RSS Feed by Calculated Risk on 12/23/2012 10:33:00 AM
Sunday, December 23, 2012
Fiscal Agreement Update
A few obvious points on the "fiscal cliff": 1) It is about the deficit shrinking too quickly next year, 2) there is no "drop dead" date and an agreement in early January still seems likely (the sites and TV stations with countdown times are embarrassing themselves), and 3) entitlements are not part of the "cliff" (although it was possible some changes might be part of an agreement).
Clearly there is going to be more austerity in the US at the Federal level next year. How much is unclear.
From Ezra Klein at Wonkblog: Obama’s “small deal” could lead to bigger tax increases
The talk in Washington now is about a “small deal.” That would likely include the Senate tax bill [to extend tax cuts for anyone making less than $250,000], some policy to turn off at least the defense side of the sequester and a handful of other policies to blunt or delay various parts of the fiscal cliff.This means the payroll tax cuts would expire (something I've expected) and tax rates for those making more than $250,000 would increase (also expected). There are many other issues - the medicare "doc" fix, mortgage debt relief, emergency unemployment benefits and on and on - that still need to be addressed.
That’s not a very good deal for the short-term health of the economy.
It is hard to guess the impact on the economy until we see the details.
And an interesting article from the NY Times: How Party of Budget Restraint Shifted to ‘No New Taxes,’ Ever
On a Saturday afternoon in October 1990, Senator Pete V. Domenici turned from a conversation on the Senate floor, caught the eye of a clerk by raising his right hand and voted in favor of a huge and contentious bill to reduce federal deficits. Then he put his hand back into his pocket and returned to the conversation.This shift in the Republican party (to no taxes ever) is why I think an early January agreement is likely. In my first post on the fiscal agreement, I wrote: "Given that the top marginal tax rate will increase - and that certain politicians can't vote for any bill with a tax increase - the agreement will probably be voted on in January after the Bush tax cuts expire." That may seem weird, but it is the current state of politics.
It was the end of an era, although no one knew it then. It was the last time any Congressional Republican has voted for higher income taxes.
...
In the early 1980s, majorities of Congressional Republicans voted for a pair of deficit deals orchestrated by President Ronald Reagan, even though tax increases accounted for more than 80 percent of the projected reductions.
Saturday, December 22, 2012
Unofficial Problem Bank list declines to 841 Institutions
by Calculated Risk on 12/22/2012 06:20:00 PM
Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The number of unofficial problem banks grew steadily and peaked at 1,002 institutions on June 10, 2011. The list has been declining since then.
This is an unofficial list of Problem Banks compiled only from public sources.
Here is the unofficial problem bank list for Dec 21, 2012.
Changes and comments from surferdude808:
As expected, the OCC released its enforcement actions through mid-November this week. For the week, there were eight removals and four additions to the Unofficial Problem Bank List. After the changes, the list holds 841 institutions with assets of $313.3 billion. A year ago, the list held 973 institutions with assets of $397.6 billion.Earlier:
The OCC terminated actions against National Bank of Kansas City, Overland Park, KS ($640 million); First Community Bank, National Association, Sugar Land, TX ($610 million); RiverWood Bank, Bemidji, MN ($156 million); The Midland National Bank of Newton, Newton, KS ($132 million); and Texas Republic Bank, National Association, Frisco, TX ($76 million).
The following three banks solved their problems by finding a healthier merger partner: The Community Bank, A Massachusetts Cooperative Bank, Brockton, MA ($317 million); Premier Bank, Tallahassee, FL ($272 million); and Stone County National Bank, Crane, MO ($81 million).
The OCC issued new actions against Los Alamos National Bank, Los Alamos, NM ($1.6 billion); Westbury Bank, West Bend, WI ($525 million); GCF Bank, Sewell, NJ ($314 million); and Home Loan Investment Bank, F.S.B., Warwick, RI ($196 million). Keen readers will know that Los Alamos National Bank is making its second appearance on the list after being removed in April 2012 when the OCC terminated an action issued in January 2010.
Next week, we look for the FDIC to release its actions through November but to shut it down as far as closings go. Wishing all a Merry Christmas and may you find a safe & sound bank under your tree.
• Summary for Week Ending Dec 21st
• Schedule for Week of Dec 23rd
Schedule for Week of Dec 23rd
by Calculated Risk on 12/22/2012 01:11:00 PM
Earlier:
• Summary for Week Ending Dec 21st
This will be a light week for economic data with the markets closing early on Monday, and closed on Tuesday, in observance of the Christmas Day holiday.
The key economic reports this week are the Case-Shiller house price indexes on Wednesday, and New Home sales on Thursday.
Happy Holidays to All. As usual, the Calculated Risk blog will be open.
SIFMA recommends US markets close at 2:00 PM ET in advance of the Christmas Day holiday.
