by Calculated Risk on 5/29/2015 07:10:00 PM

Here is a minor indicator I follow from the National Restaurant Association: Restaurant Performance Index Posts Moderate Gain in April

Driven by stronger same-stores sales and customer traffic levels, the National Restaurant Association’s Restaurant Performance Index (RPI) posted a moderate gain in April. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.7 in April, up 0.5 percent from a level of 102.2 in March. In addition, April represented the 26th consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.

"While individual indicators experienced some choppiness in recent months, the overall RPI stood above the 102 level for seven consecutive months,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “This was driven by consistent majorities of restaurant operators reporting positive same-store sales as well as an optimistic outlook for sales growth in the months ahead.”
emphasis added

Click on graph for larger image.

The index increased to 102.7 in April, up from 102.2 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. This is another solid reading.

by Calculated Risk on 5/29/2015 04:10:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in April to 1.73% from 1.78% in March. The serious delinquency rate is down from 2.13% in April 2014, and this is the lowest level since September 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier week, Freddie Mac reported that the Single-Family serious delinquency rate was declined in April to 1.66%. Freddie's rate is down from 2.15% in April 2014, and is at the lowest level since November 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

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

Click on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.40 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will close to 1% in late 2016.

The "normal" serious delinquency rate is under 1%, so maybe serious delinquencies will be close to normal at the end of 2016.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.

by Calculated Risk on 5/29/2015 02:53:00 PM

Excuse this pet peeve, but for some reason, when a business executive is interviewed on CNBC (and elsewhere), they are asked about economics in addition to their assumed areas of expertise. News flash: Business executives are NOT experts in economics (This should be called the "Jack Welch rule").

An example today: Richard Kovacevich, former chairman and CEO at Wells Fargo was on CNBC today, and said:

"We should be growing at 3 percent, given the difficulty of this last recession," he told CNBC's "Squawk Box." "We always get a higher and faster recovery from a tough recession, and this is the slowest ever, and I think it's the policies that are coming out of Washington DC that are causing this."

Wrong.

Imagine an economy with an unchanging labor force, and no innovation (everyone just does things they way they've always been done). How much should GDP grow? Zero.

Now imagine a second economy with a labor force growing 5% per year, no resource constraints, a short learning curve, and no innovation. How much should GDP grow? About 5% per year.

That is why I wrote Demographics and GDP: 2% is the new 4% earlier this year.

Two lessons: 1) Experts in one field are not necessarily experts in another, and 2) demographics matter - and right now 2% is the new 4%.

by Calculated Risk on 5/29/2015 12:51:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2015. In the past month, the indexes increased in 40 states, decreased in six, and remained stable in four, for a one-month diffusion index of 68. Over the past three months, the indexes increased in 45 states, decreased in three, and remained stable in two, for a three-month diffusion index of 84.

Note: These are coincident indexes constructed from state employment data. An explanation 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 April, 43 states had increasing activity (including minor increases).

It appears we are seeing weakness in several oil producing states including Alaska, North Dakota and Oklahoma. It wouldn't be surprising if Texas and other oil producing states also turned red sometime this year.


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 is almost all green again.

Note: Blue added for Red/Green issues.

by Calculated Risk on 5/29/2015 10:03:00 AM

Click on graph for larger image.

The final University of Michigan consumer sentiment index for May was at 90.7, up from the preliminary reading of 88.6, and down from 95.9 in April.

This was close to the consensus forecast of 90.0.

Chicago PMI May 2015: Chicago Business Barometer Back into Contraction in May

The Barometer fell 6.1 points to 46.2 in May from 52.3 in April. All five components of the Barometer weakened with three dropping by more than 10% and all of them now below the 50 breakeven mark.

April’s positive move had suggested that the first quarter slowdown was transitory and had been impacted by the cold snap and port strikes. May’s weakness points to a more fundamental slowdown with the Barometer running only slightly above February’s 5½-year low of 45.8.
...
Chief Economist of MNI Indicators Philip Uglow said, “We had thought that the April bounce was consistent with a partial return to normal following the weather and port related slowdown in the first quarter. The latest data for May, however, suggest that this was a false dawn and that sluggish activity has carried through to the second quarter.”
emphasis added

This was well below the consensus forecast of 53.0.