by Calculated Risk on 10/03/2016 10:03:00 AM

The ISM manufacturing index indicated expansion in September. The PMI was at 51.5% in August, up from 49.4% in August. The employment index was at 49.7%, up from 48.3% in August, and the new orders index was at 55.1%, up from 49.1% in August.

From the Institute for Supply Management: September 2016 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in September following one month of contraction in August, and the overall economy grew for the 88th consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The September PMI® registered 51.5 percent, an increase of 2.1 percentage points from the August reading of 49.4 percent. The New Orders Index registered 55.1 percent, an increase of 6 percentage points from the August reading of 49.1 percent. The Production Index registered 52.8 percent, 3.2 percentage points higher than the August reading of 49.6 percent. The Employment Index registered 49.7 percent, an increase of 1.4 percentage points from the August reading of 48.3 percent. Inventories of raw materials registered 49.5 percent, an increase of 0.5 percentage point from the August reading of 49 percent. The Prices Index registered 53 percent in September, the same reading as in August, indicating higher raw materials prices for the seventh consecutive month. Manufacturing expanded in September following one month of contraction in August, with nine of the 18 industries reporting an increase in new orders in September (up from six in August), and 10 of the 18 industries reporting an increase in production in September (up from eight in August)."
emphasis added

Click on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was above expectations of 50.2%, and suggests manufacturing expanded in September.

by Calculated Risk on 10/03/2016 08:00:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for August today. According to BKFS, 4.24% of mortgages were delinquent in August, down from 4.87% in August 2015. BKFS also reported that 1.04% of mortgages were in the foreclosure process, down from 1.48% a year ago.

This gives a total of 5.28% delinquent or in foreclosure.

Press Release: Black Knight’s Mortgage Monitor: 42 Percent of Q2 2016 Refinances Were Cash-Out Transactions, Largest Quarterly Sum of Equity Tapped Since 2009

Today, the Data & Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of August 2016. This month, Black Knight took a close look at mortgage refinance activity through the first half of 2016. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, borrowers are continuing the trend of drawing upon growing equity in their homes, though at nowhere near the levels at which they had pre-crisis.

“The roughly 350,000 cash-out refinances in Q2 2016 accounted for 42 percent of all refinances in the quarter, and marked the ninth consecutive quarterly increase in cash-out lending, not only by count, but also by the amount of equity tapped,” said Graboske. “At $22.6 billion, that works out to approximately $65,000 in equity tapped per borrower. While that per-borrower number is slightly down from Q1 2016 – but $6,000 higher than one year ago – the $22.6 billion total is the largest equity sum tapped since Q2 2009. Just to put that into perspective, though, it’s still a nearly 80 percent lower equity draw than at the peak in Q3 2005. And, given that we saw over $550 billion in tappable equity growth last year alone, this equates to borrowers only tapping into 15 percent of the growth in equity over the past 12 months, without even touching the $4.5 trillion balance in tappable equity available. All in all, it’s clear that cash-outs are helping to prop up the refinance market – their 42 percent share is up from only 30 percent in early 2015 when interest rates had also dropped. What’s more, refi volumes are down from 2015 – at least through the second quarter – but while overall they’re down nine percent from Q1 2015, rate/term refinances are actually down 25 percent over that same period.

“Today’s cash-out refinance borrowers continue to present a relatively low risk profile, historically speaking,” Graboske continued. “The average credit score of 748 among Q2 2016 cash-out refinance borrowers is 67 points higher than that of the low point recorded in Q3 2006, and is in fact nearly 60 points higher than the overall average credit score from 2005 through 2007. In addition, post-cash-out loan-to-value ratios remain low. At 66 percent, it’s slightly higher than in Q1 2016, but it’s the second lowest quarterly average recorded in over 11 years. This is nearly six percent below the 2005-2007 average and 10 percent below the highs recorded in late 2008. In addition, while not specific to cash-out refinancing, we continue to see prudent behavior on the part of borrowers. Some 40 percent of Q2 2016 rate/term refinances involved the borrower reducing their loan term, the highest share of term reductions since late 2013/early 2014.”

