by Calculated Risk on 5/31/2013 10:10:00 PM

With a huge hat tip to Tanta, here is a video she posted years ago.

Hmmm ... "Top ramen tastes a lot better when you eat it off a granite counter top" ...

by Calculated Risk on 5/31/2013 06:37:00 PM

From the FDIC: North Shore Bank, FSB, Brookfield, Wisconsin, Assumes All of the Deposits of Banks of Wisconsin, Kenosha, Wisconsin

As of March 31, 2012, Banks of Wisconsin had approximately $134.0 million in total assets and $127.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $26.3 million. ... Banks of Wisconsin is the 14th FDIC-insured institution to fail in the nation this year, and the first in Wisconsin.

The FDIC has slowed down on closing banks, but they are still on pace to close 30+ banks this year.

by Calculated Risk on 5/31/2013 03:18:00 PM

From the National Restaurant Association: Restaurant Performance Index Hits 10-Month High as Operators’ Business Expectations Improve

Driven by higher same-store sales and an improving outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) hit a 10-month high in April. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.0 in April, up 0.4 percent from a level of 100.6 in March. In addition, April represented the third time in the last four months that the RPI topped the 100 level, which signifies expansion in the index of key industry indicators.

“Growth in the Restaurant Performance Index was due largely to restaurant operators’ healthier outlook for the business environment in the coming months,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In particular, there was a dropoff in the proportion of operators who expect conditions to worsen in the months ahead, which suggests a broadening of the perspective that the expansion is firmly entrenched.”
...
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.1 in April – up 0.3 percent from a level of 99.8 in March. April represented the first time in eight months that the Current Situation Index rose above 100, which signifies expansion in the current situation indicators.

Click on graph for larger image.

The index increased to 101.0 in April from 100.6 in March. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month. 

by Calculated Risk on 5/31/2013 12:35:00 PM

Here is the summary of the 2013 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.  And a brief excerpt:

What is the Outlook for Future Social Security and Medicare Costs in Relation to GDP? One instructive way to view the projected costs of Social Security and Medicare is to compare the costs of scheduled benefits for the two programs with the gross domestic product (GDP), the most frequently used measure of the total output of the U.S. economy (Chart A). Under the intermediate assumptions employed in the reports and throughout this Summary, costs for both programs increase substantially through 2035 when measured this way because: (1) the number of beneficiaries rises rapidly as the baby-boom generation retires; and (2) the lower birth rates that have persisted since the baby boom cause slower growth of the labor force and GDP. Social Security’s projected annual cost increases to about 6.2 percent of GDP by 2035, declines to 6.0 percent by 2050, and remains between 6.0 and 6.2 percent of GDP through 2087. Under current law, projected Medicare cost rises to 5.6 percent of GDP by 2035, largely due to the rapid growth in the number of beneficiaries, and then to 6.5 percent in 2087, with growth in health care cost per beneficiary becoming the larger factor later in the valuation period.


In 2012, the combined cost of the Social Security and Medicare programs equaled 8.7 percent of GDP. The Trustees project an increase to 11.8 percent of GDP in 2035 and 12.7 percent of GDP in 2087. Although Medicare cost (3.6 percent of GDP) is smaller than Social Security cost (5.0 percent of GDP) in 2012, the gap closes gradually until 2056, when Medicare is projected to be the more costly program. During the final decade of the long-range projection period, Medicare cost is modestly larger than Social Security cost.

The increase in Social Security as a percent of GDP has always been expected.  The larger concern is the increase in Medicare.  According to the report, the OASI trust fund will be depleted in 2035 (then the program will either run a deficit or a pay the portion received in payroll taxes).  The current large trust fund was a result of payroll tax increases under President Reagan to have the baby boomers prepay their social security on the recommendation of the Greenspan commission.   The eventual depletion of the trust fund was expected. 

As the Columbia Journalism Review noted, any publication that says the fund is "bankrupt" or "on track for insolvency" gets an "F" for reporting (I've already seen a few).

by Calculated Risk on 5/31/2013 10:00:00 AM

Click on graph for larger image.

• The final Reuters / University of Michigan consumer sentiment index for May increased to 84.5 from the April reading of 76.4, and up from the preliminary reading of 83.7. This is the highest level since July 2007.

This was above the consensus forecast of 83.7. Sentiment has generally been improving following the recession - with plenty of ups and downs - and one big spike down when Congress threatened to "not pay the bills" in 2011.

• From the Chicago ISM:

May 2013:

The Chicago Purchasing Managers reported April's Chicago Business Barometer sprung 9.7 to 58.7, the highest since March 2012 and in sharp contrast to April's 3-1/2 year low. All Business Activity measures surged in May, reversing weakness seen in most categories in March and April.

PMI: Increased to 58.7 from 49.0. (Above 50 is expansion).

Employment increased to 56.9, up from 48.7.

New orders increased to 58.1 from 53.2.

This was well above the consensus estimate of 50.0.

by Calculated Risk on 5/31/2013 08:46:00 AM

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

Personal income decreased $5.6 billion, or less than 0.1 percent ... in April, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $20.5 billion, or 0.2 percent. In March, personal income increased $36.2 billion, or 0.3 percent ... and PCE increased $14.2 billion, or 0.1 percent, based on revised estimates.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in April, compared with an increase of 0.2 percent in March. ... The price index for PCE decreased 0.3 percent in April, compared with a decrease of 0.1 percent in March. 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 $306.9 billion in April, compared with $301.4 billion in March. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 2.5 percent in April, the same as in March.

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.

This graph shows real PCE by month for the last few years. The dashed red lines are the quarterly levels for real PCE.  