US markets are closed in observance of the Christmas Day holiday.
Note: The Mortgage Bankers Association (MBA) will not release the mortgage purchase applications index this week. They will release two weeks of results on Thursday, January 3, 2013.
9:00 AM: S&P/Case-Shiller House Price Index for October. Although this is the October report, it is really a 3 month average of August, September and October. This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through September 2012 (the Composite 20 was started in January 2000).
The consensus is for a 4.1% year-over-year increase in the Composite 20 index (NSA) for September. The Zillow forecast is for the Composite 20 to increase 4.1% year-over-year, and for prices to increase 0.3% month-to-month seasonally adjusted.
10:00 AM: Richmond Fed Survey of Manufacturing Activity for December. The consensus is for a decrease to 6 for this survey from 9 in November (Above zero is expansion).
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand from 361 thousand last week. If correct, this would put the 4-week near the low for the year.
10:00 AM: New Home Sales for November from the Census Bureau. This graph shows New Home Sales since 1963. The dashed line is the October sales rate.
The consensus is for an increase in sales to 375 thousand Seasonally Adjusted Annual Rate (SAAR) in November from 368 thousand in October.
10:00 AM: Conference Board's consumer confidence index for December. The consensus is for an decrease to 70.0 from 73.7 last month.
9:45 AM: Chicago Purchasing Managers Index for December. The consensus is for an increase to 51.0, up from 50.4 in November.
10:00 AM ET: Pending Home Sales Index for November. The consensus is for a 18% increase in the index
Summary for Week ending Dec 21st
by Calculated Risk on 12/22/2012 08:01:00 AM
The economic data released this week was encouraging. The November Personal Income and Outlays report suggests PCE might increase over 2% in Q4 - not great, but higher than most forecasts.
The housing numbers were solid. Housing starts are on pace to increase about 25% this year, and, for existing homes, inventory is down sharply and conventional sales up.
Other positives include Q3 GDP being revised up, the highest Architecture Billings Index since 2007, a rebound in the trucking index, a decline in the 4-week average of initial weekly unemployment claims, and another increase in builder confidence.
Manufacturing was still weak, but two of the three regional surveys were slightly better than expected. A negative was consumer sentiment, and that is probably related to the "fiscal cliff" debate in Washington that is still showing no signs of progress. I expect an agreement, but not until early January (although it could happen sooner). Next week will be a light week for economic data, but there are two key housing reports - new home sales and Case-Shiller house prices.
Here is a summary of last week in graphs:
• Housing Starts at 861 thousand SAAR in November
Total housing starts were at 861 thousand (SAAR) in November, down 3.0% from the revised October rate of 888 thousand (SAAR).
A few key points:
• Housing starts are on pace to increase about 25% in 2012. This is a solid year-over-year increase, and residential investment is now making a positive contribution to GDP growth.
• Even after increasing 25% in 2012, the approximately 770 thousand housing starts this year will still be the 4th lowest on an annual basis since the Census Bureau started tracking starts in 1959 (the three lowest years were 2009 through 2011). Starts averaged 1.5 million per year from 1959 through 2000, and demographics and household formation suggests starts will return to close to that level over the next few years. That means starts will come close to doubling from the 2012 level.
• Residential investment and housing starts are usually the best leading indicator for economy. Nothing is foolproof, but this suggests the economy will continue to grow over the next couple of years.
This was slightly below expectations of 865 thousand starts in November.
• Existing Home Sales in November: 5.04 million SAAR, 4.8 months of supply
The NAR reports: November Existing-Home Sales and Prices Maintain UptrendThis graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.
Sales in November 2012 (5.04 million SAAR) were 5.9% higher than last month, and were 14.5% above the November 2011 rate.
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, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.
Inventory decreased 22.5% year-over-year in November from November 2011. This is the 21st consecutive month with a YoY decrease in inventory.Months of supply declined to 4.8 months in November.
This was above expectations of sales of 4.90 million. For existing home sales, the key number is inventory - and the sharp year-over-year decline in inventory is a positive for housing.
• Personal Income increased 0.6% in November, Spending increased 0.4%
The BEA released the Personal Income and Outlays report for November.This graph shows real PCE by month for the last few years. The dashed red lines are the quarterly levels for real PCE. Personal income increased more than expected in November and PCE for October was revised up.
The "two month method" for estimating Q4 PCE suggests PCE will increase close to 2.2% in Q4 - more growth than most expect - although this estimate is probably a little high because PCE was strong in September. Still better than expected, and we are already seeing some upward revisions to Q4 GDP forecasts.
• AIA: Architecture Billings Index increases in November, "Strongest conditions since end of 2007"
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From AIA: Architecture Billings Index Signaling Gains for Fourth Straight MonthThis graph shows the Architecture Billings Index since 1996. The index was at 53.2 in November, up from 52.8 in October. Anything above 50 indicates expansion in demand for architects' services.
