Redbook Retail Sales, Case-Shiller House Prices, PMI Services, Consumer Confidence, Richmond Fed, Oil Capex, Truck Tonnage

Posted on July 28, 2015 @ 3:34 pm (Tuesday) by WARREN MOSLER

Still bad:

source: Econoday.com

Softening:

source: Econoday.com

I don’t put much weight on Markit surveys, but the optimism comment is interesting:

source: Econoday.com

Highlights

Service sector growth is strengthening slightly this month based on Markit’s July flash index which is up 4 tenths to a very solid 55.2. New orders are at a 3-month high and are getting a boost from both consumer spending and from business customers, the latter a welcome signal of strength for business investment. Backlogs are up and so is hiring. But optimism in the 12-month outlook, perhaps shaken by the outlook for the global economy, is the softest it’s been in three years. Input prices continue to rise but final prices are flat. This report is mostly upbeat and, despite the easing in the outlook, points to solid contribution from the service sector.

This kind of drop is concerning, and I’ve been watching for employment, a lagging indicator, to take a dive:

source: Econoday.com

Highlights

Consumer confidence has weakened substantially this month, to 90.9 which is more than 6 points below Econoday’s low estimate. Weakness is centered in the expectations component which is down nearly 13 points to 79.9 and reflects sudden pessimism in the jobs outlook where an unusually large percentage, at 20 percent even, see fewer jobs opening up six months from now.

Less severe is weakness in the present situation component which is down nearly 3 points to 107.4. Here, slightly more, at 26.7 percent, say jobs are hard to get but this is still low for this reading.

A striking negative in the report is a drop in buying plans for autos which confirms weakness elsewhere in the report. Inflation expectations are steady at 5.1 percent which is soft for this reading.

This report is citing problems in Greece and China as possible factors for the decline in expectations, but US consumers are typically insulated from international events. The decline in expectations, mirrored earlier this morning by a similar decline in the service-sector outlook, may be sending early hints of second-half slowing, slowing that could push back of course the Fed’s expected rate hike.

A bit better, but another reference to softening employment. And note the volatility of this series, with moves up often followed quickly with moves down:

source: Econoday.com

Highlights

The Richmond Fed is reporting the best strength of any manufacturing region this month, at 13 which is above the Econoday top-end estimate. New orders are especially strong, up 7 points to 17, with backlog orders also rising, up 7 points to 10. Shipments are strong, capacity utilization is up and inventories, because of the activity, are being drawn down. Hiring, however, is slowing. Price data show slight pressure for inputs but no pressure for finished goods.

This report contrasts with much slower rates of growth in the New York and Philadelphia Fed regions and sharply contrasts with recent data from the Dallas and Kansas City Feds where manufacturing, due to the energy sector, is in deep contraction. But today’s result is a welcome positive, suggesting that manufacturing may yet pick up this year and a reminder of strength in yesterday’s durable goods report.

This had been estimated at $100 billion:

source: Financial Times

PMI Manufacturing Index, New Home Sales, Redfin Real Estate Report, Rail Traffic

Posted on July 24, 2015 @ 11:38 am (Friday) by WARREN MOSLER

source: Econoday.com

Highlights

The manufacturing PMI is holding steady, coming in at a composite 53.8 in the July flash and right in line with the 54.0 final reading for June and June’s 53.4 flash. Though respectable, these are soft rates of growth for this report which runs hot relative to other manufacturing data and where the long-run average is 54.3.

New orders and production are both accelerating this month though hiring is holding down the composite. The report cites reduced capital spending in the energy sector as a negative for the sample, and it says some firms are focusing their efforts on domestic markets given weakness in export markets.

Other details include a fall-off in input buying due in part to excess inventories. Price readings remain subdued.

This report is pointing to little change for the manufacturing sector this month, a sector that has been struggling this year and looks to continue to struggle through the second half.

Not good. This is what happens in a recession. And in a slowdown greater supply indicates excess inventory:

Highlights

Volatility is common for new home sales and there’s plenty of it the June report where the headline plunged 6.8 percent to a far lower-than-expected annual rate of 482,000 and where revisions erased 40,000 from the prior two months.

But there is some good news in the report and that’s a surge in supply of new homes on the market, up 3.4 percent in the month to 215,000. Greater supply points to greater sales ahead. On a sales basis, supply is at 5.4 months vs 4.8 and 4.7 in June and May.