This month, Black Knight also found that the remaining inventory of loans in active foreclosure is declining at the fastest rate since 2014, and the rate of reduction has been accelerating throughout 2016.
emphasis added

Click on graph for larger image.

This graph from Black Knight shows first lien Cash-out Refinances.

From Black Knight:

• The roughly 350,000 cashout refinances in Q2 2016 accounted for 42 percent of all refinances in the quarter, and marked the ninth consecutive quarterly increase in cash-out lending in terms of both count and amount of equity tapped

• Cash-outs are helping to prop up the refinance market: their 42 percent share is up from only 30 percent in early 2015 as interest rates dropped; though overall refi volumes are down nine percent from Q1 2015, rate/term refinances are actually down 25 percent

• The $22.6 billion tapped via cash-out refinances in Q2 is the largest equity sum tapped since Q2 2009; that’s still nearly an 80 percent lower equity draw than at the peak in Q3 2005

• This works out to approximately $65,000 in equity tapped per borrower, which is down slightly from Q1 but $6,000 higher than one year ago

The second graph shows the credit scores and Loan-to-value (LTV) for cash-out refinance activity. From Black Knight:

• Historically speaking, today’s cash-out refinance borrowers continue to present a relatively low risk profile

• The average credit score of 748 among Q2 cash-out refinance borrowers is 67 points higher than that of the low point recorded in Q3 of 2006, and is nearly 60 points higher than the overall average credit score from 2005 through 2007

• Post-cash-out average loan-to-value ratios (LTVs) remain low at 66 percent; this is slightly higher than in Q1, but is the second lowest quarterly average recorded in over 11 years - nearly six percent below the 2005-2007 average and 10 percent below the highs recorded in late 2008

Cash-out refinance activity is picking up, but the level is still fairly low - and the quality of the loans (and LTV) is good.  There is much more in the mortgage monitor.

by Calculated Risk on 10/02/2016 07:35:00 PM

Weekend:
• Schedule for Week of Oct 2, 2016

Monday:
• Early, Reis Q3 2016 Office Survey of rents and vacancy rates.

• At 10:00 AM, ISM Manufacturing Index for September. The consensus is for the ISM to be at 50.2, up from 49.4 in August. The employment index was at 48.3%, and the new orders index was at 49.1%.

• Also at 10:00 AM, Construction Spending for August. The consensus is for a 0.3% increase in construction spending.

• All Day, Light vehicle sales for September. The consensus is for light vehicle sales to increase to 17.4 million SAAR in September, from 16.9 million in August (Seasonally Adjusted Annual Rate).

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

Oil prices were up over the last week with WTI futures at $47.88 per barrel and Brent at $50.19 per barrel.  A year ago, WTI was at $46, and Brent was at $47 - so oil prices are UP year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.22 per gallon (down less than $0.10 per gallon from a year ago).

by Calculated Risk on 10/02/2016 01:19:00 PM

First, here are a few serious articles about the Trump meltdown:

From the NY Times: Donald Trump Tax Records Show He Could Have Avoided Taxes for Nearly Two Decades, The Times Found

Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years, records obtained by The New York Times show.

From the WaPo: Trump Foundation lacks the certification required for charities that solicit money (A major story).

From Newsweek: How Donald Trump's Company Violated the United States Embargo Against Cuba

From the Financial Times: Donald Trump’s problem with impulse control

Even if he were able to exercise self-control, it will be hard for wavering voters to lose the impression that he is an unhinged egotist who cares more about women’s figures, say, than US national security. Or worse, that he does not know the difference.

Here is the link to the SNL video if it doesn't appear below:

by Calculated Risk on 10/01/2016 04:58:00 PM

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

Here is the unofficial problem bank list for September 2016.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for September 2016.  During the month, the list fell from 184 institutions to 177 after eight removals and one addition.  Assets dropped by $1.1 billion to an aggregate $55.4 billion.  A year ago, the list held 276 institutions with assets of $82.0 billion.

This month, actions have been terminated against Frontier State Bank, Oklahoma City, OK ($661 million); Peoples State Bank of Commerce, Nolensville, TN ($152 million); North Georgia National Bank, Calhoun, GA ($119 million); Anchor Commercial Bank, Juno Beach, FL ($105 million); State Bank of Taunton, Taunton, MN ($50 million); and Mainstreet Bank, Ashland, MO ($44 million).

