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Friday, November 23, 2012

Q3 GDP: Here come the upward revisions

by Calculated Risk on 11/23/2012 11:55:00 AM

Next Thursday, the BEA will release the second estimate of Q3 GDP. The consensus is GDP will be revised up to 2.8% annualized growth, from the advance estimate of 2.0%.  This would be a pretty sharp upward revision.

As an example, from Nomura analysts today:

"We believe real GDP growth will be revised significantly upward to an annualized pace of 3.0% versus the originally reported 2.0%, supported by greater inventory building and better net trade statistics than previously estimated."
It is important to remember that the "advance" estimate is based on incomplete source data, or data subject to revisions. It appears the missing data (mostly for September) was better than expected, and that revisions have been favorable for GDP. I'll post some more Q3 estimates later.

LA area Port Traffic: Inbound Traffic up in October

by Calculated Risk on 11/23/2012 09:13:00 AM

I've been following port traffic for some time. Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for October. LA area ports handle about 40% of the nation's container port traffic. This data suggests trade with Asia will be fairly steady in October.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

LA Area Port TrafficClick on graph for larger image.

On a rolling 12 month basis, both inbound and outbound traffic are up slightly compared to the 12 months ending in September.

In general, inbound and outbound traffic has been mostly moving sideways recently.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

LA Area Port TrafficFor the month of October, loaded outbound traffic was up slightly compared to October 2011, and loaded inbound traffic was up 5% compared to October 2011.

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday - so imports will probably decline in November.

Thursday, November 22, 2012

Irwin: "Five economic trends to be thankful for"

by Calculated Risk on 11/22/2012 07:30:00 PM

From Neil Irwin at the WaPo looked for a few positives: Five economic trends to be thankful for. Some excerpts a few comments:

Household debt is way down. ... The good news is that in the past three years, Americans have made remarkable progress cleaning up their balance sheets and paying down those debts. After peaking at nearly 98 percent of economic output at the start of 2009, the household debt was down to 83 percent of GDP in the spring of 2012. ...
CR Note: This level is still fairly high, but households have made progress. We will have more data next week when the NY Fed releases their Q3 Report on Household Debt and Credit.

Total Household Debt Click on graph for larger image.

This graph is from the Q2 NY Fed Report on Household Debt and Credit and shows that aggregate consumer debt has been decreasing.

From the NY Fed: "Household indebtedness declined to $11.38 trillion [in Q2], a $53 billion decline from the first quarter of 2012. Outstanding household debt has decreased $1.3 trillion since its peak in Q3 2008."

Note: Irwin uses a different starting point, and also looks at household debt as percent of GDP (a good way to look at debt), and clearly household is debt is down significantly.

Irwin:
The cost of servicing that debt is way, way down. ... In late 2007, debt service payments added up to a whopping 14 percent of disposable personal income. Now it’s down to 10.7 percent, about the same as in the early 1990s. ..
CR Note: Here is the data source: Household Debt Service and Financial Obligations Ratios.

Irwin:
Electricity and natural gas prices are falling. ... The retail price for consumers’ gas service piped into their homes is down 8.4 percent in the year ended in October. The lower wholesale price of natural gas is also pulling down electricity prices; they are off 1.2 percent over the past year. ...

Businesses aren’t firing people. ... While businesses aren’t adding new workers at a pace that would put the hordes of unemployed back on the job very rapidly, they also aren’t slashing jobs at a very rapid clip. Private employers laid off or discharged 1.62 million people in September, according to the Labor Department’s Job Openings and Labor Turnover data. ...
CR Note: I track the JOLTS data every month, and, as Irwin notes, layoffs and discharges are down.

Irwin:
Housing is dramatically more affordable. ... In the spring of 2006, ... typical American home buyer would have faced a monthly mortgage payment of $1,247 a month ... home prices have fallen, so have mortgage rates ... Add it all up, and in the spring of 2012 that median American house would require a mortgage payment of only $889 a month ...
CR Note: I'm not sure of all the numbers Irwin is using, but according to Case-Shiller, the Composite 20  house price index declined 31% from the peak (some areas more, some much less).  Factor in low mortgage rates, and the payment would have fallen even further. There are definitely positive trends.

Happy Thanksgiving!  

Zillow forecasts Case-Shiller House Price index to increase 3.0% Year-over-year for September

by Calculated Risk on 11/22/2012 11:58:00 AM

Note: The Case-Shiller report to be released next Tuesday is for September (really an average of prices in July, August and September).

Zillow Forecast: September Case-Shiller Composite-20 Expected to Show 3% Increase from One Year Ago

On Tuesday November 27th, the Case-Shiller Composite Home Price Indices for September will be released. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) will be up by 3 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will be up 2.3 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from August to September will be 0.4 percent for the 20-City Composite, as well as for the 10-City Composite Home Price Index (SA). All forecasts are ... are based on a model incorporating the previous data points of the Case-Shiller series, the September Zillow Home Value Index data and national foreclosure re-sales.
Zillow's forecasts for Case-Shiller have been pretty close.

CR Note: It looks like house prices will be up about 5% this year based on the Case-Shiller indexes.

Case Shiller Composite 10Case Shiller Composite 20
NSASANSASA
Case Shiller
(year ago)
Sept 2011155.61152.55141.96139.12
Case-Shiller
(last month)
Aug 2012158.62155.35145.87142.7
Zillow Sept ForecastYoY2.3%2.3%3.0%3.0%
MoM0.3%0.4%0.3%0.4%
Zillow Forecasts1159.1156146.3143.3
Current Post Bubble Low146.5149.38134.08136.65
Date of Post Bubble LowMar-12Jan-12Mar-12Feb-12
Above Post Bubble Low8.6%4.4%9.1%4.9%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

Europe Summit Update

by Calculated Risk on 11/22/2012 09:24:00 AM

No announcements yet. There is much more being dicussed at the summit than just the Greek situation. Here are a few articles ...

From the WSJ: EU Leaders Prepare for Battle Royal at Summit

European Union leaders are headed to Brussels on Thursday for a big showdown over the bloc's spending budget, in a battle that pits richer against poorer member states, the East of the continent against the West, and the U.K. against almost everyone else.
...
European Council President, Herman Van Rompuy, who will preside over the two-day meeting, has vowed repeatedly to keep heads of state in Brussels through the weekend to avert a collapse of the talks, arguing that a deal is needed urgently to ensure the EU and its institutions continue to function properly.

The Multiannual Financial Framework, as the 2014 to 2020 budget is known, sets out the headline figures allocated to different EU programs and activities, ranging from foreign policy to transport and infrastructure.
From the Financial Times: German Doubts Force Rethink on Greece
After almost 10 hours of intense talks on Tuesday night, eurozone finance ministers failed to agree on how fast to cut Greece’s debt pile. They called a further meeting next week to settle differences and release €44bn of long-overdue aid.
excerpt with permission
From Reuters: EU's Rehn Sees Definitive Deal on Greek Aid on Monday
Greece has taken all the steps necessary to secure its next tranche of aid and euro zone finance ministers should be able to sign off definitively on the assistance on Monday, the European commissioner for economic affairs said on Wednesday.

"I trust everyone will reconvene in Brussels on Monday with the necessary constructive spirit, and move beyond the detrimental mindset of red lines," Olli Rehn told the European Parliament.
And from Reuters: Spain Kicks Off 2013 Funding With Strong Bond Sale
Spain sold nearly 4 billion euros of bonds with ease at an auction on Thursday that kicked off its funding program for a daunting 2013 ...