by Calculated Risk on 11/19/2020 09:44:00 AM

From the Philly Fed: November 2020 Manufacturing Business Outlook Survey

Manufacturing activity in the region continued to grow, according to firms responding to the November Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments remained positive for the sixth consecutive month but fell from their readings in October. However, employment increases were more widespread this month. Most future indexes also moderated this month but continue to indicate that firms expect growth over the next six months.

The diffusion index for current activity decreased 6 points to 26.3 in November, its sixth consecutive positive reading after reaching long-term lows in April and May The current employment index, however, fell 3 points to 12.7 this month ... On balance, the firms reported increases in manufacturing employment for the fifth consecutive month. The current employment index increased 15 points to 27.2.
emphasis added

This was close to the consensus forecast.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (blue, through November), and five Fed surveys are averaged (yellow, through October) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through October (right axis).

These early reports suggest the ISM manufacturing index will still be solid, but will likely decrease slightly in November from the October level.

by Calculated Risk on 11/19/2020 08:37:00 AM

The DOL reported:

In the week ending November 14, the advance figure for seasonally adjusted initial claims was 742,000, an increase of 31,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 709,000 to 711,000. The 4-week moving average was 742,000, a decrease of 13,750 from the previous week's revised average. The previous week's average was revised up by 500 from 755,250 to 755,750.
emphasis added

This does not include the 320,237 initial claims for Pandemic Unemployment Assistance (PUA) that was up from 296,374 the previous week. (There are some questions on PUA numbers).

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 decreased to 742,000.

The previous week was revised up.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims decreased to 6,372,000 (SA) from 6,801,000 (SA) last week and will likely stay at a high level until the crisis abates.

Note: There are an additional 8,681,647 receiving Pandemic Unemployment Assistance (PUA) that decreased from 9,433,127 the previous week (there are questions about these numbers). This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance. 

An additional 4,376,847 are receiving Pandemic Emergency Unemployment Compensation (PEUC) that increased from 4,143,389 the previous week. These last two programs are set to expire on December 26th.

by Calculated Risk on 11/18/2020 09:29:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is initial claims decreased to 700 thousand from 709 thousand last week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for November. The consensus is for a reading of 24.0, down from 32.3.

• At 10:00 AM, Existing Home Sales for October from the National Association of Realtors (NAR). The consensus is for 6.45 million SAAR, down from 6.54 million in September.

• At 11:00 AM, the Kansas City Fed manufacturing survey for November.

by Calculated Risk on 11/18/2020 08:16:00 PM

The end of the pandemic is coming, possibly by Q2 2021! 

Please be careful, especially over the holidays. Thanksgiving, Christmas and New Years will be tough this year, but keep your guard up - plan now to have a safe holiday.

The US is now averaging over 1 million tests per day. Based on the experience of other countries, for adequate test-and-trace (and isolation) to reduce infections, the percent positive needs to be well under 5% (probably close to 1%), so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 1,245,343 test results reported over the last 24 hours.

There were 163,975 positive tests.  

Almost 19,500 US deaths have been reported so far in November. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 13.2% (red line is 7 day average).  The percent positive is calculated by dividing positive results by the sum of negative and positive results (I don't include pending).

And check out COVID Exit Strategy to see how each state is doing.

The second graph shows the 7 day average of positive tests reported and daily hospitalizations.

The dashed line is the previous hospitalization maximum.

Note that there were very few tests available in March and April, and many cases were missed, so the hospitalizations was higher relative to the 7-day average of positive tests in July. 

• 7-day average cases are at a new record.

• 7-day average deaths at highest level since May.

• Record Hospitalizations.

by Calculated Risk on 11/18/2020 07:13:00 PM

The CAR reported: California homebuying season extends into fall as home sales and prices remain elevated in October, C.A.R. reports

Continued record low mortgage interest rates sustained California’s housing market in October as home sales and prices took a breather from September’s record high levels and still recorded double-digit increases from a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 484,510 units in October, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2020 if sales maintained the October pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

October’s sales total climbed above the 400,000 level for the fourth straight month since the COVID-19 crisis depressed the housing market earlier this year and was just 15,000 units shy of the 500,000 benchmark. October sales dipped 1.0 percent from 489,590 in September and were up 19.9 percent from a year ago, when 404,240 homes were sold on an annualized basis.
...
Active listings continued to decline significantly, with most regions declining more than 40 percent from last year. The Central Valley had the biggest year-over-year drop of 49.6 percent in October, followed by Southern California (-46.6 percent), the Central Coast (-46.5 percent), the Far North (-40.9 percent), and the San Francisco Bay Area (-23.8 percent).
emphasis added

CR Note: Existing home sales are reported when the transaction closes, so this was mostly for contracts signed in August and September. Sales-to-date, through October, are down 1.3% compared to the same period in 2019.

by Calculated Risk on 11/18/2020 01:59:00 PM

Note: The expansion to the Panama Canal was completed in 2016 (As I noted a few years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.