Allied Bank, Mulberry, AR ($66 million) failed on September 23rd and, in an infrequent event, Fidelity National Bank, Medford, WI closed through a voluntary liquidation on September 1st.

The addition this month was First Trust & Savings Bank of Albany, Illinois, Albany, IL ($222 million).

With it being the end of the third quarter, we bring an updated transition matrix to detail how banks are moving off the Unofficial Problem Bank List.  Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,713 institutions have appeared on a weekly or monthly list at some point.  Only 10.3 percent of the banks that have appeared on the list remain today.  In all, there have been 1,536 institutions that have transitioned through the list.  Departure methods include 875 action terminations, 400 failures, 245 mergers, and 16 voluntary liquidations.  Of the 389 institutions on the first published list, 20 or 5.1 percent still remain more than seven years later.  The 400 failures represent 23.4 percent of the 1,713 institutions that have made an appearance on the list.  This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

Unofficial Problem Bank List
Change Summary
		Number of Institutions	Assets ($Thousands)
Start (8/7/2009)		389	276,313,429
Subtractions
	Action Terminated	169	(63,786,937)
	Unassisted Merger	39	(9,713,878)
	Voluntary Liquidation	4	(10,584,114)
	Failures	157	(184,803,449)
	Asset Change		(1,465,675)
Still on List at 9/30/2016		20	5,962,376
Additions after 8/7/2009		157	49,503,834
End (9/30//2016)		177	55,466,210
Intraperiod Deletions1
	Action Terminated	706	284,256,499
	Unassisted Merger	206	80,490,602
	Voluntary Liquidation	12	2,474,477
	Failures	243	119,858,467
	Total	1,167	487,080,045
1Institution not on 8/7/2009 or 9/30/2016 list but appeared on a weekly list.

by Calculated Risk on 10/01/2016 08:11:00 AM

The key report this week is the September employment report on Friday.

Other key indicators include the September ISM manufacturing and non-manufacturing indexes, September auto sales, and the August trade deficit.

Also the quarterly Reis surveys for office, apartment and malls will be released this week.

A key focus will be on the second Presidential debate on Sunday, Oct 9th.

----- Monday, Oct 3rd -----
Early: Reis Q3 2016 Office Survey of rents and vacancy rates.

10:00 AM: ISM Manufacturing Index for September. The consensus is for the ISM to be at 50.2, up from 49.4 in August.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated contraction at 49.4 in August. The employment index was at 48.3%, and the new orders index was at 49.1%.

10:00 AM: Construction Spending for August. The consensus is for a 0.3% increase in construction spending.

All day: Light vehicle sales for September. The consensus is for light vehicle sales to increase to 17.4 million SAAR in September, from 16.9 million in August (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the August sales rate.

----- Tuesday, Oct 4th -----
Early: Reis Q3 2016 Apartment Survey of rents and vacancy rates.

At 9:00 PM ET, the Vice Presidential Debate, at Longwood University in Farmville, Virginia

----- Wednesday, Oct 5th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for September. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in September, down from 177,000 added in August.

Early: Reis Q3 2016 Mall Survey of rents and vacancy rates.

8:30 AM: Trade Balance report for August from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through July. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $39.0 billion in August from $39.5 billion in July.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for August. The consensus is a 0.2% decrease in orders.

10:00 AM: the ISM non-Manufacturing Index for September. The consensus is for index to increase to 52.9 from 51.4 in August.

----- Thursday, Oct 6th -----
8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 256 thousand initial claims, up from 254 thousand the previous week.


----- Friday, Oct 7th -----
8:30 AM: Employment Report for September. The consensus is for an increase of 168,000 non-farm payroll jobs added in September, up from the 151,000 non-farm payroll jobs added in August.

The consensus is for the unemployment rate to decline to 4.8%.

This graph shows the year-over-year change in total non-farm employment since 1968.

In August, the year-over-year change was 2.45 million jobs.

A key will be the change in wages.

3:00 PM: Consumer credit from the Federal Reserve.  The consensus is for a $16.8 billion increase in credit.

