by Calculated Risk on 7/18/2016 10:18:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 59 in July, down from 60 in June. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Holds Firm in July

Builder confidence in the market for newly built, single-family homes in July fell one point to 59 from a June reading of 60 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.

“For the past six months, builder confidence has remained in a relatively narrow positive range that is consistent with the ongoing gradual housing recovery that is underway,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “However, we are still hearing reports from our members of scattered softness in some markets, due largely to regulatory constraints and shortages of lots and labor.”

“The economic fundamentals are in place for continued slow, steady growth in the housing market,” said NAHB Chief Economist Robert Dietz. “Job creation is solid, mortgage rates are at historic lows and household formations are rising. These factors should help to bring more buyers into the market as the year progresses.”
...
All three HMI components edged lower in July. The components measuring current sales expectations and buyer traffic each fell one point to 63 and 45, respectively. The index measuring sales expectations in the next six months posted a three-point decline to 66.

The three-month moving averages for regional HMI scores held remarkably steady. The Northeast, Midwest and South were unchanged at 39, 57 and 61, respectively. The West edged one point higher to 69.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was below the consensus forecast of 61, however this is still a solid reading.

by Calculated Risk on 7/18/2016 08:01:00 AM

In addition to Case-Shiller, and CoreLogic, I'm also watching the FNC, Zillow and several other house price indexes.

FNC released their May 2016 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.7% from April to May (Composite 100 index, not seasonally adjusted). 

The 10 city MSA increased 0.3% (NSA), the 20-MSA RPI increased 0.5%, and the 30-MSA RPI increased 0.6% in May. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

From FNC: FNC Index: May Home Prices Up 0.7%

According to the latest FNC Residential Price Index™ (RPI), U.S. home prices rose at a less robust pace in May, up 0.7% at a seasonally unadjusted rate. On a year-over-year basis, home price appreciation continues to level off, ending in May with a seasonally unadjusted rate of 4.9%.

Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data.

The index is still down 11.6% from the peak in 2006 (not inflation adjusted).

Click on graph for larger image.

This graph shows the year-over-year change based on the FNC index (four composites) through May 2016. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Most of the other indexes are also showing the year-over-year change in the mid single digit range.

Note: The May Case-Shiller index will be released on Tuesday, July 26th.

by Calculated Risk on 7/17/2016 06:57:00 PM

From Tim Duy on Friday: Data Dump

Interesting mix of data today that will give monetary policymakers plenty of food for thought. My guess is that it will probably drive a deeper division in the Fed between those who looking to secure two hikes this year rather and those good with just one or none at all.
...
Bottom Line: Generally solid data sufficient to keep the prospect of a rate hike or two alive for this year. But soft or mixed enough on key points to lean policy closer to the former than the latter.

Weekend:
• Schedule for Week of July 17, 2016

Monday:
• At 10:00 AM ET, the July NAHB homebuilder survey. The consensus is for a reading of  61, up from 60 in June.  Any number above 50 indicates that more builders view sales conditions as good than poor.

From CNBC: Pre-Market Data and Bloomberg futures: S&P are up 4 and DOW futures are up 35 (fair value).

Oil prices were up over the last week with WTI futures at $45.91 per barrel and Brent at $47.61 per barrel.  A year ago, WTI was at $51, and Brent was at $56 - so prices are down 10% to 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.21 per gallon (down over $0.50 per gallon from a year ago).

by Calculated Risk on 7/17/2016 11:06:00 AM

Note: The large year-over-year decline in the occupancy rate last week was related to the timing of the July 4th weekend.

From HotelNewsNow.com: STR: US hotel results for week ending 9 July

The U.S. hotel industry reported mixed year-over-year results in the three key performance metrics during the week of 3-9 July 2016, according to data from STR.

In comparison with a full 2015 week that did not include the Fourth of July, the industry’s occupancy decreased 6.4% to 67.4%. Average daily rate was up 1.3% to US$121.11. Revenue per available room fell 5.2% to US$81.59.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

The red line is for 2016, dashed orange is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.

2015 was the best year on record for hotels.

So far 2016 is tracking just behind 2015, and well ahead of the median rate.

The 4-week average occupancy rate should remain above 70% during the Summer travel period.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 7/16/2016 08:11:00 AM

The key economic reports this week are June housing starts, and June Existing Home Sales.

For manufacturing, the July Philly Fed manufacturing survey will be released this week.

----- Monday, July 18th -----
10:00 AM: The July NAHB homebuilder survey. The consensus is for a reading of  61, up from 60 in June.  Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Tuesday, July 19th -----
8:30 AM: Housing Starts for June.

Total housing starts decreased to 1.164 million (SAAR) in May. Single family starts increased to 764 thousand SAAR in May.

The consensus for 1.170 million, up from the May rate.

----- Wednesday, July 20th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

During the day: The AIA's Architecture Billings Index for June (a leading indicator for commercial real estate).

----- Thursday, July 21st -----
8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 265 thousand initial claims, up from 254 thousand the previous week.

8:30 AM: the Philly Fed manufacturing survey for July. The consensus is for a reading of 5.0, up from 4.7.

8:30 AM ET: Chicago Fed National Activity Index for June. This is a composite index of other data.

9:00 AM: FHFA House Price Index for May 2016. This was originally a GSE only repeat sales, however there is also an expanded index.  The consensus is for a 0.4% month-to-month increase for this index.

10:00 AM: Existing Home Sales for June from the National Association of Realtors (NAR). The consensus is for 5.48 million SAAR, down from 5.53 million in May.

