb)

"If the package is rejected, which no one expects actually, then the prerequisites would no longer exist for the IMF, EU and euro zone countries to release the next tranche of aid," [Wolfgang Schaeuble] told German Sunday newspaper Bild am Sonntag.

Although the Greek government is "confident" the legislation will pass, the reaction in the streets - and the market reaction are less certain.

by Calculated Risk on 6/26/2011 09:14:00 AM

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
• Schedule for Week of June 26th

Oil prices are down sharply this month - and the announcement last week by the International Energy Agency (IEA) of the release of 60 million barrels of oil from emergency stockpiles (30 million U.S.) pushed oil prices down further.

Brent crude futures fell to $105 per barrel and WTI futures are down to $91 per barrel.

And gasoline prices are still falling. According to GasBuddy.com, prices are now down almost 40 cents per gallon nationally from the recent peak in early May. And it looks like gasoline prices will probably fall some more over the next few weeks ...

Orange County Historical Gas Price Charts Provided by GasBuddy.com

The sharp increase in oil prices in March appeared to impact consumer spending and sentiment. Consumer sentiment, as measured by Reuters / University of Michigan, fell sharply in March to 67.5 from 77.5 in February (and has only recovered slightly to 71.8 in early June).

Personal Consumption Expenditure (PCE) growth also slowed in March. Tomorrow the BEA will release the income and outlay report for May (it will be ugly), but falling gasoline prices should help some in June and July. On Friday, Reuters / University of Michigan will release the final sentiment report for June (might show a slight increase), and falling prices will probably boost sentiment in July.

by Calculated Risk on 6/25/2011 05:55:00 PM

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix

This will be busy week for economic data. The key releases will be the ISM manufacturing index on Friday, Case-Shiller house prices (April) on Tuesday, and auto sales on Friday.

Some of these releases will show ongoing weakness such as the ISM manufacturing index and the Chicago PMI. The regional surveys suggest the ISM index will be in the low 50s – or possibly below 50 in June (below 50 would indicate contraction for manufacturing).

However other releases might show some improvement such as auto sales and pending home sales. Of special interest will be the Case-Shiller index for April (a three month average of prices in February, March and April). Other house price indexes have indicated prices increased in April, however, because of the averaging, Case-Shiller might still show a decline.

----- Monday, June 27th -----
8:30 AM: Personal Income and Outlays for May. The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 dollars).

Click on graph for larger image in graph gallery.

PCE increased 0.4% in April, but real PCE only increased 0.1% as the price index for PCE increased 0.3 percent in April.

The consensus is for a 0.4% increase in personal income in May, and a 0.1% increase in personal spending, and for the Core PCE price index to increase 0.2%.

10:30 AM: Dallas Fed Manufacturing Survey for June. The Texas production index increased to 12.7 in May from 8.1 in April.

----- Tuesday, June 28th -----
9:00 AM: S&P/Case-Shiller Home Price Index for April. Although this is the April report, it is really a 3 month average of February, March and April.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

House prices have continued to decline, and the Composite 20 index hit a new post-bubble low in March. The consensus is for prices to decline about 0.3% in April, however other indexes suggest the decline will be less (or even an increase).

10:00 AM: Conference Board's consumer confidence index for June. The consensus is for a slight increase to 61.0 from 60.8 last month, possibly due to slightly lower gasoline prices.

10:00 AM: Richmond Fed Manufacturing Survey for June. The consensus is for the survey to show modest contraction with a reading of -2.

----- Wednesday, June 29th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last couple months suggesting weak home sales through early summer (not counting all cash purchases).

10:00 AM: Pending Home Sales Index for May. The consensus is for a 2% decrease in the index, however economist Tom Lawler is forecasting a possible double digit increase.

----- Thursday, June 30th -----
8:30 AM: The initial weekly unemployment claims report will be released. The number of claims has been elevated for the last couple of months. The consensus is for a decrease to 420,000 from 429,000 last week.

9:45 AM: Chicago Purchasing Managers Index for June. The consensus is for a decrease to 54.0, down from 56.6 in May.

11:00 AM: Kansas City Fed regional Manufacturing Survey for June. The index was at 1 in May, down from 14 in April.

----- Friday, July 1st -----
10:00 AM: Construction Spending for May. The consensus is for no change in construction spending.

10:00 AM: ISM Manufacturing Index for June. The consensus is for a decrease to 51.7 from 53.5 in May. Based on the regional manufacturing surveys, the ISM index could be below 50 for June (indicating contraction).

All day: Light vehicle sales for June. Light vehicle sales are expected to increase to 12.0 million (Seasonally Adjusted Annual Rate), from 11.8 million in May.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the May sales rate.