----- Sunday, Oct 9th -----
At 9:00 PM ET, the Second Presidential Debate, at Washington University in St. Louis, St. Louis, MO

by Calculated Risk on 9/30/2016 06:20:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Mixed, But Closer to Recent Lows

Mortgage Rates were mixed today, with some lenders in slightly weaker territory while others offered modest improvements versus yesterday. The dichotomy has to do with the timing of yesterday's market movements. Bond market began the day in weak territory yesterday but improved noticeably by the end of the day. Some lenders sent out updated (better) rate sheets while others stood pat. Lenders whose rates increased today tended to come from the group that offered improvements yesterday afternoon. Long story short, there was a brief window of the week's best rates for some lenders yesterday with everyone getting mostly back on the same page today.

Fortunately, that page is still a good one. While rates aren't quite as low as they were earlier this week, they're still much lower than they were earlier this month. 3.375% is still the most prevalent conventional 30yr fixed quotes on top tier scenarios. That's the lowest stably-held rate of all time (there have been lower rates, but only for a few days here and there), even though the upfront costs are slightly higher than they were in early August. That's splitting hairs though! The point is that, unless you're examining day-to-day rate movement under a microscope, rates have been holding steady near all-time lows.
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 9/30/2016 01:47:00 PM

Here is a minor indicator I follow from the National Restaurant Association: RPI drops into contraction territory

Due in large part to declines in both same-store sales and customer traffic, the National Restaurant Association’s Restaurant Performance Index (RPI) fell below 100 in August. The RPI stood at 99.6, down 1.0 percent from a level of 100.6 in July.

“Broad-based declines in the current situation indicators caused the RPI to fall below 100 for the first time in eight months,” said Hudson Riehle, senior vice president of research for the National Restaurant Association. “Restaurant operators reported soft sales and traffic in August, along with corresponding dips in the labor indicators. While the Expectations component of the index remains in expansion territory, it too has trended downward in the past several months.”
emphasis added

Click on graph for larger image.

The index decreased to 99.6 in August, down from 100.6 in July. (below 100 indicates contraction).

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

by Calculated Risk on 9/30/2016 11:18:00 AM

Chicago PMI: September Chicago Business Barometer Up 2.7 Points to 54.2

The MNI Chicago Business Barometer increased 2.7 points to 54.2 in September from 51.5 in August, recovering most of lost ground experienced in the previous month.
...
In response to September’s special question, 79% of Chicago panellists said the run-up to November Presidential Elections is having a negligible impact on business.
...
“Economic growth in the US appears to have picked up a little at the end of the third quarter and although the Employment component fell, this was on the back of a relatively strong showing in the previous month. Note Employment usually lags changes in orders and output, so it was not that surprising to see this component weakening in September,” said Lorena Castellanos, senior economist at MNI Indicators
emphasis added

This was above the consensus forecast of 52.0.


Click on graph for larger image.

The final consumer sentiment reading was 91.2 in September, up from 89.8 in August.

"Confidence edged upward in September due to gains among higher income households, while the Sentiment Index among households with incomes under $75,000 has remained at exactly the same level for the third consecutive month. Importantly, the data provide no evidence of an upward trend as the average level of the Sentiment Index since the start of 2016 is nearly identical with the September level (91.4 versus 91.2). "
emphasis added

This was above the consensus forecast.

by Calculated Risk on 9/30/2016 08:38:00 AM

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

Personal income increased $39.3 billion (0.2 percent) in August according to estimates released today by the Bureau of Economic Analysis. ... personal consumption expenditures (PCE) increased $6.2 billion (less than 0.1 percent).
...
Real PCE decreased 0.1 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

The August PCE price index increased 1.0 percent year-over-year and the August PCE price index, excluding food and energy, increased 1.7 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through August 2016 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was at consensus expectations.  And the increase in PCE was below the 0.2% increase consensus.

Using the two-month method to estimate Q3 PCE growth, PCE was increasing at a 3.1% annual rate in Q3 2016. (using the mid-month method, PCE was increasing 2.6%). This suggests decent PCE growth in Q3, even with the weak August report.