by Calculated Risk on 1/30/2017 09:04:00 AM

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

Personal income increased $50.2 billion (0.3 percent) in December according to estimates released today by the Bureau of Economic Analysis ... personal consumption expenditures (PCE) increased $63.1 billion (0.5 percent).
...
Real PCE increased 0.3 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

On inflation: The PCE price index increased 1.6 percent year-over-year. (This was up from 1.4% year-over-year in November). The core PCE price index (excluding food and energy) increased 1.7 percent year-over-year in December (the same as in November).

by Calculated Risk on 1/29/2017 07:11:00 PM

On Trump immigration executive order:

"This isn't normal. Its not humane, its not thought through, its not necessary, its not wise, its not decent and above all, its not American."
Eliot A. Cohen, Counselor in the United States Department of State under Condoleezza Rice and President George W. Bush

Weekend:
• Schedule for Week of Jan 29, 2017

• These are Not Normal Times

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures are down 8, and DOW futures are down 60 (fair value).

Oil prices were down over the last week with WTI futures at $52.97 per barrel and Brent at $55.52 per barrel.  A year ago, WTI was at $33, and Brent was at $33 - so oil prices are up sharply year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.27 per gallon - a year ago prices were at $1.82 per gallon - so gasoline prices are up 45 cents a gallon year-over-year.

by Calculated Risk on 1/29/2017 11:37:00 AM

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

Here is the unofficial problem bank list for January 2017.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for January 2017.  During the month, the list dropped from 169 to 163 institutions after six removals.  Aggregate assets fell by $1.5 billion to $43.5 billion.  A year ago, the list held 238 institutions with assets of $69.5 billion.

Actions were terminated against The Baraboo National Bank, Baraboo, WI ($412 million); International Finance Bank, Miami, FL ($354 million); First National Bank USA, Boutte, LA ($132 million); and First Federal of South Carolina, FSB, Walterboro, SC ($77 million  Ticker: FSGB).

Removals through failure were Seaway Bank and Trust Company, Chicago, IL ($361 million) and Harvest Community Bank, Pennsville, NJ ($126 million).  It has been 15 months since the last month with two or more bank failures.  The failure in Chicago is the 18th bank to fail in that city since September 2009 and the 64th bank to fail in Illinois since 2008.

by Calculated Risk on 1/28/2017 08:02:00 PM

These are not normal times, and I can't just post economic data and remain silent on other issues.

Mr. Trump's executive order is un-American, not Christian, and hopefully unconstitutional. This is a shameful act and no good person can remain silent.

From the NY Times: Donald Trump’s Muslim Ban Is Cowardly and Dangerous

The first casualties of this bigoted, cowardly, self-defeating policy were detained early Saturday at American airports just hours after the executive order, ludicrously titled “Protecting the Nation From Foreign Terrorist Entry Into the United States,” went into effect. It must have felt like the worst trick of fate for these refugees to hit the wall of Donald Trump’s political posturing at the very last step of a yearslong, rigorous vetting process. This ban will also disrupt the lives and careers of potentially hundreds of thousands of immigrants who have been cleared to live in America under visas or permanent residency permits.

That the order, breathtaking in scope and inflammatory in tone, was issued on Holocaust Remembrance Day spoke of the president’s callousness and indifference to history, to America’s deepest lessons about its own values.

The order lacks any logic. It invokes the attacks of Sept. 11 as a rationale, while exempting the countries of origin of all the hijackers who carried out that plot and also, perhaps not coincidentally, several countries where the Trump family does business. The document does not explicitly mention any religion, yet it sets a blatantly unconstitutional standard by excluding Muslims while giving government officials the discretion to admit people of other faiths.
...
Republicans in Congress who remain quiet or tacitly supportive of the ban should recognize that history will remember them as cowards.

by Calculated Risk on 1/28/2017 08:11:00 AM

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

Other key indicators include the January ISM manufacturing and non-manufacturing indexes, and January auto sales.

The FOMC meets on Tuesday and Wednesday, and no change to policy is expected.

----- Monday, Jan 30th -----
8:30 AM: Personal Income and Outlays for December. The consensus is for a 0.4% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.2%.

10:00 AM: Pending Home Sales Index for December. The consensus is for a 0.6% increase in the index.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for January. This is the last of the regional Fed surveys for January.

----- Tuesday, Jan 31st-----
9:00 AM ET: S&P/Case-Shiller House Price Index for November. Although this is the November report, it is really a 3 month average of September, October and November prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the October 2016 report (the Composite 20 was started in January 2000).

The consensus is for a 5.0% year-over-year increase in the Comp 20 index for November. The Zillow forecast is for the National Index to increase 5.6% year-over-year in November.

9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a reading of 55.2, up from 54.6 in December.

