by Calculated Risk on 1/15/2016 02:23:00 PM

Here is a price index for commercial real estate that I follow. 

From CoStar: CRE Prices Continued Upward Climb in November

STRONG FUNDAMENTALS AND CAPITAL FLOWS SUPPORTED BROAD CRE PRICE GROWTH IN NOVEMBER. U.S. commercial real estate continued to post broad price gains in November 2015, with market fundamentals reflecting healthy levels of absorption and continued rental gains, even as construction levels slowly increased. The two broadest measures of aggregate pricing for commercial properties within the CCRSI — the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index — each increased by 0.9% in November 2015, contributing to annual gains of 12.2% and 11.7%, respectively, for the 12 months ended November 2015.
emphasis added

Click on graph for larger image.

This graph from CoStar shows the the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index indexes.

The value-weighted index increased 0.9% in November and is up 12.2% year-over-year.

The equal-weighted index increased 0.9% in November and up 11.7% year-over-year.

Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.

by Calculated Risk on 1/15/2016 10:07:00 AM

The preliminary University of Michigan consumer sentiment index for January was at 93.3, up from 92.6 in December:

"Consumer confidence inched upward for the fourth consecutive month due to more positive expectations for future economic growth. Personal financial prospects have remained largely unchanged during the past year at the most favorable levels since 2007 largely due to trends in inflation rather than wages. Indeed, expected wage gains fell to their lowest level in a year in early January, but were more than offset by declines in the expected inflation rate. The result was that inflation-adjusted income expectations rose to their highest level in nine years. Consumer optimism is now dependent on the continuation of an extraordinarily low inflation rate. Rather than welcoming a rising inflation rate as a signal of a strengthening economy, consumers are now more likely to reduce the pace of their spending and thus act to erase the Fed's rationale for higher interest rates. Given the favorable overall state of the Sentiment Index, the data continue to indicate that real personal consumption expenditures can be expected to advance by 2.8% in 2016."
emphasis added

This was slightly above the consensus forecast of 93.0.


Click on graph for larger image.

by Calculated Risk on 1/15/2016 09:24:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production declined 0.4 percent in December, primarily as a result of cutbacks for utilities and mining. The decrease for total industrial production in November was larger than previously reported, but upward revisions to earlier months left the level of the index in November only slightly below its initial estimate. For the fourth quarter as a whole, industrial production fell at an annual rate of 3.4 percent. Manufacturing output edged down in December. The index for utilities dropped 2.0 percent, as continued warmer-than-usual temperatures reduced demand for heating. Mining production decreased 0.8 percent in December for its fourth consecutive monthly decline. At 106.0 percent of its 2012 average, total industrial production in December was 1.8 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in December to 76.5 percent, a rate that is 3.6 percentage points below its long-run (1972–2014) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 9.6 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 76.5% is 3.6% below the average from 1972 to 2014 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased 0.4% in December to 106.5. This is 21.5% above the recession low, and 0.8% above the pre-recession peak.

This was below expectations of a 0.2% decrease, mostly due to "cutbacks in utilities and mining" (warm weather and lower gasoline prices).

by Calculated Risk on 1/15/2016 08:39:00 AM

On a monthly basis, retail sales were down 0.1% from November to December (seasonally adjusted), and sales were up 2.2% from December 2014.

From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $448.1 billion, a decrease of 0.1 percent from the previous month, and 2.2 percent above December 2014. Total sales for the 12 months of 2015 were up 2.1 percent from 2014.

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline was unchanged.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales ex-gasoline increased by 3.9% on a YoY basis (22.2% for all retail sales including gasoline).

The increase in December was below expectations of unchanged, however retailed sales for November were revised up from a 0.2% increase to a 0.4% increase. The headline number was weak, however sales ex-gasoline are up a solid 3.9% YoY.

by Calculated Risk on 1/14/2016 07:52:00 PM

Friday:
• At 8:30 AM ET, the Producer Price Index for December from the BLS. The consensus is for a 0.2% decrease in prices, and a 0.1% increase in core PPI.

• Also at 8:30 AM, Retail sales for December will be released. The consensus is for retail sales to be unchanged in December.

• Also at 8:30 AM, the NY Fed Empire State Manufacturing Survey for January. The consensus is for a reading of -4.0, up from -4.6.

• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for December. The consensus is for a 0.2% decrease in Industrial Production, and for Capacity Utilization to decrease to 76.8%.

• At 10:00 AM, the University of Michigan's Consumer sentiment index (preliminary for January). The consensus is for a reading of 93.0, up from 92.6 in December.

• Also at 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for November. The consensus is for a 0.1% increase in inventories.

Note: There were some large swings in LA area port traffic early last year due to labor issues that were settled in late February. Port traffic surged in March as the waiting ships were unloaded (the trade deficit increased in March too), and port traffic declined in April.  This will impact the YoY changes soon.

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

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.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 0.1% compared to the rolling 12 months ending in November.   Outbound traffic was down 0.8% compared to 12 months ending in November.

