by Calculated Risk on 6/22/2014 12:49:00 PM

Kathleen Pender points out three reasons gasoline prices haven't risen sharply yet: 1) Geography in Iraq, 2) seasonal factors, and 3) domestic production. From the San Francisco Chronicle: 3 reasons Iraq conflict isn't driving up gas prices (yet)

The fighting is mainly in the northern part of Iraq. Its main oil production and export facilities are in the south, where Shiites dominate. ... Most experts do not expect the Sunni rebels to invade the south, which accounts for about 90 percent of Iraq's oil production and exports.
...
Prices typically fall in June, when refineries are revved up and ready to go but families still have kids in school. They go up again in July and August, when vacationers take to the roads. ... This June, prices have been mostly steady, which amounts to a stealth increase.
...
U.S. production has gone from about 5.5 million barrels a day to almost 8.5 million in the past three years, and could hit 10 million within a few years ... reduced reliance on Mideast oil is blunting the impact of the Iraq conflict.

And a couple of articles on oil from Jim Hamilton: Iraq, oil markets, and the U.S. economy and Gasoline price calculator

by Calculated Risk on 6/21/2014 01:11:00 PM

There are several key reports this week: New and Existing home sales for May, Case-Shiller house prices for April, the 3rd estimate of Q1 GDP, and the May Personal Income and Outlays.

For manufacturing, the June Richmond and Kansas City Fed surveys will be released.

----- Monday, June 23rd -----
8:30 AM ET: Chicago Fed National Activity Index for May. This is a composite index of other data.

10:00 AM: Existing Home Sales for May from the National Association of Realtors (NAR).

The consensus is for sales of 4.75 million on seasonally adjusted annual rate (SAAR) basis. Sales in April were at a 4.65 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 4.81 million SAAR.

A key will be the reported year-over-year increase in inventory of homes for sale.

----- Tuesday, June 24th -----
9:00 AM: FHFA House Price Index for April. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.5% increase.

9:00 AM: S&P/Case-Shiller House Price Index for April. Although this is the April report, it is really a 3 month average of February, March and April.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes through March 2014 (the Composite 20 was started in January 2000).

The consensus is for a 11.4% year-over-year increase in the Composite 20 index (NSA) for April. The Zillow forecast is for the Composite 20 to increase 11.8% year-over-year, and for prices to increase 1.2% month-to-month seasonally adjusted.

10:00 AM: New Home Sales for May from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the April sales rate.

The consensus is for an in increase in sales to 441 thousand Seasonally Adjusted Annual Rate (SAAR) in May from 433 thousand in April.

10:00 AM: Conference Board's consumer confidence index for June. The consensus is for the index to increase to 83.7 from 83.0.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for June.  The consensus is for a reading of 7, unchanged from 7 in May.

----- Wednesday, June 25th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Durable Goods Orders for May from the Census Bureau. The consensus is for a 0.4% increase in durable goods orders.

8:30 AM: Q1 GDP (third estimate). This is the third estimate of Q1 GDP from the BEA. The consensus is that real GDP decreased 1.8% annualized in Q1, revised down from the second estimate of a 1.0% decrease.

----- Thursday, June 26th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 313 thousand from 312 thousand.

8:30 AM: Personal Income and Outlays for May. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.2%.

11:00 AM: the Kansas City Fed manufacturing survey for May.

----- Friday, June 27th -----
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for June). The consensus is for a reading of 82.0, up from the preliminary reading of 81.2, and up from the May reading of 81.9.

by Calculated Risk on 6/21/2014 08:19:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for June 20, 2014.

Changes and comments from surferdude808:

A couple bank failures and an update from the OCC on its enforcement action activities contributed to several changes to the Unofficial Problem Bank List. In all, there were six removals that push the list count down to 488 institutions with assets of $152.6 billion. In comparison, there were 751 institutions with assets of $273 billion on the list a year ago.

The OCC terminated actions against Eagle National Bank, Upper Darby, PA ($190 million); The First National Bank and Trust Company of Broken Arrow, Broken Arrow, OK ($189 million); Lee County Bank & Trust, National Association, Fort Madison, IA ($148 million); and First National Bank Northwest Florida, Panama City, FL ($108 million).