Prices look soft in the report, at a median $281,800 which is up 0.5 percent in the month but down 1.8 percent year-on-year. The latter reading points to deep discounting compared to the year-on-year sales gain of 18.1 percent.

Regional data show big drops in the West and the Midwest in the month and a smaller drop in the South. But the Northeast is showing life with a second straight solid gain. Year-on-year, the South and Northeast lead with respective sales gains of 23.7 and 23.1 percent with the West and Midwest lagging at 10.9 and 5.7 percent.

The sales data in today’s report, with the June rate the lowest of the year, are likely to shave second-quarter GDP slightly and take some of the shine off the housing outlook.

From Redfin:

source: CNBC.com

Sales of existing U.S. homes rose to the highest level in eight years, according to the National Association of Realtors, but that may be the peak for the year. One real estate brokerage claims consumer demand for housing took a sharp turn for the worse in June, as potential buyers balked at higher home prices.

“People look at houses and don’t pull the trigger,” said Glenn Kelman, CEO of brokerage Redfin, which released a new demand index on Thursday. “We know that the number of people writing offers has been declining for 4½ weeks, and based on that data we make a forecast.”

The new demand index tracks millions of visits to Redfin’s listing pages, as well as customer requests for home tours, customer offer requests on homes and various pricing data; in June it showed demand up 13 percent from a year ago but down 7 percent from May. That was the largest monthly decline since December of 2014.

source: Econointersect.com

Rail Week Ending 18 July 2015: Rail Data Continues to be Soft
Econintersect: Week 28 of 2015 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. Intermodal traffic expanded year-over-year, which accounts for approximately half of movements – but weekly railcar counts continued in contraction.

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Truck Tonnage, MTG Purchase Apps, Gas Prices Not Helping, Existing Home Sales, Architectural Index

Posted on July 22, 2015 @ 3:16 pm (Wednesday) by WARREN MOSLER

Who would’ve thought…

Up some but still depressed and not part of GDP in any case:

Up a bit but note the details:

“The June numbers are likely showing some catch-up from slow growth earlier this year. This is the first month in 2015 that all regions are reporting positive business conditions and aside from the multi-family housing sector, all design project categories appear to be in good shape,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “The demand for new apartments and condominiums may have crested with index scores going down each month this year and reaching the lowest point since 2011.”
…
Sector index breakdown: institutional (59.1), mixed practice (54.7), commercial / industrial (51.6) multi-family residential (47.0)
emphasis added

Read more at Calculated Risk Blog

Redbook Retail Sales, NY Housing Spike

Posted on July 21, 2015 @ 2:28 pm (Tuesday) by WARREN MOSLER

More of same- looking very weak

Highlights

Redbook’s sample has been reporting depressed sales rates since all the way back in March, including the latest week when same-store year-on-year sales rose only 1.2 percent. The report blames a seasonal lull for the latest disappointment, citing lack of shopper interest ahead of the back-to-school season.

From Nomura:
Looks like an expiring property tax break in NY State caused the burst of activity. Excluding the northeast, looks like starts in Q2 were about the same as Q1:

Housing Starts, Consumer Sentiment

Posted on July 17, 2015 @ 10:50 am (Friday) by WARREN MOSLER

The increase is entirely a multi family story, and multi family dwellings are cheaper/smaller than single family:

Highlights

Strong demand for apartment units drove housing starts & permits data far beyond expectations, overshadowing less strength for the key single-family home category. Starts came in near the top of expectations, up 9.8 percent in June at a 1.174 million annual rate, but reflect a 29.4 percent surge in the multi-family component. The single-family component actually fell 0.9 percent. The same pattern appears for permits which jumped 7.4 percent overall to a much higher-than-expected 1.343 million rate but here too multi-family units rose 15.3 percent with single-family up far less but at a still very strong 0.9 percent.

Regional data, where the separation between single-family homes and multi-family units is not broken out, show special strength for the South which is by far the largest region for housing. Starts in the South rose 13.5 percent in June with permits up 10.4 percent. Permits in the West are also strong, up 9.5 percent, though starts in the region fell 6.0 percent. Also of note is an outsized 35.5 percent surge in Northeast starts.

The unusual rise for multi-family units reflects high levels of rent, evident in today’s CPI report. The single-family component is less strong though the 0.9 percent rise in permits does point to strong second-half activity for the new home sector. This report is very solid but just not as spectacular as the headlines suggest.