The recent downturn in exports might be due to the strong dollar and weakness in China.

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

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).

Imports were up slightly year-over-year in December; exports were down 9% year-over-year.  This suggests a larger trade deficit with the Far East in December.

by Calculated Risk on 1/14/2016 05:29:00 PM

Mortgage rates are nears the lows of the last two months ...

From Matthew Graham at Mortgage News Daily: Mortgage Rates Lower as Markets Grow Anxious Ahead of Fed

Yesterday was best described as 'unchanged,' and today's rate sheets were almost imperceptibly weaker. In other words, we've spent the last few days bouncing along the lowest levels in more than 2 months. Lenders are back to quoting conventional 30yr fixed rates in a range of 3.875% to 4.0%.
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 1/14/2016 12:36:00 PM

From the National Multifamily Housing Council (NMHC): Apartment Markets Recede in the January NMHC Quarterly Survey

All four indexes in the January 2015 National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions fell below the breakeven level of 50, indicating a decline over the past quarter. The last time Market Tightness (47), Sales Volume (46), Equity Financing (46) and Debt Financing (37) all landed below 50 was in October 2013.

“After an incredible year for the apartment industry, some weakening has appeared reflecting seasonal patterns along with additional pullback in some markets,” said Mark Obrinsky, NMHC’s Senior Vice President of Research and Chief Economist.

“2015 was one for the record books. Construction of new apartments rose to the highest level in almost 30 years, while the occupancy rate continued to climb and rent growth accelerated,” said Obrinsky. “All signs point to continued strong demand for apartment residences. With new supply finally approaching the level needed to meet new demand, we may well see some moderation in both occupancy and rent growth.”

Consumer demand for apartments declined slightly, with the Market Tightness Index coming in at 47 from 53 last quarter. This marks the first time in two years that the index showed a contraction from the previous quarter.

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading below 50 indicates looser conditions from the previous quarter. This indicates market conditions were looser over the last quarter.

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010.

There is a seasonal pattern for "tightness", and January is typically weaker for apartments - but it does appear supply is catching up with demand (the vacancy rate is also starting to increase slightly).

by Calculated Risk on 1/14/2016 10:51:00 AM

From Tim Duy: So You Think A Recession Is Imminent, Employment Edition

The recession drumbeat grows louder. This is not unexpected. Most forecasters have an asymmetric loss function; the cost of being wrong by missing a recession exceeds the cost of being wrong on a recession call. Hence economists tend to over-predict recessions. Eight of the last four recessions or so the joke goes [1]. And while I don't believe a recession is imminent, there are perfectly good reasons to be wary that a recession will bear down on the economy in the not-so-distant future. Historically, when the Fed begins a tightening cycle, the clock is ticking for the expansion. By that time, the economy is typically in a late-mid to late-stage expansion, and you are looking at two to three years before the cycle turns, four at the outside.

Of course there are some not so good reasons for worrying about a recession. Like listening to an investor talking their book. Or someone who needs to whip up a never ending stream of apocalyptic visions to hawk gold.

So what I am looking for when it comes to a recession? It's not a recession until you see it economy wide in the labor markets. When it's there, you will see it everywhere. Clearly, we weren't seeing it in the final quarter of last year. But, you say, employment is a lagging indicator, so last quarter tells you nothing. Not nothing, I would say, but a fair point nonetheless. One would need to look for the leading indicators within the employment data.
...
Bottom Line: From a labor market perspective, I am not seeing conclusive evidence of an impending recession in manufacturing, let alone the overall economy. Might be at the tip of one, but even that will take a year to evolve. I have more sympathy for the view that the economy has evolved into a mid-late to late stage of the cycle, and the transition and associated uncertainty results in some not-surprising volatility in financial markets.

Dr. Duy is looking at labor indicators. My favorite leading indicators for a possible recession are housing starts and new home sales. No worries right now - I'm not even on recession watch.

[1] Duy added:

Greg Ip calls me out on the direction of forecast accuracy ... if you were to tell me that these recession callers were not on average "economists" I would concede the point. And forecasts from official agencies such as the IMF and the Federal Reserve always miss recessions (a point Larry Summers makes with regard to the IMF here.) So Ip's point is well taken.

by Calculated Risk on 1/14/2016 08:33:00 AM

The DOL reported:

In the week ending January 9, the advance figure for seasonally adjusted initial claims was 284,000, an increase of 7,000 from the previous week's unrevised level of 277,000. The 4-week moving average was 278,750, an increase of 3,000 from the previous week's unrevised average of 275,750.

There were no special factors impacting this week's initial claims.

The previous week was unrevised at 277,000.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 278,750.

This was above the consensus forecast of 275,000, however the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 1/13/2016 07:53:00 PM

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for 275 thousand initial claims, down from 277 thousand the previous week.



Here is a graph (click on graph for larger image) from Doug Short and shows the S&P 500 since the 2007 high ... more graphs from Doug here: S&P 500 Snapshot: Down 2.50% for the Day and 11.29% Off Its Record Close