----- Wednesday, Feb 1st -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

All day: Light vehicle sales for January. The consensus is for light vehicle sales to decrease to 17.7 million SAAR in January, from 18.4 million in  December (Seasonally Adjusted Annual Rate).

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

8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 168,000 payroll jobs added in January, up from 153,000 added in December.

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 55.0, up from 54.7 in December.

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

The ISM manufacturing index indicated expansion at 54.7% in December. The employment index was at 53.1%, and the new orders index was at 60.2%.

10:00 AM: Construction Spending for December. The consensus is for a 0.2% increase in construction spending.

2:00 PM: FOMC Meeting Announcement. No change to FOMC policy is expected at this meeting.

----- Thursday, Feb 2nd -----
8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 253 thousand initial claims, down from 259 thousand the previous week.

----- Friday, Feb 3rd -----
8:30 AM: Employment Report for January. The consensus is for an increase of 175,000 non-farm payroll jobs added in January, up from the 156,000 non-farm payroll jobs added in December.

The consensus is for the unemployment rate to be unchanged at 4.7%.

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

In December, the year-over-year change was 2.16 million jobs.

A key will be the change in wages.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for December. The consensus is a 0.9% increase in orders.

10:00 AM: the ISM non-Manufacturing Index for January. The consensus is for index to increase to 57.2 from 57.1 in December.

by Calculated Risk on 1/27/2017 05:47:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC:

• Another huge week, total US oil rigs up 15 to 566

• Horizontal oil rig counts up +17 to 463
...
• Widespread gains: Permian, EF, Bakken, Cana Woodford – the shale sector as a whole has turned back on

• Another month of this will torpedo the OPEC deal

Click on graph for larger image.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

by Calculated Risk on 1/27/2017 02:58:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in December was at 1.00%, down from 1.03% in November.  Freddie's rate is down from 1.32% in December 2015.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

This is the lowest serious delinquency rate since June 2008.

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

Click on graph for larger image

Although the rate is declining, the "normal" serious delinquency rate is under 1%.

Maybe the rate will decline another 0.25 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Fannie Mae will report soon.

by Calculated Risk on 1/27/2017 12:58:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for December 2016. In the past month, the indexes increased in 41 states, decreased in two, and remained stable in seven, for a one-month diffusion index of 78. Over the past three months, the indexes increased in 47 states, decreased in two, and remained stable in one, for a three-month diffusion index of 90.

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.

Philly Fed.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 December 46 states had increasing activity (including minor increases).

The downturn in 2015 and 2016, in the number of states increasing, was mostly related to the decline in oil prices. Now that oil prices have recovered somewhat, most states are increasing again.

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 almost all green now.

Source: Philly Fed. Note: For complaints about red / green issues, please contact the Philly Fed.

by Calculated Risk on 1/27/2017 09:58:00 AM

The first graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Click on graph for larger image.

Residential investment (RI) increased at a 10.2% annual rate in Q4.  Equipment investment increased at a 3.1% annual rate, and investment in non-residential structures decreased at a 5.0% annual rate.

On a 3 quarter trailing average basis, RI (red) is unchanged,  equipment (green) is also unchanged, and nonresidential structures (blue) is slightly positive.

I'll post more on the components of non-residential investment once the supplemental data is released.

I expect investment to pick up going forward, and for the economy to continue to grow.


The second graph shows residential investment as a percent of GDP.

Residential Investment as a percent of GDP has generally been increasing, but is only just above the bottom of the previous recessions - and I expect RI to continue to increase for the next few years.

I'll break down Residential Investment into components after the GDP details are released.

Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

The third graph shows non-residential investment in structures, equipment and "intellectual property products".  Investment in equipment - as a percent of GDP - has declined a little recently..  Investment in nonresidential structures - as a percent of GDP - had been moving down due to less investment in energy and power, and is now moving sideways.

Still no worries - residential investment will pickup (still very low), and oil and related non-residential will also pickup.

by Calculated Risk on 1/27/2017 08:36:00 AM

From the BEA: Gross Domestic Product: Fourth Quarter and Annual 2016 (Advance Estimate)

Real gross domestic product (GDP) increased at an annual rate of 1.9 percent in the fourth quarter of 2016, according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.5 percent.
...
The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by negative contributions from exports and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the fourth quarter reflected a downturn in exports, an acceleration in imports, a deceleration in PCE, and a downturn in federal government spending that were partly offset by an upturn in residential fixed investment, an acceleration in private inventory investment, an upturn in state and local government spending, and an acceleration in nonresidential fixed investment.
emphasis added

The advance Q4 GDP report, with 1.9% annualized growth, was below expectations of a 2.2% increase.

Personal consumption expenditures (PCE) increased at a 2.5% annualized rate in Q4, down from 3.0% in Q3.   Residential investment (RI) increased at a 10.2% pace. Equipment investment increased at a 3.1% annualized rate, and investment in non-residential structures decreased at a 5.0% pace.

I'll have more later ...