Negative surprise here:

Highlights

Consumer sentiment is softening this month, to 93.3 in the mid-month July reading which is below Econoday’s low estimate for 94.5. The current conditions component is down nearly 3 points to 106.0 in an early reading for July that points to another month of weakness for consumer activity. The expectations component fell a bit less to 85.2 which is still very respectable for this reading and points to confidence in the jobs outlook.

Inflation data, as Federal Reserve policy makers have been predicting, are inching higher with 1-year expectations at 2.8 percent and 5-year expectations at 2.7 percent, both up 1 tenth in the month.

Consumer sentiment has been running very strong most of this year and often well ahead of consumer spending readings which have been flat. But today’s report suggests that the best for confidence may already have passed.

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Claims, Phili Fed, Housing index

Posted on July 16, 2015 @ 12:02 pm (Thursday) by WARREN MOSLER

Down a touch but the 4 week moving average still moving higher:

Highlights

Auto retooling is clouding initial jobless claims data which fell 15,000 in the July 11 week to 281,000. But the 4-week average, inflated by a 14,000 spike in the prior week, rose 3,250 to a 282,500 level that’s more than 5,000 above the month ago comparison. The rise in the average is not a positive indication for the July employment report.

But the latest on continuing claims, which are reported with a 1-week lag, are very favorable, down a very steep 112,000 to 2.215 million in the July 4 week which is a new recovery low. Nevertheless, the 4-week average, down 3,000 to 2.264 million, is trending slightly higher than the month-ago comparison. The unemployment rate for insured workers is down 1 tenth to a recovery low of 1.6 percent.

July, with its closings in the auto sector, is always a difficult month for claims data. Next week’s report will be especially important as initial claims will cover the sample week for the monthly employment report.

Not at all good:

Highlights

It turns out that the Philly Fed’s big jump in June was in fact a one-time wonder as the index slowed substantially in the July reading to 5.7 from 15.2. Growth in new orders is still respectable, at 7.1, but well down from June’s 15.2. Likewise, shipments slowed to 4.4 from 14.3 while backlog orders fell into contraction at minus 6.3 from plus 3.7. Employment also fell into contraction, at minus 0.4 from 3.8.

The June reading for this report stood alone as really the only strong indication this year on the manufacturing sector, but the give back now in July puts the Philly Fed in line with other readings. The nation’s manufacturing sector is being held down by weak exports and is a drag on economic growth.

Housing still a bit of a bright spot, relatively speaking, but still very low and depressed, and too small to move the GDP needle. And there are fewer builders:

Highlights

The housing market index, unchanged in July at 60, is signaling substantial strength for the new home market. This is the strongest reading since November 2005.

Future sales, at 71, lead the report with present sales right behind at 66. Still lagging is traffic, down 1 point in the month to 43 and reflecting a lack of first-time buyers in the market.

All regions are showing growth led by the West at a composite 63 followed by the South at 62. The Midwest is at 59 and the Northeast, which had been under 50 for a long run, is now at 52.

The new home market is accelerating and is in place to be the best surprise of the 2015 economy. Housing starts & permit data, which have been volatile but very strong, will be posted tomorrow.

mtg purch apps, Empire survey, industrial production

Posted on July 15, 2015 @ 11:54 am (Wednesday) by WARREN MOSLER

Still up from last year this time but seem stalled out at relatively low levels and Q2 not any better than Q1:

United States : MBA Mortgage Applications

Highlights
Weekly data are often volatile and it’s hard making much of the last two weeks of purchase applications data which plunged 8.0 percent in the July 10 week after spiking 7.0 percent in the prior week. Put together, the purchase index has slipped 1.4 percent in the two weeks which is a negative signal for home purchases. The refinance index rose 4 percent in the week. Rates were little changed in the week with the average 30-year mortgage for conforming loans ($417,000 or less) unchanged at 4.23 percent.

Not encouraging and yet another reference to weak US exports:

United States : Empire State Mfg Survey

Highlights
The manufacturing sector isn’t picking up any steam this month based on the Empire State index which came in only just above zero, at 3.86. The new orders index, ominously, is in negative ground at minus 3.50. This is the fourth negative reading in five months for new orders which points squarely at slowing overall activity in the months ahead.

And hiring this month has slowed, to 3.19 vs June’s 8.65 in yet another soft signal. Price data show moderation for inputs at 7.45 vs 9.62. One plus in the report is a slight uptick in the 6-month outlook to 27.04 vs 25.84.

Hit by weak exports, the manufacturing sector is dragging down U.S. growth. Watch Thursday for the Philly Fed report for July which, in what may prove to be an outlier, showed surprising strength in June.