The failure plagued states of Florida and Illinois experienced a failure each this Friday. The River Valley Bancorp, Inc., Davenport, IA, saw its two banking subsidiaries that each operate under the name Valley Bank fail. The larger Valley Bank with assets of $456 million was located in Moline, Illinois, while its smaller sister with $82 million of assets was located in Fort Lauderdale, Florida. Since the on-set of the Great Recession, there have been 71 failures in Florida and 59 in Georgia. Both states only trail Georgia which has an astonishing 87 failures but none so far this year.

Next week we anticipate the FDIC will release an update on its enforcement action activities. With it being the last Friday of the quarter, we will provide an update on transition matrix.

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 494.

by Calculated Risk on 6/20/2014 06:35:00 PM

From the FDIC: Great Southern Bank, Reeds Spring, Missouri, Assumes All of the Deposits of Valley Bank, Moline, Illinois

As of March 31, 2014, Valley Bank had approximately $456.4 million in total assets and $360.0 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $51.4 million. ... Valley Bank is the 10th FDIC-insured institution to fail in the nation this year, and the third in Illinois.

From the FDIC: Landmark Bank, National Association, Fort Lauderdale, Florida, Assumes All of the Deposits of Valley Bank, Fort Lauderdale, Florida

As of March 31, 2014, Valley Bank had approximately $81.8 million in total assets and $66.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $7.7 million. ... Valley Bank is the 11th FDIC-insured institution to fail in the nation this year, and the first in Florida.

A two for Friday!

by Calculated Risk on 6/20/2014 03:48:00 PM

I use the weekly Freddie Mac Primary Mortgage Market Survey® (PMMS®) to track mortgage rates. The PMMS series started in 1971, so there is a fairly long historical series.

For daily rates, the Mortgage News Daily has a series that tracks the PMMS very well, and is usually updated daily around 3 PM ET. The MND data is based on actual lender rate sheets, and is mostly "the average no-point, no-origination rate for top-tier borrowers with flawless scenarios". (this tracks the Freddie Mac series).

MND reports that average 30 Year fixed mortgage rates decreased today to 4.18% from 4.20% yesterday.

One year ago, on June 20, 2013, rates were at 4.29% and rising.   So rates are down year-over-year!

The spread will be even larger next week. Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 6/20/2014 12:58:00 PM

The Fed's Household Debt Service ratio through Q1 2014 was released this morning: Household Debt Service and Financial Obligations Ratios. I used to track this quarterly back in 2005 and 2006 to point out that households were taking on excessive financial obligations.

These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households. Note: The Fed changed the release in Q3.

The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income.

The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR.

This data has limited value in terms of absolute numbers, but is useful in looking at trends. Here is a discussion from the Fed:

The limitations of current sources of data make the calculation of the ratio especially difficult. The ideal data set for such a calculation would have the required payments on every loan held by every household in the United States. Such a data set is not available, and thus the calculated series is only an approximation of the debt service ratio faced by households. Nonetheless, this approximation is useful to the extent that, by using the same method and data series over time, it generates a time series that captures the important changes in the household debt service burden.

Click on graph for larger image.

The graph shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow).

The overall Debt Service Ratio decreased in Q1, and is at a record low.  Note: The financial obligation ratio (FOR) is also near a record low  (not shown)

Also the DSR for mortgages (blue) are near the low for the last 30 years.  This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.

This data suggests household cash flow is in much better shape than a few years ago.

by Calculated Risk on 6/20/2014 10:00:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were generally little changed in May. Twenty states had unemployment rate decreases from April, 16 states had increases, and 14 states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today.
...
Rhode Island again had the highest unemployment rate among the states in May, 8.2 percent. North Dakota again had the lowest jobless rate, 2.6 percent.

Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement. 

The states are ranked by the highest current unemployment rate. No state has double digit or even a 9% unemployment rate.  Only Rhode Island (8.2%) is at or above 8%.  

The second graph shows the number of states with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate at or above 11% (red).

Currently no state has an unemployment rate at or above 9% (purple), 1 state is at or above 8% (light blue), and 9 states are at or above 7% (dark blue).

by Calculated Risk on 6/19/2014 06:55:00 PM

There are some key questions about inflation right now. Will the recent pickup in inflation continue? Or was it just "noise" (As Fed Chair Janet Yellen said)? This will be important to watch.

