by Calculated Risk on 10/24/2010 09:00:00 AM

A summary of last week - mostly in graphs.

With all the Fed speeches last week it is clear that the countdown to QE2 continues (QE2: quantitative easing, 2nd round). Also "put-backs" of "soured" mortgages (repurchase demands) is picking up steam, see:

From Bloomberg: Pimco, New York Fed Said to Seek BofA Repurchase of Mortgages

From Nick Timiraos at the WSJ: Regulator for Fannie Set to Get Litigious

Industrial Production, Capacity Utilization decreased in September

From the Fed: Industrial production and Capacity Utilization

Industrial production decreased 0.2 percent in September after having increased 0.2 percent in August. ... The capacity utilization rate for total industry edged down to 74.7 percent ...

Click on graph for larger image in new window.

This graph shows Capacity Utilization. This series is up 9.5% from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 74.7% is still far below normal - and well below the pre-recession levels of 81.2% in November 2007.

The second graph shows industrial production since 1967.

Industrial production declined slightly in September, and production is still 7.5% below the pre-recession levels at the end of 2007.

This is below consensus expectations of a 0.2% increase in Industrial Production, and an increase to 74.8% (from 74.7% before revision) for Capacity Utilization.

Housing Starts increased in September, still Depressed

Total housing starts were at 610 thousand (SAAR) in September, up 0.3% from the revised August rate of 608 thousand (revised up from 598 thousand), and up 28% from the all time record low in April 2009 of 477 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959).

There has been an increase in multi-family starts over the last two months, although single family starts are significantly below the levels of earlier this year.

Single-family starts increased 4.4% to 452 thousand in August. This is 25% above the record low in January 2009 (360 thousand).

This was above expectations of 580 thousand starts, mostly because of the volatile multi-family starts.

NAHB Builder Confidence increased in October, still Depressed

The National Association of Home Builders (NAHB) reports the housing market index (HMI) was at 16 in October. This is a 3 point increase from 13 in September, and is the highest level since June. The record low was 8 set in January 2009, and 16 is still very low ...

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the October release for the HMI and the August data for starts (posted before starts were released).

This shows that the HMI and single family starts mostly move in the same direction - although there is plenty of noise month-to-month.

Moody's: Commercial Real Estate Prices fall to 2002 Levels

Moody's reported today that the Moody’s/REAL All Property Type Aggregate Index declined 3.3% in August. This is a repeat sales measure of commercial real estate prices.

Here is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.

CRE prices only go back to December 2000.

The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

It is important to remember that the number of transactions is very low and there are a large percentage of distressed sales.

AIA: Architecture Billings Index shows expansion, first time since Jan 2008

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

Reuters reports that the American Institute of Architects’ Architecture Billings Index increased to 50.4 in September from 48.2 in August. Any reading above 50 indicates expansion.

This graph shows the Architecture Billings Index since 1996. This is the first time the index has been above 50 since Jan 2008.

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So, if the index stays at 50 or above, this suggests there will probably be further declines in CRE investment for the next 9 to 12 months.

Philly Fed Index "steady" in October

Here is the Philadelphia Fed Index: Business Outlook Survey

Results from the Business Outlook Survey suggest that regional manufacturing activity was steady in October. Although the broad survey measures showed marginal improvement this month, the new orders index continued to suggest weak demand for manufactured goods.
...
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of –0.7 in September to 1.0 in October.

This graph shows the Philly index for the last 40 years.

This index turned down sharply in June and July and was negative in August and September (indicating contraction). The index was barely positive in October, and the internals (new orders, employment) are still weak.

These surveys are timely, but noisy. However this is further evidence of a slowdown in manufacturing. This was slightly worse than the consensus view of a reading of 1.8 (slight expansion).

Other Economic Stories ...

From Economix: Answers to Your Questions on the Foreclosure Crisis

Statement from GMAC: GMAC resumes some foreclosures

From Dow Jones: Citigroup Says Its Foreclosure Processing Is 'Sound'

And from the WSJ: BofA Sets Timetable for Foreclosure Review

From the Federal Reserve: Fed's Beige Book: Economic Activity increased at "modest pace"

Unofficial Problem Bank List at 871 institutions

Best wishes to all.