This increase is mostly being driven by demand for design of multi-family residential buildings, but every building sector is now expanding. New project inquiries are also increasing. Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.
• Weekly Initial Unemployment Claims at 361,000
"In the week ending December 15, the advance figure for seasonally adjusted initial claims was 361,000, an increase of 17,000 from the previous week's revised figure of 344,000."The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined to 367,750.
The recent spike in the 4 week average was due to Hurricane Sandy as claims increased significantly in NY, NJ and other impacted areas. Now, as expected, the 4-week average is back to the pre-storm level.
Weekly claims were slightly higher than the 359,000 consensus forecast.
• Final December Consumer Sentiment declines to 72.9
The final Reuters / University of Michigan consumer sentiment index for December declined to 72.9, down from the preliminary reading of 74.5, and was down from the November reading of 82.7.This was below the consensus forecast of 75.0. The recent decline in sentiment is probably related to Congress and the so-called "fiscal cliff". This is similar to the sharp decline in 2011 when Congress threatened to force the US to default (not pay the bills).
I still think an agreement will be reached in early January - there is no drop dead date - but you never know.
Friday, December 21, 2012
Earlier: Chicago Fed National Activity Index improves, Kansas City Fed Mfg Survey shows contraction
by Calculated Risk on 12/21/2012 06:51:00 PM
A couple of reports from earlier this morning:
• The Chicago Fed released the national activity index (a composite index of other indicators): Economic Activity Increased in November
Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.10 in November from –0.64 in October. Two of the four broad categories of indicators that make up the index increased from October, but only the production and income category made a positive contribution to the index in November.This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.
The index’s three-month moving average, CFNAI-MA3, increased from –0.59 in October to –0.20 in November—its ninth consecutive reading below zero. November’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
Click on graph for larger image.This suggests economic activity increased, but growth was still below trend in November.
According to the Chicago Fed:
What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.• From the Kansas City Fed: Tenth District Manufacturing Activity Declined Further
A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.
Tenth District manufacturing activity declined further in December, though by a smaller amount than in October or November. Factories’ production expectations were somewhat more optimistic than last month, but a higher share of firms plan to decrease employment in coming months. Approximately half of all contacts cited fiscal policy uncertainty as having impacted their hiring decisions. Price indexes mostly increased, particularly for future raw materials, with the increase driven heavily by food prices.This showed contraction, but the index was slightly better than expected.
The month-over-month composite index was -2 in December, up slightly from -6 in November and -4 in October ... The employment index decreased from 22 to 13 after rebounding solidly last month.
...
“We saw factory activity decline for the third straight month, which many firms blamed on the uncertainty created by the fiscal cliff talks", said [Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City]. "Contacts still plan modest output expansion in the first half of 2012, but they now expect their employment to fall, before recovering later in the year.”
ATA Trucking Index rebounds in November
by Calculated Risk on 12/21/2012 02:52:00 PM
This is a minor indicator that I follow. Truck tonnage was negatively impacted by Hurricane Sandy in October, and bounced back in November.
From ATA: ATA Truck Tonnage Index Rebounds 3.7% in November
The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index jumped 3.7% in November erasing October’s 3.7% drop. (The 3.7% decrease in October was revised from a 3.8% contraction ATA reported on November 20, 2012.) November’s gain was the first since July of this year. As a result, the SA index equaled 118.0 (2000=100) in November versus 113.8 in October. Compared with November 2011, the SA index was up 1%, after contracting 2.1% on a year-over-year basis in October. Year-to-date, compared with the same period last year, tonnage was up 2.8%.Note from ATA:
...
“Sandy impacted both October’s and November’s tonnage readings,” ATA Chief Economist Bob Costello said. “But it was still good to see tonnage snap back in November.” Costello said he expects a boost to flatbed tonnage from the rebuilding in the areas impacted by Sandy, but most of that won’t happen until the spring when the money starts flowing and the weather is conducive to building.
“Outside of Sandy, if the fiscal cliff isn’t fixed in time, expect a slowdown in tonnage early next year as paychecks shrink for all households,” Costello said. “Since trucks account for the vast majority of deliveries in the retail supply, any reduction in consumer spending will hurt.” Costello added that even if we don’t go off the fiscal cliff, he expects slower tonnage growth in 2013 than 2012 as better housing starts and auto sales will be offset by slower factory output and consumer spending.
emphasis added
Trucking serves as a barometer of the U.S. economy, representing 67% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.2 billion tons of freight in 2011. Motor carriers collected $603.9 billion, or 80.9% of total revenue earned by all transport modes.
Click on graph for larger image.Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.
The dashed line is the current level of the index.
