by Calculated Risk on 11/30/2011 09:45:00 PM

The post title is from a post Michael Pettis wrote last year: Beijing’s stop-and-go measures. It looks like China is back to pushing on the gas pedal ...

From the NY Times: China, in Surprising Shift, Takes Steps to Spur Bank Lending

China’s central bank, in a surprise move on Wednesday, shifted its economic focus from fighting inflation to stimulating growth by freeing the nation’s commercial banks to lend more money.
...
For more than a year, the Chinese central bank tried to squeeze the country’s banking system in hopes of restraining inflation. Its action on Wednesday’s indicated that China’s government feared the country’s growth engine was starting to falter.

From Reuters: China Factory Sector Shrinks First Time in Nearly 3 Years

China's factory sector shrank in November for the first time in nearly three years, an official purchasing managers' index (PMI) showed on Thursday, underlining the central bank's move to cut bank reserve requirements to shore up the economy.

The Asian markets are all green tonight. The Nikkei is up about 2%, the Hang Seng is up 5.4%.

by Calculated Risk on 11/30/2011 05:27:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate was unchanged at 4.00% in October. This is down from 4.52% in October of 2010. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate increased to 3.54% in October, up from 3.51% in September. This is down from 3.82% in October 2010. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

Tracking this on a monthly basis this is kind of like watching grass grow, but the serious delinquency rates are generally falling - but only falling slowly. The reason for the slow decline is most likely the backlog of homes in the foreclosure process.

The "normal" serious delinquency rate is under 1%, and at this pace of decline, the delinquency rate will not be back to "normal" for a number of years.

All current mortgage delinquency graphs

by Calculated Risk on 11/30/2011 02:00:00 PM

Fed's Beige Book:

Overall economic activity increased at a slow to moderate pace since the previous report across all Federal Reserve Districts except St. Louis, which reported a decline in economic activity.
...
District reports indicated that consumer spending increased modestly, on balance, during the reporting period.
...
Hiring was generally subdued, but some firms with open positions reported difficulty finding qualified applicants.

And on real estate:

Overall residential real estate activity increased, but conditions were varied across Districts. Philadelphia, Richmond, Minneapolis, Kansas City, and Dallas noted increased activity. New York, Boston, Cleveland, and San Francisco reported flat activity at relatively low levels. Atlanta and St. Louis indicated decreased sales. Residential construction remained sluggish. Single-family home construction remained weak, while multifamily construction picked up in New York, Philadelphia, Cleveland, Chicago, and Minneapolis. San Francisco remained "anemic," while St. Louis and Kansas City reported decreased activity.

Commercial real estate markets remained sluggish across most of the nation. Boston, New York, Chicago, Minneapolis, and San Francisco indicated roughly unchanged activity. Atlanta and Kansas City noted slight improvement. Philadelphia and Dallas indicated mixed activity. However, Richmond and St. Louis noted that vacancy rates increased. Commercial construction was somewhat mixed.

This was based on data gathered on or before November 18th. More sluggish growth ...

by Calculated Risk on 11/30/2011 11:31:00 AM

From the National Restaurant Association: Restaurant Performance Index Essentially Unchanged in October, Balanced by Softer Current Conditions and Stronger Future Optimism

The National Restaurant Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.0 in October, essentially unchanged from September’s level of 100.1. October’s steady RPI level was the result of softer sales and customer traffic being offset by a more optimistic outlook among restaurant operators.

“Although sales results were somewhat softer in October, restaurant operators reported net positive same-store sales for the fifth consecutive month,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, each of the four forward-looking indicators improved in October, which pushed the Expectations Index to its highest level in four months.”
...
Restaurant operators reported positive same-store sales for the fifth consecutive month in October, although results were somewhat softer than September’s performance. ... Restaurant operators also reported softer customer traffic levels in October.

Click on graph for larger image.

The index decreased to 100.0 in October (above 100 indicates expansion).

Unfortunately the data for this index only goes back to 2002.

Restaurant spending is discretionary and is impacted by the overall economy. Right now this is moving sideways ...
All current retail related graphs

by Calculated Risk on 11/30/2011 10:00:00 AM

• Chicago PMI: The overall index increased to 62.6 in November from 58.4 in October. This was above consensus expectations of 58.5.

From the Chicago ISM Chicago Business Barometer™ Rebounded:

The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER rebounded to a 7-month high in November and marked the 26th month of expansion.

The employment index decreased to 56.9 from 62.3. "EMPLOYMENT reversed half of its gains since August"

The new orders index increased to 70.2 from 61.3. "NEW ORDERS expanded to an 8-month high and PRODUCTION expanded to a 7-month high"

Note: any number above 50 shows expansion.

• From the NAR: Pending Home Sales Jump in October

The Pending Home Sales Index, a forward-looking indicator based on contract signings, surged 10.4 percent to 93.3 in October from 84.5 in September and is 9.2 percent above October 2010 when it stood at 85.5. The data reflects contracts but not closings.
...
The PHSI in the Northeast surged 17.7 percent to 71.3 in October and is 3.4 percent above October 2010. In the Midwest the index jumped 24.1 percent to 88.7 in October and remains 13.2 percent above a year ago. Pending home sales in the South rose 8.6 percent in October to an index of 99.5 and are 9.7 percent higher than October 2010. In the West the index slipped 0.3 percent to 105.5 in October but is 8.1 percent above a year ago.

by Calculated Risk on 11/30/2011 08:19:00 AM

On Central Bank action, from the WSJ: Central Banks Take Coordinated Action and from the Federal Reserve: "The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity."