Not good, and another reference to weak US exports:

United States : Industrial Production

Highlights
A plus 0.3 percent rise in June industrial production looks respectable but still overstates strength. The gain follows two prior months of sizable contraction, at minus 0.2 percent and minus 0.5 percent, and reflects a jump higher for utilities and for mining. Manufacturing, and the key component for the series, is unchanged for a second straight month — truly dead in the water at a year-on-year rate of only plus 1.8 percent.

Motor vehicle production is very weak in the June report, down 3.7 percent and more than offsetting a 0.8 percent rise for hi-tech production, a 0.7 percent gain for chemicals, and a 1.4 percent jump for furniture. Retail sales of vehicles surged back in May but turned lower in June which doesn’t point to much of a rebound for vehicle production later this summer.

One sign of strength is a 2 tenths uptick in the overall capacity utilization rate to 78.4 percent. But here too, the gain reflects gains for utilities and mining and not manufacturing where capacity utilization actually fell 1 tenth to 77.2 percent.

This report offers the first conclusive data on the manufacturing sector during June while this morning’s earlier release of the Empire State report offers the first anecdotal look at July. And the verdict? A manufacturing sector that is being hurt by weakness in exports and that’s dragging down the economy’s growth.

Mtg purchase apps, Consumer credit

Posted on July 8, 2015 @ 4:12 pm (Wednesday) by WARREN MOSLER

The purchase index had a nice increase, more than reversing last week’s decline, as cash purchases have declined and been ‘replaced’ with mortgage financing. There has been a pick up in total sales as well, though applications remain severely depressed and haven’t even recovered to 2013 levels. The July 4 holiday may also have created a distortion:

MBA Mortgage Applications

Highlights
Weekly data are often volatile, evident in MBA’s mortgage applications where big gains in the latest week offset big losses in the prior week. The purchase index rose 7 percent in the week with the refinance index up 3 percent. A fall in rates helped the week’s volumes with the average 30-year mortgage with conforming balances ($417,000 or less) down 3 basis points to 4.23 percent.

Low than expected and not reflecting an acceleration from Q1.
And note the misleading cheer leading:

Consumer Credit

Highlights
The consumer is showing some life. Consumer borrowing rose $16.1 billion in May following an upward revised $21.4 billion in April. Key to this report is the component for revolving credit which is where credit cards are tracked. Revolving credit rose $1.6 billion in May, a moderate gain that follows, however, two very strong gains in April and March. Non-revolving credit, inflated by the student loan subcomponent, rose $14.5 billion in May. Non-revolving gains, however, do reflect gains for vehicle financing.

Redbook retail sales, Chicago PMI, CS house price index, consumer confidence

Posted on June 30, 2015 @ 11:39 am (Tuesday) by WARREN MOSLER

This measure of retail sales remains surprising depressed, even to me:

United States : Redbook

Highlights
Redbook’s sample continues to report stubbornly low sales rates, at a same-store year-on-year plus 1.7 percent in the June 27 week. Month-over-month, Redbook’s call is a sharp 1.5 percent contraction for June in what is a negative signal for the government’s core ex-auto ex-gas reading. The report says sales following Father’s Day were depressed though retailers expect to see strength going into the July 4 holiday. This report, which first swung lower in March, did not pick up the strength in May and is not likely to shape forecasts for June.

And another bad one:

Chicago PMI

Highlights
Chicago’s PMI sample remains surprisingly depressed, at a June index of 49.4 which is noticeably below the Econoday consensus for 50.6. June is the 4th contractionary reading (sub-50) of the last five months.

The sample’s employment is the lowest since November 2009 with backlog orders the lowest since September 2009. Note that weakness in backlogs is a clear negative for future employment. Production, like the main index, is in contraction for the 4th time in five months.

But leading the positive side of the report are new orders which are now back above 50. And in a special question, respondents are cautiously optimistic that new orders will begin to pick up in the third quarter

Also below expectations and decelerating:

S&P Case-Shiller HPI

Highlights
Growth in home prices slowed sharply in April, up only 0.3 percent for Case-Shiller’s 20-city index which is 5 tenths below Econoday’s consensus and 2 tenths below the low forecast. The year-on-year rate, at plus 4.9 percent, is 5 tenths below the consensus and 1 tenth above the low end.

For the first time since all the way back in September, minus signs suddenly appear on the city breakdown list with 8 of 20 cities showing contraction in April. Cleveland shows the sharpest monthly contraction at minus 0.5 percent followed by Atlanta and Chicago at minus 0.4 percent each.