Some of the decline in spending is probably related to lower gasoline prices in April - and that is actually a positive (gasoline prices rebounded in May though).    Also PCE was revised up for January (slightly), February and March.

A key point is that the PCE price index was only up 0.7% year-over-year (1.1% for core PCE).   Core PCE increased at a 0.1% annualized rate in April keeping the pressure off the Fed to taper asset purchases.

by Calculated Risk on 5/30/2013 09:16:00 PM

The 2013 Social Security Trustees Report is expected tomorrow. If it is released, expect some terrible media coverage. Last year, the Columbia Journalism Review issued a Report Card on Social Security Trust Fund Coverage. They gave the media an "F" on headlines, and a "C-" on coverage.

With a few exceptions like USNews.com, the ABCNews blog, and Mark Miller, who noted on his Reuters blog “[Security Commissioner Michael] Astrue went out of his way to emphasize that the program is far from broke,” Astrue’s warning went unheeded.. Most press coverage ignored Astrue’s cautions and left the impression with the public that Social Security will not be there for them. “There won’t be much money left for you” after 2033, declared a reporter on WBEZ in Chicago.

Obviously any site that says "broke" or "bankrupt", is well, wrong. Unfortunately the coverage is typically more political than data driven. Be prepared to ridicule the coverage (The Columbia article has some great examples from last year).

Friday economic releases:
• At 8:30 AM ET, the BEA will release the Personal Income and Outlays for April. The consensus is for a 0.1% increase in personal income in April, and for no change in personal spending. Also for the Core PCE price index to increase 0.1%. Based on the second estimate of GDP, there will be an upward revision to outlays for Q1.

• At 9:45 AM, the Chicago Purchasing Managers Index for May will be released. The consensus is for an increase to 50.0, up from 49.0 in April.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (final for May). The consensus is for a reading of 83.7.

• Expected: The 2013 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds

by Calculated Risk on 5/30/2013 05:50:00 PM

Oh my ... from the Irish Times: Recession out of the picture as Fermanagh puts on a brave face for G8 leaders

Just a few weeks ago, Flanagan’s – a former butcher’s and vegetable shop in the neat village – was cleaned and repainted with bespoke images of a thriving business placed in the windows. Any G8 delegate passing on the way to discuss global capitalism would easily be fooled into thinking that all is well with the free-market system in Fermanagh. But, the facts are different. ...

The butcher’s business has been replaced by a picture of a butcher’s business. Across the road is a similar tale. A small business premises has been made to look like an office supplies store. It used to be a pharmacy, now relocated on the village main street.

Elsewhere in Fermanagh, billboard-sized pictures of the gorgeous scenery have been located to mask the occasional stark and abandoned building site or other eyesore.

The picture in the Irish Times is amazing. Ahhh, a Potemkin village that might fool some "leaders" into thinking Ireland is actually recovering.

by Calculated Risk on 5/30/2013 03:29:00 PM

Earlier the BEA reported the second estimate of Q1 GDP. The revisions were fairly small, as the BEA reported that real GDP increased at a 2.4% annual rate in Q1, revised down from the advanced estimate of 2.5%.  The underlying details were slightly positive.

Personal consumption expenditure (PCE) grew at a 3.4% annualized real rate in Q1, revised up from 3.2%.

The change in private inventories was revised down to a 0.63 percentage point contribution from a 1.03 percentage point contribution in the advance report (a 0.40 percentage point decline between estimates). This smaller buildup in inventories for Q1 is probably a positive for Q2.

A key negative was the contribution from state and local government from -0.14 percentage points to -0.29 percentage points - the largest drag since Q2 2011.

This graph shows the contribution to percent change in GDP for residential investment and state and local governments since 2005.

Click on graph for larger image.

The blue bars are for residential investment (RI), and RI was a significant drag on GDP for several years - and is now adding to the economy.

However the drag from state and local governments has continued.  Just ending this drag will be a positive for the economy.  Note: In real terms, state and local government spending is at the lowest level since Q1 2001.

With consumer spending holding up, residential investment increasing - and state and local governments near the bottom - this suggests decent growth going forward. Of course there will be a substantial drag from Federal fiscal policy over the next couple of quarters ...

by Calculated Risk on 5/30/2013 12:31:00 PM

From Freddie Mac today: Fixed Mortgage Rates Highest in a Year

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing fixed mortgage rates following long-term government bond yields higher. The average 30-year fixed moved up nearly half a percentage point since the beginning of May when it averaged 3.35 percent. ...

30-year fixed-rate mortgage (FRM) averaged 3.81 percent with an average 0.8 point for the week ending May 30, 2013, up from last week when it averaged 3.59 percent. Last year at this time, the 30-year FRM averaged 3.75 percent.

15-year FRM this week averaged 2.98 percent with an average 0.7 point, up from last week when it averaged 2.77 percent. A year ago at this time, the 15-year FRM averaged 2.97 percent.

Click on graph for larger image.

This graph shows the the 30 year and 15 year fixed rate mortgage interest rates from the Freddie Mac Primary Mortgage Market Survey®.   Not much of an increase recently, but this is the highest level in a year.

This is a weekly average for the week ending May 30th.  Rates moved higher over the last couple of days, and 30 year rates will probably be close to 4% in the next survey if Treasury yields remain at the current level.

Note: The Freddie Mac survey started in 1971 and rates were below 5% in earlier periods.

The second graph shows the 30 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey® compared to the MBA refinance index.

The refinance index has dropped sharply recently (down almost 30% over the last 3 weeks) and will probably decline significantly if rates stay at this level.