Category: Recession

Economics Update

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Well, the news has been pretty good today with the American Trucking Association Truck Tonnage Index rising in December, and the Conference Board’s consumer confidence index rose sharply in January, while across both ponds, the UK GSP rose in the 4th quartter opf 2009, indicating an possible end to their recession, and Japanese exports rose for the first time since the Lehman collapse.

I will note that ex-consumer confidence, these could be temporary blips from the need to restock inventories.

In the old standards of oil and currency, oil fell, largely on concerns about a downgrade on Japanese sovereign debt, while the dollar was mixed, up vs the Euro and Pound, but down vs. the Yen, and I’m just confused about that.

Mostly, I think that the markets are holding their breath waiting for the Fed’s meeting this week to finish.

Economics Update (For the Week)

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Well, it’s “Jobless Thursday”, as Atrios is wont to say, and it ain’t a good Thursday, with initial claims up 36,000 to 482,000 and hitting a 2 month high, the 4-week moving average up 7,000 to 448,250, though continuing claims fell by 18K to 4,599,000.

Additionally, the Philadelphia Federal Reserve Bank’s business activity index fell from 22.5 to 15.2, which still indicates growth, positive numbers indicate growth, but might show that the stimulus package is running out of steam.

Also, it looks like finances may be catching up with the bank, with Citi reporting a loss for the year on a horrible 3rd quarter, and Bank of America posted a large loss, largely as a result of its eagerness to pay off the TARP so that it could go back to overpaying its incompetent executives, while Morgan Stanley misses its earning estimate, though it still turned a profit.

I had kind of figured that a lot of the obscene profits earlier in the year were the result of rearranging deck chairs, and I think that the 4th quarter results give credence to this view.

Note that these numbers were turning worse even as consumer defaults were falling.

BTW, in the UK, we are seeing journalists running around like chickens with their heads cut off over the recent spike in consumer prices, up to a 2.9% annual rate.

Kind of silly when you think about it.

US inflation seems well in check, with the
Producer Price Index for up 0.2% in December,

In real estate, home builder confidence fell in January, but the Architecture Billings Index was up slightly, though still below 50, indicating further contraction.

The jump in building applications, would seem to indicate improvements in the real estate market, but the FHA is increasing premiums and tightening loan standards, which may deflate the balloon.

The FHA really does not have a choice. Their balance sheet is a complete mess.

10%?

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That is the current charge-off rate for Capital One US Credit Cards.

This means that today, with no sign of unemployment abating, over 10% of their debt portfolio is deemed to be uncollectable:

Capital One Financial Corp’s U.S. credit-card charge-offs rose to double digits in December, showing consumers became increasingly stressed in the holiday shopping month.

In a regulatory filing on Friday, Capital One said the annualized net charge-off rate — debts the company believes it will never collect — for U.S. credit cards rose to 10.14 percent in December from 9.60 percent in November.

I used to think that the banks couldn’t lose money when they paid 3% on savings accounts and got 18% on credit cards, but now that it’s 1½% and 28%, it looks like they are going under.

To quote The Hunt for Red October, “You arrogant ass. You’ve killed us! “

Economics Update

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Another Transportation Indicator of Non-Recovery

The Federal Reserve has released its Industrial Production and Capacity Utilization data, and it shows a 0.6% increase in December, though, as Dean Baker notes, it would have fallen but for increased electricity and gas consumption from the weather.

This is kind of in line with the LA/Long Beach port traffic data for December, the last 3 months of the year were down -9.2% year over year, though they were up +2.9% Y0Y in December.

As the associated graph pr0n shows, there is a big seasonal variation, so only YoY is the only meaningful data.

Still, the Empire State Fed Index is at 15.9, with numbers above zero indicating expansion, and Reuters/University of Michigan index of consumer sentiment rose to 72.8, though this was less than the forecast of 74.

Inflation is mooted, CPI rising by only 0.1% in December, and the figure, at least the initial inflation number, for the year was 2.7% inflation in 2009, largely on the fact that energy and other commodity prices are much higher, +50% on a gallon of gas, for example.

Ex-energy, we are still looking at deflation.

In real estate, once again, New York City is not doing, well, which means that no one is doing well, with properties across the 5 boroughs rising by only 0.12%, $1,200 on a million dollar property for the mathematically disinclined, and in Manhattan, rents fell 9.4%.