----- Friday, July 22nd -----
10:00 AM: Regional and State Employment and Unemployment for June 2016

by Calculated Risk on 7/15/2016 08:33:00 PM

The preliminary University of Michigan consumer sentiment index for July was at 89.5, down from 93.5 in June:

"The early July decline in consumer sentiment was due to increased concerns about prospects for the national economy that were mainly voiced by high income households. Prior to the Brexit vote, virtually no consumer thought the issue would have the slightest impact on the U.S. economy. Following the Brexit vote, it was mentioned by record numbers of consumers, especially high income consumers. Nearly one-in-four (24%) households with incomes in the top third mentioned Brexit when asked to identify any recent economic news that they had heard. For these households, the initial impact on domestic stock prices translated Brexit into personal wealth losses. While stock prices quickly rebounded, an underlying sense of uncertainty about global prospects as well as the outlook for the domestic economy have not faded. To be sure, the overall decline in the Sentiment Index was rather minor, and could be anticipated to recover some of those losses in late July or early August. Importantly, the least affected components have been personal finances and buying plans."
emphasis added

Click on graph for larger image.

by Calculated Risk on 7/15/2016 02:21:00 PM

The BLS reported this morning:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.6 percent over the last 12 months to an index level of 235.308 (1982-84=100).

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and is not seasonally adjusted (NSA).

• In 2014, the Q3 average of CPI-W was 234.242. In the previous year, 2013, the average in Q3 of CPI-W was 230.327. That gave an increase of 1.7% for COLA for 2015.

• In 2015, the Q3 average of CPI-W was 233.278. That was a decline of 0.4% from 2014, however, by law, the adjustment is never negative so the benefits remained the same this year (in 2016).

Since the previous highest Q3 average was in 2014 (not 2015), at 234.242, we have to compare Q3 this year to two years ago. 

Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Note: The year labeled for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).

CPI-W was up 0.6% year-over-year in June, and although this is very early - we need the data for July, August and September - my current guess is COLA will be positive this year, and will probably be around 1% this year.

Contribution and Benefit Base

The law prohibits an increase in the contribution and benefit base if COLA is not greater than zero, so there was no change in the contribution and benefit base for 2016. However if the there is even a small increase in COLA (seems likely this year), the contribution base will be adjusted using the National Average Wage Index (and catch up for last year).

From Social Security: Cost-of-Living Adjustment Must Be Greater Than Zero

... ... any amount that is directly dependent for its value on the COLA would not increase. For example, the maximum Supplemental Security Income (SSI) payment amounts would not increase if there were no COLA.

... if there were no COLA, section 230(a) of the Social Security Act prohibits an increase in the contribution and benefit base (Social Security's maximum taxable earnings), which normally increases with increases in the national average wage index. Similarly, the retirement test exempt amounts would not increase ...

The contribution base will be adjusted using the National Average Wage Index. This is based on a one year lag. The National Average Wage Index is not available for 2015 yet, but wages probably increased again in 2015. If wages increased the same as last year, then the contribution base next year will increase to around $127,000 from the current $118,500.

Remember - this is an early look. What matters is average CPI-W for all three months in Q3 (July, August and September).

by Calculated Risk on 7/15/2016 11:00:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.2% annualized rate) in June. The 16% trimmed-mean Consumer Price Index also rose 0.2% (1.9% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.2% (2.6% annualized rate) in June. The CPI less food and energy rose 0.2% (2.1% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for June here. Motor fuel was up 48% annualized in June.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.5%, the trimmed-mean CPI rose 2.0%, and the CPI less food and energy also rose 2.3%. Core PCE is for May and increased 1.6% year-over-year.

On a monthly basis, median CPI was at 2.2% annualized, trimmed-mean CPI was at 1.9% annualized, and core CPI was at 2.1% annualized.

Using these measures, inflation has been moving up, and most of these measures are at or above the Fed's target (Core PCE is still below).

by Calculated Risk on 7/15/2016 09:23:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.6 percent in June after declining 0.3 percent in May. For the second quarter as a whole, industrial production fell at an annual rate of 1.0 percent, its third consecutive quarterly decline. Manufacturing output moved up 0.4 percent in June, a gain largely due to an increase in motor vehicle assemblies. The output of manufactured goods other than motor vehicles and parts was unchanged. The index for utilities rose 2.4 percent as a result of warmer weather than is typical for June boosting demand for air conditioning. The output of mining moved up 0.2 percent for its second consecutive small monthly increase following eight straight months of decline. At 104.1 percent of its 2012 average, total industrial production in June was 0.7 percent lower than its year-earlier level. Capacity utilization for the industrial sector increased 0.5 percentage point in June to 75.4 percent, a rate that is 4.6 percentage points below its long-run (1972–2015) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 8.7 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 75.4% is 4.6% below the average from 1972 to 2015 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 increased 0.6% in June to 104.1. This is 19.1% above the recession low, and 1.5% below the pre-recession peak.

This was above expectations of a 0.4% increase.

by Calculated Risk on 7/15/2016 08:41:00 AM

On a monthly basis, retail sales were up 0.6% from May to June (seasonally adjusted), and sales were up 2.7% from June 2015.

From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $457.0 billion, an increase of 0.6 percent from the previous month, and 2.7 percent above June 2015. ... The April 2016 to May 2016 percent change was revised from up 0.5 percent to up 0.2 percent.

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 were up 0.5%.

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.

The increase in June was way above expectations for the month, however retail sales for April and May were revised down. Overall a decent report.