Here are some excerpts from an article by Merrill Lynch Global Economist Ethan Harris Inflation: bump up or bust out?

One of the great ironies this year is that even as growth has disappointed to the downside, inflation has surprised to the upside. Most important, in the past three months, core CPI inflation has risen at the fastest rate since before the crisis. Moreover, the pick-up is fairly broad-based. Both goods and services inflation is higher and there appear to be only a couple anomalies—strong apparel price inflation and a huge 41.6% annualized jump in airfares.

Despite the strong numbers, we are reluctant to make significant changes in our inflation call. ... we have incorporated the spring surprises and have raised our sequential forecasts slightly, but that only raises our annual numbers by a few tenths. Why the limited response? To put it simply, the fundamentals don’t support a strong sustained increase. Let’s take a look at the main inflation stories.

Reserved money growth
Since the beginning of the economic recovery, monetarists have argued that with the Fed’s massive balance sheet strong inflation could be just around the corner. Our response has always been: reserves are not money, and unless those reserves stimulate a surge in bank lending and spending, they are not inflationary. ... even with the recent pick up in business lending, overall bank lending is still growing at half the normal pace of a business expansion. ...

Medical mal-pricing?
Another key inflation concern is that special factors have temporarily held inflation in check and are now reversing. There seems to be an element of this in medical inflation. Inflation dipped last year as government payment rates were reduced and as key drugs became generic. Thus the medical PCE price index fell 0.45% in April 2013 and then rose 0.20% this April. That swing alone added more than a tenth to year-over-year core PCE inflation. However, we are reluctant to extrapolate the recent strength going forward. ...

It’s a small world after all
In our view, one of the most underrated factors in recent inflation movements is the impact of global markets. ... In recent months, there have been some signs of a bottoming out of consumer import prices. However, a significant acceleration seems unlikely. The conditions that created the low inflation are still in place: emerging market growth remains low, there is abundant spare capacity in the global economy, the dollar is trending higher and Europe is at risk of sliding into deflation. The main upside risk comes from commodity prices, but usually that takes some time to develop.

Weak wages
While there is a lot of talk about higher wage growth, there is very little evidence. .... In our view, there is still some slack in the labor market; when slack disappears, the rise in wage growth will be very slow, and as Yellen made clear at the press conference, the Fed will welcome the initial rise in wage inflation as a sign of normalization rather than inflation.

... Put it all together, we continue to expect a slow rise in inflation, allowing an equally slow Fed exit.

by Calculated Risk on 6/19/2014 12:55:00 PM

From Freddie Mac: Fixed Mortgage Rates Down Slightly

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates reversing course and moving slightly lower for the week.

30-year fixed-rate mortgage (FRM) averaged 4.17 percent with an average 0.6 point for the week ending June 19, 2014, down from last week when it averaged 4.20 percent. A year ago at this time, the 30-year FRM averaged 3.93 percent.

Click on graph for larger image.

Here is a graph of 30 year fixed mortgage rates - according to the PMMS® - for 2013 (blue) and 2014 (red).

Mortgage rates jumped to 4.46% in late June 2013, and it is possible that rates will be lower year-over-year soon (currently 4.17%).

Note: Looking at daily rates from Mortgage News Daily, it is likely mortgage rates will be down year-over-year tomorrow. The MND data is based on actual lender rate sheets, and is mostly "the average no-point, no-origination rate for top-tier borrowers with flawless scenarios". (this tracks the Freddie Mac series very well).

by Calculated Risk on 6/19/2014 10:00:00 AM

From the Philly Fed: June Manufacturing Survey

The diffusion index of current general activity increased from a reading of 15.4 in May to 17.8 this month. The index has remained positive for four consecutive months and is at its highest reading since last September. The current new orders and shipments indexes also moved higher this month, increasing 6 points and 1 point, respectively.
...
Indicators also suggest improved labor market conditions this month. The employment index remained positive for the 12th consecutive month and increased 4 points. [to 11.9].
emphasis added

This was above the consensus forecast of a reading of 13.0 for June.

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through June. The ISM and total Fed surveys are through May.

The average of the Empire State and Philly Fed surveys is at the highest level since 2011, and this suggests stronger expansion in the ISM report for June.