Finally, we had warm weather pushing oil down again, and the dollar rose.

Economics Update

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Unemployment, SA vs NSA, h/t Brad Delong

Well, it’s Thursday, and initial unemployment claims rose for the 2nd straight week, once again worse than forecast.

What might be more significant is the significant divergence between seasonally and non-seasonably adjusted numbers, because the NSA unemployment number was 800,000 initial claims. (see graph pr0n)

The 4 week moving average continued to fall though, down 9,000 to 440,750 and the continuing claims number fell by 211 thousand to 4.596 million, though it should be noted that all these numbers are seasonally adjusted, and it appears that the adjustments are getting a big hinky.

In any case, the DoL’s numbers are here.

Retail sales also were below forecast, with the December number showing a -0.3% drop, missing analysts expectations of +0.5%.

We do have some good news though, with business inventories rising in November; it is the 2nd straight month, and the 2nd month-to-month increase in 15 months.

In real estate, foreclosures rose 14% in December, and total defaults for 2009 hit a record, 2,824,674, up 21% from 2008, and more than double the number for 2007.

In central bank land, Chilean central bank kept it’s rate at 0.5%, as the economy in the Latin American nation remains mired in recession and deflation.

In the US, the bad financial numbers had Treasurys rising as investors looked for safety.

In energy, warmer weather continued to push oil prices down, while in currency, the dollar was essentially unchanged.

Economics Update

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H/t Calculated Risk

The Federal Reserve has released its “Summary of Commentary on Current Economic Conditions”, better known as the “Beige Book”, and there has been a small improvement.

I’m not sure where the improvement is, since transportation indices continue to disappoint, with the American Association of Railroads’ report on carload traffic showing the lowest level since 1988, and if goods aren’t moving, then people aren’t buying.

Meanwhile the trend in mortgages, with refinancing increasing and mortgages for purchases falling, continued this week.

Overseas, the GDPs of Britain and Germany both suffered the largest drop since before the 2nd World War, -4.8% and -5.0% respectively, while in Japan, machinery orders fell sharply in November.

In the world of US government finance, the US budget deficit doubled year over year in December, which probably had something to do with bond prices being mixed, with the 10-year bond falling slightly, and the 30-year bond rising slightly. (Yields move in the opposite direction of prices)

In energy, oil fell below $80/bbl, on reports of increasing US fuel inventories.

In currency, the dollar was mixed, down slightly versus the Pound and Euro, but up slightly versus the Yen.

Economics Update

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Deleveraging: The recession continues until it’s done
h/t Calculated Risk


H/t Calculated Risk

Well, the NFP came out, and the non-farm payroll fell by 85,000, and unemployment (U3) remained at 10%, which kind of gives the lie to all those forecasts that predicted an increase.

On bright spot, however, was that “November payrolls were revised to show the economy actually added 4,000 jobs rather than losing 11,000,” so the 22 month losing streak is broken….Kind of. (BLS link)

Consumer spending is not bouncing back either, as US consumer credit fell by $17.5 billion, a new record, indicating that consumers are continuing to deleverage and pay down their debts, taking us yet further into the paradox of thrift.

The fact that US office vacancies hit 17 pct, a 15-year high, reinforces the idea that things are still not turning around, though a surprise increase in wholesale inventories weighs in on the other side of the ledger.

Treasuries rose. and the dollar fell on the jobs report, as investors fled the dollar, and ran to treasuries, because of concerns about the strength of the recovery.

Of more concern is the fact that oil still rose after the abysmal NFP report, which implies that the new stable level for oil prices is above $80/bbl, which would have the effect of further crippling any recovery.

Economics Update

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first time unemployment claims rose slightly this week, up 1,000 to 434,000, down from the 490,000 at this time last year, and the 4 week average fell to 450,250.

I would note that this number needs to be below about 400K before non-farm payroll increases, and if the December numbers show an increase in NFP, it’s seasonal adjustment bull sh$#.

The numbers are better, but it’s still, “better in a not getting worse as fast,” way.

That being said, retail sales surprised on the upside, with December sales up 3% over the 2008 numbers, though still down by about 2-3% FROM 2007.

We also had some big news in central bank land, with China’s central bank raising its benchmark rate, with 3-month bills increasing to 1.3684%, up 4.04 basis points (0.0404%) from the rate that it had maintained for the past 4 months.