Overall the index has been mostly moving sideways this year due to the slowdown in manufacturing.
State Unemployment Rates decreased in 45 States in November
by Calculated Risk on 12/21/2012 11:55:00 AM
From the BLS: Regional and State Employment and Unemployment Summary
Regional and state unemployment rates were generally lower in November. Forty-five states and the District of Columbia recorded unemployment rate decreases and five states had no change, the U.S. Bureau of Labor Statistics reported today.
...
Nevada continued to record the highest unemployment rate among the states, 10.8 percent in November, followed by Rhode Island at 10.4 percent. North Dakota again registered the lowest jobless rate, 3.1 percent.
Click on graph for larger image in graph gallery.This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are below the maximum unemployment rate for the recession.
The size of the blue bar indicates the amount of improvement - Michigan and Ohio have seen the most improvement - New Jersey and Connecticut are the laggards.
The states are ranked by the highest current unemployment rate. Only two states still have double digit unemployment rates: Nevada and Rhode Island. In early 2010, 18 states and D.C. had double digit unemployment rates.
Last month I wrote: "I expect the unemployment rate in California to fall below 10% very soon" and sure enough the unemployment rate in California fell to 9.8% in November, the lowest level since January 2009.
Even though Nevada still has the highest unemployment rate, the rate has declined in recent months, falling from 12.1% in August to 10.8% in November.
LPS: Mortgage delinquencies increased in November, "In Foreclosure" Declines
by Calculated Risk on 12/21/2012 10:55:00 AM
LPS released their First Look report for November today. LPS reported that the percent of loans delinquent increased in November compared to October, and declined about 9% year-over-year. Also the percent of loans in the foreclosure process declined further in November and are the lowest level since 2009.
LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) increased to 7.12% from 7.03% in October. Note: the normal rate for delinquencies is around 4.5% to 5%.
The percent of loans in the foreclosure process declined to 3.51% from 3.61% in October.
The number of delinquent properties, but not in foreclosure, is down about 10% year-over-year (434,000 fewer properties delinquent), and the number of properties in the foreclosure process is down 18% or 388,000 year-over-year.
The percent (and number) of loans 90+ days delinquent and in the foreclosure process is still very high, but the number of loans in the foreclosure process is now declining.
LPS will release the complete mortgage monitor for November in early January.
| LPS: Percent Loans Delinquent and in Foreclosure Process | |||
|---|---|---|---|
| Nov 2012 | Oct 2012 | Nov 2011 | |
| Delinquent | 7.12% | 7.03% | 7.83% |
| In Foreclosure | 3.51% | 3.61% | 4.20% |
| Number of properties: | |||
| Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure: | 1,999,000 | 1,957,000 | 2,250,000 |
| Number of properties that are 90 or more days delinquent, but not in foreclosure: | 1,584,000 | 1,543,000 | 1,767,000 |
| Number of properties in foreclosure pre-sale inventory: | 1,767,000 | 1,800,000 | 2,155,000 |
| Total Properties | 5,350,000 | 5,300,000 | 6,172,000 |
Final December Consumer Sentiment declines to 72.9
by Calculated Risk on 12/21/2012 09:55:00 AM
Click on graph for larger image.
The final Reuters / University of Michigan consumer sentiment index for December declined to 72.9, down from the preliminary reading of 74.5, and was down from the November reading of 82.7.
This was below the consensus forecast of 75.0. The recent decline in sentiment is probably related to Congress and the so-called "fiscal cliff". This is similar to the sharp decline in 2011 when Congress threatened to force the US to default (not pay the bills).
I still think an agreement will be reached in early January - there is no drop dead date - but you never know.
Personal Income increased 0.6% in November, Spending increased 0.4%
by Calculated Risk on 12/21/2012 08:30:00 AM
The BEA released the Personal Income and Outlays report for November:
Personal income increased $85.8 billion, or 0.6 percent ... in November, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $41.3 billion, or 0.4 percent..The following graph shows real Personal Consumption Expenditures (PCE) through November (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.6 percent in November, in contrast to a decrease of 0.2 percent in October. ... The price index for PCE decreased 0.2 percent in November, in contrast to an increase of 0.1 percent in October. The PCE price index, excluding food and energy, increased less than 0.1 percent, compared with an increase of 0.1 percent.
...
Personal saving -- DPI less personal outlays -- was $436.7 billion in November, compared with $404.6 billion in October. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 3.6 percent in November, compared with 3.4 percent in October.
Click on graph for larger image.This graph shows real PCE by month for the last few years. The dashed red lines are the quarterly levels for real PCE. Personal income increased more than expected in November and PCE for October was revised up.
The "two month method" for estimating Q4 PCE suggests PCE will increase close to 2.2% in Q4 - more growth than most expect - although this estimate is probably a little high because PCE was strong in September. Still better than expected ...