Original post:

ADP reports:

ADP today reported that employment in the U.S. nonfarm private business sector increased by 206,000 from October to November on a seasonally adjusted basis. The estimated advance in employment from September to October was revised up to 130,000 from the initially reported 110,000. The increase in November was the largest monthly gain since last December and nearly twice the average monthly gain since May when employment decelerated sharply.

Employment in the private, service-providing sector rose 178,000 in November, which is up from an increase of 130,000 in October. Employment in the private, goods-producing sector increased 28,000 in November, while manufacturing employment increased 7,000.

This was well above the consensus forecast of an increase of 130,000 private sector jobs in November. The BLS reports on Friday, and the consensus is for an increase of 112,000 payroll jobs in November, on a seasonally adjusted (SA) basis.

Government payrolls have been shrinking by about 27,000 per month this year. So this suggests around 206,000 private nonfarm payroll jobs added, minus 27,000 government workers - or around 179,000 total jobs added in November. Of course ADP hasn't been very useful in predicting the BLS report.

by Calculated Risk on 11/30/2011 12:45:00 AM

From the WSJ: GOP Set to Back Payroll-Tax Cut

Republican leaders said Tuesday they would join Democrats in supporting an extension of the 2011 payroll-tax cut ... virtually assuring that American wage-earners will continue to receive the benefit next year.
...
Workers this year have seen their payroll taxes cut to 4.2% of their salary from 6.2%. Democrats want to cut it further, to 3.1%, but Republicans are unlikely to support that.

Probably the two most significant downside risks to the U.S. economy are contagion from the European financial crisis and more rapid fiscal tightening. The extension of the payroll tax cut will lessen the amount of fiscal tightening in 2012 - although government spending will still be a drag on GDP growth next year.

Earlier:
• CoreLogic: 10.7 Million U.S. Properties with Negative Equity in Q3
• Case Shiller: Home Prices decline in September
• Real House Prices and House Price-to-Rent

by Calculated Risk on 11/29/2011 08:10:00 PM

The top story in the Financial Times says it all: Businesses plan for possible end of euro

Here is a quote from someone at Volkswagen: “The conclusion is that overall the impact would not be so negative to our company, as we are mainly an exporter ..."

Export to whom?

Earlier:
• CoreLogic: 10.7 Million U.S. Properties with Negative Equity in Q3
• Case Shiller: Home Prices decline in September
• Real House Prices and House Price-to-Rent

by Calculated Risk on 11/29/2011 04:46:00 PM

• From the Athens News: Eurogroup signs off on 8bn euro aid payment

Eurozone finance ministers agreed on Tuesday to release an 8bn euro aid payment to Greece, part of an 110bn euro package of support agreed with the government last year ...

It looks like Greece will not default in December, but there is a huge hurdle in January when the private creditors are supposed to "voluntarily" agree to large haircuts.

• Surprise! The EFSF is insufficient.

From the WSJ: Euro Zone Sees Shortfall in Rescue Fund

Euro-zone finance ministers acknowledged on Tuesday that the bloc's bailout fund would have less capacity to help troubled nations than once hoped, and stepped up calls on the European Central Bank and the International Monetary Fund to come to their aid.

An analysis presented at a meeting of finance ministers here suggested the fund would be able to raise a maximum of €500 billion to €700 billion ($666 billion to $932 billion), far short of the €1 trillion or even €2 trillion that many had expected. ... ministers are exploring further measures to stem the crisis, which they hope to announce at a European summit on Dec. 8-9.

From the Financial Times: Fears of shortfall lead to moves to boost EFSF

Eurozone finance ministers are weighing more radical options to strengthen their firewall against the sovereign debt crisis, after acknowledging that plans to expand the €440bn eurozone rescue fund could deliver as little as half the extra punch that was anticipated.
Excerpt with permission

• European bond yields were mostly lower today after (from Bloomberg) Italy Pays More Than 7% at Auction of EU7.5 Billion of Bonds

Italy was again forced to pay above the 7 percent threshold that led Greece, Portugal and Ireland to seek bailouts when it sold 7.5 billion euros ($10.1 billion) in bonds today, short of the maximum target for the auction.

The Italian 2 year yield was down to 7.1%, and the 10 year yield was at 7.24%.

The Spanish 2 year yield was down to 5.6%, and the 10 year yield was down to 6.39%.

The Belgian 10 year yield was down to 5.33%, and the French 10 year yield was down to 3.52%.

Note: There is a link below the first post for the table of European bond yields.

• Tim Duy has more: Another European "Solution" Coming?

Earlier:
• CoreLogic: 10.7 Million U.S. Properties with Negative Equity in Q3
• Case Shiller: Home Prices decline in September
• Real House Prices and House Price-to-Rent

by Calculated Risk on 11/29/2011 03:14:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2011. In the past month, the indexes increased in 43 states, decreased in five, and remained unchanged in two (Georgia and New Mexico) for a one-month diffusion index of 76. Over the past three months, the indexes increased in 42 states, decreased in seven, and remained unchanged in one (Delaware) for a three-month diffusion index of 70.

Note: These are coincident indexes constructed from state employment data. From the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In October, 45 states had increasing activity, up from 39 in September. This is the highest level since April.

Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all green earlier this year - but this is an improvement from September.

Earlier:
• CoreLogic: 10.7 Million U.S. Properties with Negative Equity in Q3
• Case Shiller: Home Prices decline in September
• Real House Prices and House Price-to-Rent