Edmunds is forecasting:

The estimated sales volume translates to a Seasonally Adjusted Annualized Rate (SAAR) of 11.9 million in June, according to Edmunds.com analysts. Even with SAAR coming in below 12 million for the second month in a row, Edmunds.com continues to project an annual SAAR of 12.9 light vehicle sales overall in 2011.

The supply chain disruption is impacting sales, however sales will probably pick up in Q3.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for June). The consensus is for a slight increase to 72.0 from the preliminary reading of 71.8.

Best wishes to All!

by Calculated Risk on 6/25/2011 11:11:00 AM

Probably the three most talked about stories of the week were 1) the Greek financial situation, 2) the release of oil from the petroleum reserves, and 3) Fed Chairman Bernanke’s press briefing following the FOMC meeting.

Oil prices fell sharply after the announcement of oil releases from reserves. And gasoline prices are expected to continue to decline (Gasoline prices are already down over 30 cents per gallon from the recent peak).

There were no surprises with the FOMC announcement or during Bernanke’s press briefing. The Fed’s forecast for growth was revised down, and the forecast for the unemployment rate and inflation were revised up. The Fed believes that most of the recent economic weakness was temporary, and the increase in inflation was transitory. QE2 will end as scheduled and the Fed is clearly on hold waiting for additional data.

This was a light week for economic data: Home sales – both existing and new home sales – were weak. However durable goods orders were a little better this month, and there were several house price reports suggesting prices increased slightly in April (Case-Shiller will be released next Tuesday).

Below is a summary of economic data last week mostly in graphs:

• May Existing Home Sales: 4.81 million SAAR, 9.3 months of supply

The NAR reports: Existing-Home Sales Decline in May

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 May 2011 (4.81 million SAAR) were 3.8% lower than last month, and were 15.3% lower than in May 2010.

The next graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, so it really helps to look at the YoY change.

Inventory decreased 4.4% year-over-year in May from May 2010. This is the fourth consecutive month with a YoY decrease in inventory.

Inventory should increase over the next couple of months months (the normal seasonal pattern), and the YoY change is something to watch closely this year.

This graph shows existing home sales Not Seasonally Adjusted (NSA).

The red columns are for 2011.

Sales NSA are well below the tax credit boosted level of sales in May 2010, but slightly above the level of May sales in 2009. The level of sales is still elevated due to investor buying.

• New Home Sales in May at 319 Thousand SAAR

The Census Bureau reports New Home Sales in May were at a seasonally adjusted annual rate (SAAR) of 319 thousand. This was down from a revised 326 thousand in April (revised from 323 thousand).

This graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new one-family houses in May 2011 were at a seasonally adjusted annual rate of 319,000 ... This is 2.1 percent (±10.7%)* below the revised April rate of 326,000, but is 13.5 percent (±13.6%)* above the May 2010 estimate of 281,000.

Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale fell to 64,000 units in May. The combined total of completed and under construction is at the lowest level since this series started.

This graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In May 2011 (red column), 30 thousand new homes were sold (NSA). The record low for May was 26 thousand in 2010 (following the expiration of the homebuyer tax credit) and now 2011. The high was 120 thousand in 2005.

Although above the consensus forecast of 305 thousand, this was just above the record low for May - and new home sales have averaged only 300 thousand SAAR since the expiration of the tax credit ... moving sideways at a very low level.

• AIA: Architecture Billings Index indicates declining demand in May

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

This graph shows the Architecture Billings Index since 1996. The index decreased in May to 47.2 from 47.6 in April. Anything below 50 indicates a decrease in billings.

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 suggests another dip in CRE investment towards the end of this year - and into 2012.

• Moody's: Commercial Real Estate Prices declined 3.7% in April, Prices at new Post-Bubble Low

Moody's reported that the Moody’s/REAL All Property Type Aggregate Index declined 3.7% in April.

Here is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index. Beware of the "Real" in the title - this index is not inflation adjusted.

CRE prices only go back to December 2000. The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

According to Moody's, CRE prices are down 13% from a year ago and down about 49% from the peak in 2007. Prices are at new post-bubble lows - and at new lows for the index.

• Other Economic Stories ...
• From CoreLogic: CoreLogic® Reports Shadow Inventory Continues to Decline
• DOT: Vehicle Miles Driven decreased -2.4% in April compared to April 2010
• FOMC Statement: No Change, "Economic recovery is continuing at a moderate pace"
• FHA sells record number of REO in May, Freddie Mac Serious Delinquency Rate declines
• Q1 real GDP growth revised up to 1.9%, Durable-goods orders up 1.9%

Best wishes to all!

by Calculated Risk on 6/25/2011 08:26:00 AM

Note: this is an unofficial list of Problem Banks compiled only from public sources. This post includes an update to the transition matrix (see comments and table at bottom).

