by Calculated Risk on 8/01/2011 11:50:00 AM

Catching up ... this morning from the Census Bureau reported that overall construction spending increased slightly in June:

[C]onstruction spending during June 2011 was estimated at a seasonally adjusted annual rate of $772.3 billion, 0.2 percent (±1.8%)* above the revised May estimate of $770.5 billion.

Private construction spending increased in June:

Spending on private construction was at a seasonally adjusted annual rate of $493.4 billion, 0.8 percent (±1.3%)* above the revised May estimate of $489.6 billion. Residential construction was at a seasonally adjusted annual rate of $235.8 billion in June, 0.3 percent (±1.3%)* below the revised May estimate of $236.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $257.7 billion in June, 1.8 percent (±1.3%) above the revised May estimate of $253.1 billion.

Click on graph for larger image in graph gallery.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 65% below the peak in early 2006, and non-residential spending is 38% below the peak in January 2008.

Private construction spending is mostly moving sideways, and it is public construction spending that is now declining.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending will probably turn positive in August, but public spending is now falling sharply as the stimulus spending ends.

by Calculated Risk on 8/01/2011 10:00:00 AM

PMI was at 50.9% in July, down from 55.3% in June. The employment index was at 53.5%, down from 59.9% and new orders decreased to 49.2%, down from 51.6%.

From the Institute for Supply Management: July 2011 Manufacturing ISM Report On Business®

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 50.9 percent, a decrease of 4.4 percentage points, indicating expansion in the manufacturing sector for the 24th consecutive month, although at a slower rate of growth than in June. Production and employment also showed continued growth in July, but at slower rates than in June. The New Orders Index registered 49.2 percent, indicating contraction for the first time since June of 2009, when it registered 48.9 percent. The rate of increase in prices slowed for the third consecutive month, dropping 9 percentage points in July to 59 percent. In the last three months combined, the Prices Index has declined by 26.5 percentage points, dropping from 85.5 percent in April to 59 percent in July. Despite relief in pricing, however, several comments suggest a slowdown in domestic demand in the short term, while export orders continue to remain strong."

Click on graph for larger image in new window.

Here is a long term graph of the ISM manufacturing index.

This was below expectations of 54.3%, but in line with the weak regional surveys.

by Calculated Risk on 8/01/2011 09:06:00 AM

From Alejandro Lazo at the LA Times: Homeowners who want to trade up are stuck waiting

Although there is no way to precisely to track move-up buyers, such shoppers often are looking in the $300,000-to-$800,000 price range, according to San Diego real estate research firm DataQuick.

Home sales fell the most in that category in June, dropping 25.5% from June 2010, mainly because buyer tax credits last year sparked so many first-time purchases, DataQuick said. All those first-time purchases fueled move-up transactions.

By comparison, sales of homes priced below $200,000 fell 11.4% from June 2010, and sales of homes priced at more than $800,000 dropped 17.6%.

Before the bust, moving up was so common that chains of buyers and sellers would develop, with each deal dependent on the previous one in the chain. Move-up buyers are a key part of a more robust market, as all that trading up fuels price gains and helps homeowners to build equity.

"It is critical," said Ed Leamer, director of the UCLA Anderson Forecast. "The way to think about is a chain of trades that normally occurs, and if that chain is broken at any point, or it doesn't begin because you don't have enough entry-level buyers, then the whole dynamic of the marketplace is affected and the level of resales is going to be very small."

Talk about "chain reaction". Here is a graphic I put together in early 2007 to talk about how the move-up buyer would disappear.

Click on graphis for larger image in new window.

An excerpt from a post in 2009:

[T]hese sales are "one and done" with no move up buyer.

Where are the move up buyers going to come from?

There is no "chain reaction" in the housing market - over half the sales are to first time buyers, and frequently the sellers are banks.

I hear this from real estate agents all the time: the agents (low end) are plenty busy with REOs and short sales, but the deals are mostly "one and done".

Weekend:
• Summary for Week ending July 29th
• Schedule for Week of July 31st

by Calculated Risk on 7/31/2011 10:39:00 PM

Although the debt ceiling deal has been announced, we still need to see the details to evaluate the drag on the economy. And the bill still needs to pass the House and Senate.

Hopefully the focus can be back on the economy (instead of D.C.) Unfortunately the economic data for July will be weak. The economy is still sluggish, and the "debate" itself was negatively impacting the economy over the last few weeks as some people feared the U.S. government would not pay its bills. Although that fear was unfounded, it is pretty clear there will be no additional stimulus, no further help for the unemployed, and no extension of the payroll tax cut.

Here is the economic schedule for coming week. The key report for this week will be the July employment report to be released on Friday, August 5th.

The Asian markets are green tonight with the Nikkei up almost 2%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 is up about 15 points, and Dow futures are up about 175 points.

Oil: WTI futures are up to $97.41 and Brent is up to $118.23.

Yesterday:
• Summary for Week ending July 29th

by Calculated Risk on 7/31/2011 06:58:00 PM

The details are still murky ...

UPDATE2: WSJ: Obama Says Congressional Leaders Have Agreed to a Debt Deal

Update: The WSJ reports:

House Republican leaders have agreed to a “tentative deal” ... House leaders have scheduled a briefing for their caucus at 8:30, aides say.

From the WSJ:

* $900 billion in the first stage of deficit reduction.

* $1.5 trillion in second stage of deficit reduction to be defined by a bipartisan special committee of lawmakers appointed by leaders of the House and Senate.

* If the special committee fails to deliver a deficit-cutting package that would trigger $1.2 trillion in cuts, half would be Defense cuts and the other half would be non-Defense cuts, exempting low-income programs Social Security and Medicaid, and only impacting providers in Medicare.

* The debt ceiling increase would be done in three phases: $400 billion initially; another $500 billion later this year would be subject to a vote of disapproval; a third increase of $1.5 to get the rest through 2012 and would also be subject to vote of disapproval.

* There is also a provision to have Congress vote on balanced budget amendment.

From the WaPo: Reid hopes for vote on deal Sunday night

From the NY Times: Reid Backs Debt Deal; Defense Cuts Still in Debate

Apparently Boehner is balking at the defense cuts. The idea behind the triggers is to make people take the recommendations of the special committee seriously. Unless the triggers are unpalatable to both sides, the commission will fail (I suspect it is already doomed).

The multiple votes are for more posing (shameful, but typical politics).

Yesterday:
• Summary for Week ending July 29th
• Schedule for Week of July 31st