It indicates that they will be tightening on the money supply, which could get interesting, because much of the Chinese stock market is smoke and mirrors. Additionally, it may be a first step in allowing the Yuan to drift higher, as higher returns make the currency more attractive.

On the less surprising side of stupid central bank tricks, the Bank of England left both rates and policy unchanged, which means that they are still printing money hand over fist.

Also, Treasurys fell slightly, though I think that this is concern regarding the NFP payroll data.

Energy and currency surprised. The surprise increase in Chinese rates would normally presage an increase in oil prices, because there is the assumption that there is additional demand that is being tamped down, and the dollar down, because the Yuan becomes more attractive, but in fact, oil fell slightly, to below $ 83/bbl, though that might be profit taking, and the dollar rose fairly sharply.

Year End Auto Wrap Up

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Numbers are year over year h/t CNN

The surprising news is that in 2009, more old cars were scrapped than new cars were bought, meaning that the US auto fleet fell to 246 million from 250 million.

Note that “cash for clunkers” accounted for only about 700,000 vehicles, so the auto fleet would have contracted without the program.

This is the first time that the US fleet has shrunk since probably the end of WWII.

So the year sucked in terms of sales, though December was good for Ford and Toyota, but bad for GM and Chrysler.

Sales had to go up, as at their nadir, sales would have resulted in a fleet age of almost 30 years.

Economics Update

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H/t Calculated Risk

Well, the ADP private employment survey is saying that the private sector lost 84,000 jobs in December, and the Institute for Supply Management’s non manufacturing index rose to 50.1, up from 48.7 in November, and not as good as forecast, but still showing a smidgen of growth.

Real estate was rather grim though, with mortgage applications hitting (seasonally adjusted) a 6 month low, and mortgage purchase applications (top pic) hitting a 12 year low.

Basically this means that people are not buying homes, they are just refinancing, though, with interest rates inching up, they aren’t doing that as much either.

Additionally, a feature of suburban blight, the strip mall, is taking a hit with vacancies hitting 10.6%, an 18 year high.

I keep saying it, but no one listens: we need some inflation here.

In energy, the cold weather drove both crude oil and natural gas higher, while in currency, the dollar fell slightly vs. the Euro, as traders make up their minds about whether to be optimists of pessimists.

Economics Update

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The Institute for Supply Management’s national factory index just rose to 55.9, the highest reading on factory activity since April 2006.

It’s good news, but but as Krugman notes, it may just be an inventory bounce:

Such blips are often, in part, statistical illusions. But even more important, they’re usually caused by an “inventory bounce.” When the economy slumps, companies typically find themselves with large stocks of unsold goods. To work off their excess inventories, they slash production; once the excess has been disposed of, they raise production again, which shows up as a burst of growth in G.D.P. Unfortunately, growth caused by an inventory bounce is a one-shot affair unless underlying sources of demand, such as consumer spending and long-term investment, pick up.

That being said, we are seeing increased demands for capital from small businesses, with a 37% year over year increase in the Small Business Administration’s 7(a) lending program, a total of $3.8 billion.

On the down side, construction spending fell for the 7th, falling 0.6%, and it has been reported that US bankruptcies are up 32% in 2008.

On the other side of the pond, new orders to factories slowed in the Euro zone.

In energy, low temperatures and a Russia-Belarus price dispute drove Oil above $80/bbl.

In currency, the US dollar fells on the good ISM factory report, as risk appetite improved.

Economics Update (For the Week)

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Yes, it does appear that the seasonal adjustment for the week after Christmas is whack

The lede for the week is obviously that first time unemployment claims fell to the lowest level in 17 months, down 22K to 432K, though, as Brad Delong notes, this is likely because of problems with the seasonal adjustment for this week. (See graph pr0n).

Continuing claims, as well as the 4 week average fell too, but emergency claims, for people (like me shortly) who exhausted their regular benefits (i.e. out of work more than 6 months), rose sharply, by 199 thousand to 4.82 million, a 4.1% jump in one week. (!)

Earlier this week, the Institute for Supply Management released its Chicago index, aka the Purchasing Managers’ Index (PMI), and it unexpectedly jumped to 60 in December from 56.1 in November………Only they just revised it, and oops, it the PMI was only 58.7, largely on a downward revision on employment…………Happy, happy, joy, joy.

That’s not to say that the numbers aren’t better, they are better, much like the ATA Truck Tonnage Index November numbers, and the ShopperTrak year over year retail sales for last week, though the latter saw a drop in traffic.