Here is the unofficial problem bank list for June 24, 2011.

Changes and comments from surferdude808:

As anticipated, the FDIC released its actions for May 2011, which contributed to many changes to the Unofficial Problem Bank List. This week there are eight additions and three removals. The net five additions push the list back over the 1,000 threshold to 1,001. Assets total $419.2 billion, up $2.5 billion from last week. For the month of June, changes included 17 additions and 13 removals, with four from failure, two from unassisted mergers, and seven from action terminations.

Removals this week include the failed Mountain Heritage Bank, Clayton, GA ($104 million) and action terminations against Commercial State Bank of El Campo, El Campo, TX ($127 million) and Slovak Savings Bank, Pittsburgh, PA ($85 million). This month the FDIC terminated 13 consent orders and two Prompt Corrective Action orders, but, strangely, nine of the terminations were for banks that had failed.

Among the eight additions this week are Patriot Bank, Houston, TX ($1.3 billion); American Bank of the North, Nashwauk, MN ($644 million); and Stonebridge Bank, Exton, PA ($365 million). One other change of note includes the FDIC issuing a Prompt Corrective Action Order against Colorado Capital Bank, Castle Rock, CO ($718 million).

With this being the last Friday of the second quarter, it is time to update the transition matrix. The Unofficial Problem Bank List debuted on August 7, 2009 with 389 institutions with assets of $276.3 billion (see table below).

Over the past 22 months, about 49 percent or 192 institutions have been removed from the original list with 125 due to failure, 49 due to action termination, and 18 due to unassisted merger. About 32 percent of the 389 institutions on the original list have failed, which is substantially higher than the 12 percent figure usually cited by the media as the failure rate for institutions on the FDIC Problem Bank List.

Since the publication of the original list, another 1,009 institutions have been added. However, only 804 of those 1,009 additions remain on the current list as 205 institutions have been removed in the interim. Of the 205 interim removals, 134 were from failure, 44 were from an unassisted merger, 25 from action termination, and two from voluntary liquidation.

In total, 1,398 institutions have made an appearance on the Unofficial Problem Bank List and 259 or 18.5 percent have failed. Of the 397 total removals, the primary way of exit from the list is failure at 259 or 65 percent. Only 74 or 18.6 percent have been rehabilitated while another 62 or 15.6% have found merger partners. Total assets that have appeared on the list amount to $768.9 billion and $258.6 billion have been removed due to failure. The average asset size of removals from failure is nearly $1 billion.

Unofficial Problem Bank List
Change Summary
		Number of Institutions	Assets ($Thousands)
Start (8/7/2009)		389	276,313,429
Subtractions
	Action Terminated	49	(12,581,702)
	Unassisted Merger	18	(3,105,440)
	Voluntary Liquidation	0	-
	Failures	125	(169,470,405)
	Asset Change		(20,083,711)
Still on List at 6/24/2011		197	71,072,171
Additions		804	348,177,411
End (6/24/2011)		1001	419,249,582
Intraperiod Deletions1
	Action Terminated	25	22,538,068
	Unassisted Merger	44	31,856,880
	Voluntary Liquidation	2	833,567
	Failures	134	89,146,292
	Total	205	144,374,807
1Institution not on 8/7/2009 or 6/24/2011 list but appeared on a list between these dates.

by Calculated Risk on 6/24/2011 09:39:00 PM

Steve Kanigher at the Las Vegas Sun presents several photos of bubble monuments in Nevada: Abandoned projects leave lasting reminder of economic crash

"It wasn’t long ago that hotels, high-rise condominiums and massive retail and office complexes sprang up in Southern Nevada seemingly faster than one could drive from one end of the valley to the other. Take that same drive today, though, and you’ll likely see vestiges of the Great Recession: partially built structures with exposed foundations or steel beams ..."

Check out the photos ...

It sure seemed like projects with names like "Manhattan West" (see the 4th slide) or "Central Park West" were doomed.

by Calculated Risk on 6/24/2011 05:38:00 PM

From the FDIC: First American Bank and Trust Company, Athens, Georgia, Assumes All of the Deposits of Mountain Heritage Bank, Clayton, Georgia

As of March 31, 2011, Mountain Heritage Bank had approximately $103.7 million in total assets and $89.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $41.1 million. ... Mountain Heritage Bank is the 48th FDIC-insured institution to fail in the nation this year, and the fourteenth in Georgia.

What a surprise ... a bank in Georgia fails. That is a pretty big percentage loss.