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 2.2% in October compared to the rolling 12 months ending in September.   Outbound traffic was down 0.4% compared to the rolling 12 months ending the previous month.

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 25% YoY in October, and exports were down 5% YoY.

by Calculated Risk on 11/18/2020 10:37:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture billings remained stalled in October

While architectural billings failed to show much progress during October, signs of improving business conditions at firms have emerged, according to a new report from the American Institute of Architects (AIA).

The pace of decline during October remained at about the same level as in September, posting an ABI score of 47.5 (any score below 50 indicates a decline in firm billings). Meanwhile, firms reported a modest increase in new project inquiries—growing from 57.2 in September to 59.1 in October—and newly signed design contracts jumped into positive territory for the first time since the pandemic began, with a score of 51.7.

“Though still in negative territory, the moderating billings score along with the rebound in design contracts and inquiries provide some guarded optimism,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “The pace of recovery will continue to vary across regions and sectors.”
...
• Regional averages: West (50.4); Midwest (49.4); South (45.8); Northeast (44.9)

• Sector index breakdown: multi-family residential (55.1); mixed practice (52.7); commercial/industrial (48.0); institutional (42.2)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 47.5 in October, up from 47.0 in September. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

This index has been below 50 for eight consecutive months.  This represents a significant decrease in design services, and suggests a decline in CRE investment through the first half of 2021 (This usually leads CRE investment by 9 to 12 months).

This weakness is not surprising since certain segments of CRE are struggling, especially offices and retail.

by Calculated Risk on 11/18/2020 09:32:00 AM

Earlier: Housing Starts increased to 1.530 Million Annual Rate in October

Total housing starts in October were above expectations, and starts in August and September were revised up, combined. The single family sectors has increased sharply, but the volatile multi-family sector is down year-over-year (apartments are under  pressure from COVID).

The housing starts report showed starts were up 4.9% in October compared to September, and starts were up 14.2% year-over-year compared to October 2019.

Single family starts were up 29% year-over-year.  Low mortgage rates and limited existing home inventory have given a boost to single family housing starts.

The first graph shows the month to month comparison for total starts between 2019 (blue) and 2020 (red).

Click on graph for larger image.

Starts were up 14.2% in October compared to October 2019.

Last year, in 2019, starts picked up towards the end of the year, so the comparisons were earlier this year.

Starts, year-to-date, are up 6.7% compared to the same period in 2019. This is close to my forecast for 2020, although I didn't expect a pandemic!

I expect starts to remain solid, but the growth rate will slow.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily for several years following the great recession - then mostly moved sideways.  Completions (red line) had lagged behind - then completions caught up with starts- then starts picked up a little again late last year, but have fallen off the pandemic.

The last graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Single family starts are getting back to more normal levels, and  I expect some further increases in single family starts and completions on rolling 12 month basis.

by Calculated Risk on 11/18/2020 08:38:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,530,000. This is 4.9 percent above the revised September estimate of 1,459,000 and is 14.2 percent above the October 2019 rate of 1,340,000. Single-family housing starts in October were at a rate of 1,179,000; this is 6.4 percent above the revised September figure of 1,108,000. The October rate for units in buildings with five units or more was 334,000.

Building Permits:
Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,545,000. This is virtually unchanged (±1.3 percent)* from the revised September rate of 1,545,000, but is 2.8 percent above the October 2019 rate of 1,503,000. Single-family authorizations in October were at a rate of 1,120,000; this is 0.6 percent above the revised September figure of 1,113,000. Authorizations of units in buildings with five units or more were at a rate of 365,000 in October.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) were unchanged in October compared to September.   Multi-family starts were down 18% year-over-year in October.

Single-family starts (blue) increased in October, and were up 29% year-over-year.   This is the highest level for single family starts since 2007.

The second graph shows total and single unit starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then eventual recovery (but still historically low).

Total housing starts in October were above expectations, and starts in August and September were revised up, combined.

I'll have more later …

by Calculated Risk on 11/18/2020 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 0.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 13, 2020. This week’s results do not include an adjustment for the Veterans’ Day holiday.

... The Refinance Index decreased 2 percent from the previous week and was 98 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 4 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 26 percent higher than the same week one year ago.

“Mortgage market activity was mixed last week, despite the 30-year fixed rate mortgage staying below 3 percent. The purchase market recovered from its recent weekly slump, with activity increasing 3 percent and climbing above year-ago levels for the 26th straight week. Housing demand remains supported by the ongoing recovery in the job market, and an increased appetite from households seeking more space because of the pandemic,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The refinance index decreased last week – driven by sharp declines in FHA and VA applications – but remained a robust 98 percent above a year ago. The average refinance loan balance of $291,000 last week was the lowest since January. Many borrowers with higher loan balances may have acted earlier on in the current refinance wave.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 2.99 percent from 2.98 percent, with points increasing to 0.37 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

The refinance index has been very volatile recently depending on rates and liquidity.

But with record low rates, the index remains up significantly from last year.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 26% year-over-year unadjusted.

Note: Red is a four-week average (blue is weekly).