In real estate, the 30-year fixed mortgage rate rose to a 4 month high, 5.14%, which is still at a level which is historically low, and the recent uptick in housing prices seems to have petered out, with the Case-Shiller index showing flat prices in October, following 4 straight months of price increases.

This is unsurprising, as home price subsidy new home buyer tax credit was supposed to end in November, and homes needed to close by November 30, which meant that there were a lot of sellers who knew that they had to move their houses quickly, or not at all.

Houses are still well above trend, both in terms of rent to own price to income ratio, though you still have claims that housing affordability is better than the historical numbers, because the mortgage rates are still incredibly (see above) low.

If rates return to their historical levels, about 9% for the 30-year fixed, we have a downward pressure on house prices of roughly 1/3, because people buy houses on monthly payment, not price.

We do have some good international news, with South Korean exports rising rapidly, and Chinese manufacturing growing at a 20-month high, though I wonder how much of the latter is the result of provincial bureaucrats goosing the numbers, or encouraging local industries to over produce, in order to score brownie points with Beijing.

Economics Update

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New Home Sales Not Just Ugly, but Fugly!
h/t Calculated Risk

Yesterday, I noted the jump in existing home sales, and posited that this was almost entirely due to people rushing to get in under the wire on the new home buyer house credit, well today, we have the new home sales numbers, and they plunged by 11.3%, which validates my thesis.

Basically, existing home sales numbers are recorded at closing, while new home sales are recorded when the contract is signed, which means that the new home sales numbers lead existing home sales by 30-60 days, so we have a snapshot of what happens when people rushing to secure a tax credit stop rushing, and it ain’t pretty.

It also explains why home mortgage application volume fell.

As I’ve said before, real estate won’t lead us out of a recession, it will follow.

On the other hand, personal income and spending rose in November, which is a sign of improvement, and the latest CNN/Opinion Research and Reuters/University of Michigan surveys show an improvement in consumer sentiment, though of the “slightly less suckage” rather than the “going well” variety..

One interesting development in the 3rd quarter of this year was that central banks have cut purchases of dollars for reserves to a record low, “30 percent of new foreign-exchange reserves,” which implies a slow walk away from the dollar by central banks.

Even so, the dollar rose today, and Oil also rose on a surprise drop in inventories………Which raises the question, why are inventories always surprising folks?

Economics Update

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H/t Barry Ritholtz

New home sales, effect of tax credit h/t Barry Ritholtz basic graph h/t Calculated Risk


H/t Calculated Risk

So, we have another revision of the GDP numbers for the 3rd quarter, and the GDP number falls again, down from an initial estimate of 3.5% to the first official figures of 2.8%, and now it has been revealed that the GDP grew at just 2.2%. (top pic)

The more accurate data that comes in, the worse the news.

As an aside, the US Bureau of Economic Analysis always does this, that is to say that the numbers get worse when better data comes in, which implies a systemic problem that needs to be fixed.

On the other hand, the UK initial numbers were revised in the opposite direction, with a contraction of -0.2%, up from the initial estimate of -0.3%.

The news from down under is not grand either, with the New Zealand economy’s GDP missing forecasts.

Still, the Philadelphia Bank of the Federal Reserve’s State Coincident Index looks better (bottom pic), with at least marginal levels of growth in 1/3 of the states.

On the other hand, we had some good news in real estate, where the National Association of Realtors has reported existing home sales rose 7.4%, to the highest level since February 2007:, though even the NAR admits that this is largely due to people rushing to buy houses before the home buyer tax credit expires.

As both CR and Barry Ritholtz note (2nd pic), this a function of changes and/or perceived changes in tax policy, so December will give a real picture of where the housing market is.

It should be noted that a remarkably unpleasant milestone was passed though with, the number of mortgages in national banks, which report to the OCC, reporting that for the first time ever, over one million mortgages were in foreclosure in the 3rd quarter.

Additionally, we are seeing signs of problems among small banks and businesses, with more small bank TARP recipients not paying dividends [on edit: a clarification, they are not paying dividents on their RARP money, so they are technically in default], and small business bankruptcies are up 81% YoY in California.

In energy, OPEC kept oil production levels flat, but has promised to more rigorously enforce the current limits, which is a de facto (but rather small) cut in production, which drove oil higher, even though the dollar rose on the surprisingly strong home sale report.