But several on the plus side show significant strength led by Minneapolis at a monthly plus 1.0 percent followed by Denver, Detroit and Las Vegas at plus 0.9 percent. Year-on-year, Denver and San Francisco lead the list at plus 10.3 and 10.0 percent with Dallas in third at plus 8.8 percent. Those showing the least year-on-year growth are Washington DC at plus 1.1 percent, Cleveland at plus 1.3 percent, and Boston at plus 1.8 percent.

But weakness in this report, where monthly readings are actually 3-month averages, reflects the weak sales conditions in the early part of the year, conditions which reversed strongly in May and which point to price strength for the May edition of this report. The next hard data on housing will be construction spending on tomorrow’s calendar.

Nice pick up in confidence to get back towards Q1 levels:

existing home sales, Greece and China comments

Posted on June 29, 2015 @ 12:37 pm (Monday) by WARREN MOSLER

So after cheering the big jump last month to 112.4, it gets revised down to only 111.6, so the lower than expected print of 112.6 vs 113 expected is now hailed as a larger than expected increase from last month, as the shameless cheer leading continues:

United States : Pending Home Sales Index

Highlights
Solid momentum is building inside the housing market based on the ongoing run of very strong data including today’s pending home sales index which is up a better-than-expected 0.9 percent in the May report which tops Econoday expectations for a 0.6 percent gain. The index level, at 112.6, is as high as it’s been since the bubble days of 2006.

Sales have been very strong in the West where pending sales rose 2.2 percent in May for a 13.0 percent year-on-year gain. Pending sales in the South, up 10.6 percent year-on-year, have also been strong though the region did dip 0.8 percent in the latest month. Sales also dipped in the Midwest, down 0.6 percent for a year-on-year plus 7.8 percent, but they rose sharply in the Northeast where housing after a heavy winter is bouncing back strongly, up 6.3 percent in this report for a year-on-year again of 10.6 percent.

Today’s report points to further strength for the existing home sales report which surged in data posted last week. Housing is getting a boost from the strong jobs market together perhaps with the prospect of rising mortgage rates which may be pushing buyers into the market. Watch for Case-Shiller home price data on tomorrow’s calendar.

Year over year % change, as the absolute number remains depressed:

Pending home sales index- only back to previous highs of what was also a depressed market:

NAR: Pending Home Sales Index increased 0.9% in May, up 10% year-over-year

By Bill McBride

So after reading this and a few other articles it seems they think a ‘run on the banks’ somehow removes euro that could otherwise be used to pay creditors. This implies either some kind of plan to tax bank deposits to pay creditors or just the continued evidence of gross ignorance of their own monetary system. In any case seems the most likely outcome is a yes vote for the troika plan which gives the leadership the desired political cover to go ahead and sign it and move on and remain the European citizens in good standing they’ve always been…

And this would also be yet another victory for the ongoing deflationary policies, this time being spun as explicit support from the people, proving once again that populations dislike inflation even more than they dislike unemployment. This means the focused pursuit of a trade surplus is intact, and I’ve yet to see a currency with a persistent trade surplus and a weak currency:

Greece Bailout: Eurozone Ministers to Explore ‘Plan B’ (WSJ) The first step in what has commonly been referred to as “Plan B” among Greece’s creditors would likely be the introduction of capital controls to avoid a run on the country’s banks. But in comparison to Cyprus, which implemented capital controls as part of a €10 billion bailout package from the eurozone and the International Monetary Fund, the financial situation of the Greek government is much more precarious. The eurozone portion of Greece’s €245 billion rescue package runs out on Tuesday, the same day the government has to pay €1.55 billion to the IMF.

Doing the same thing over and over again and expecting different results…

China cuts reserve ratio, interest rates to bolster growth (Xinhua) The central bank cut the RRR for commercial banks serving rural areas, agriculture and small businesses by 50 basis points (bps). The RRR for finance companies, or non-bank financial institutions, will be lowered by 300 bps, the PBOC announced. Benchmark interest rates have also been cut. Interest rates for one-year lending and deposits are cut by 25 bps to 4.85 percent and 2 percent respectively. Lending of other terms and kinds will also be lowered by the same margin, the announcement said. It is the third RRR reduction in nearly five months, while the fourth round of interest cuts in nearly seven months.

Mosler Economics / Modern Monetary Theory

The Site of Economist Warren Mosler

Category Archives: Housing