Economics Update

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More bad news in real estate, with commercial real estate prices falling to a 7-year low, and the latest figures on home prices showing a year over year decline of 7.8%.

More generally, the Chicago Bank of the Federal Reserve’s economic index rose slightly in November, from -1.02 in October (indicating growth below the historical trend) to -0.32 (indicating growth below, but closer to the historical trend).

We also had good news in Japan, where exports rose sharply.

In treasurys, bond prices fell, as investors moved into US equities.

To move into those equities, foreign investors bought dollars, which drove the dollar, and the rising dollar drove oil down.

Likely Record Snow Today

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Apologies for the crappy cell phone camera pic

Well, we’re getting a lot of snow here, it’s still coming down, and the estimate is that it will be in the range of 18-24 inches when all is said and done should beat the December record of 11½ inches in a single day and 14 inches in a 2-day storm, and may actually break the all-time record set in February 2003 in the North American blizzard of 2003 of 28.2 inches if it exceeds what the weatherman are reporting by a bit.

We still have not seen a snow plow on my street, though it has seen the more heavily traveled streets in the area.

Snow is expected to continue until tapering off sometime tomorrow.

[on edit]Not a big deal for me, but with 1 week left to go before American Greed and Conspicuous Consumption day, it looks like this will hammer retailers, because for much of the Eastern seaboard, this weekend is done, and there may still be a lot of closings, etc. on Monday.

Economics Update

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Well, someone sliced and diced the numbers, and the unemployment picture continues to improve, with unemployment dropping in 36 States in November, though this U3, and not the more expansive, and to my mind more accurate U6.

We are also seeing a marked improvement in German business confidence this month.

In real estate, we have another shoe dropping, with Moody’s Investors Service stating its intend to review $143 billion in residential mortgage backed securities (RMBS) with an eye toward downgrading them, because their loss rates have continued to climb.

In currency and energy, the reversed the past few days’ course, with oil rising, and the dollar weakening, but these may just be traders unwinding positions that they accumulated over the past week.

Economics Update

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h/t Calculated Risk

Yea, sure, the recession is over. That’s why initial jobless claims rose again this week, up 7000 to 480,000, and continuing claims rose as well, though the 4-week average fell.

I’m beginning to think that those “stunning” NFP payroll numbers in November were an artifact of a seasonal correction of some kind.

In any case, real estate is not looking so hot, with the 30-year fixed mortgage rate rising again, and the estimates for the “shadow inventory” in housing , basically homes that are being foreclosed on, or are being held off the market by the foreclosing institutions to keep from depressing prices too much was revised upward:

The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic.

The “shadow inventory” rose from 1.1 million a year earlier. Such properties include those taken over by banks and mortgage companies and those where the loans are at least 90 days delinquent, the Santa Ana, California-based research firm said in a report today. The number of unsold homes listed for sale was 3.8 million in September, down from 4.7 million a year earlier, First American said.

So I think that any claim to a recovery in residential real estate has been, greatly exaggerated.

That being said, the Conference Board’s Index of Leading Economic Indicators, as well as the Philadelphia Federal Reserve Bank’s Business Outlook Survey both showed signs of growth, though, as Calculated Risk notes, the recovery is weaker than in earlier months, indicating, perhaps, the start of a “W” downturn.

In either case, the LEI and the Philly Fed report did not seem to have much of an effect on Treasuries, which rose, meaning that the yield dropped, largely on concerns about Greece.

This sentiment also drove the dollar up.

In energy, the strong dollar drove oil down, but natural gas rose, largely on the cold weather and smaller than expected inventory numbers.

Economics Update

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H/t Calculated Risk


H/t Calculated Risk


The 2006 spike is just before the new bankruptcy law
h/t Calculated Risk,

Well, we are in for a bumpy ride, with the Federal Reserve Bank of New York’s Empire State Manufacturing Survey falling 21 points in November. (top pic)

It’s still positive, barely, meaning that there is expansion, but it is a rather precipitous drop.

We also saw US industrial capacity utilization rise in November, (2nd pic down) so it appears that there is an upswing going on, albeit a slow one.

Even so, we are saw both homebuilder sentiment falling (3rd pic down), credit card chargeoffs rising (bottom pic), and the Architecture Billings Index falling in November on the other side of the ticket.

In energy, oil rose for its first time in 10 days, and in currency, the dollar was up, hitting an October high.