by Calculated Risk on 8/31/2014 12:49:00 PM

From the National Restaurant Association: Restaurant Performance Index Dipped in July

Due in part to a dampened outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) registered a modest decline in July. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.0 in July, down from a level of 101.3 in June and the second consecutive monthly decline. Despite the recent downticks, the RPI remained above 100 for the 17th consecutive month, which signifies expansion in the index of key industry indicators.

“Although restaurant operators reported positive same-store sales and customer traffic results in July, the RPI edged down as a result of a mixed outlook for the months ahead,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Restaurant operators were less bullish about the direction of the overall economy, and rising wholesale food costs are once again starting to pose a significant challenge.”
emphasis added

Click on graph for larger image.

The index decreased to 101.0 in July, down from 101.3 in June. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month.  Even with the recent declines in the index, this is still a decent level.

by Calculated Risk on 8/30/2014 01:11:00 PM

This will be a busy week for economic data.  The key report is the August employment report on Friday.

Other key reports include the ISM manufacturing index on Tuesday and August vehicle sales on Wednesday.

The ECB rate decision and press conference with ECB President Mario Draghi on Thursday will be closely watched.

----- Monday, September 1st -----
All US markets will be closed in observance of the Labor Day holiday.

----- Tuesday, September 2nd -----
Early: Black Knight Mortgage Monitor report for July.

10:00 AM: ISM Manufacturing Index for August. The consensus is for a decrease to 56.8 from 57.1 in July.

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

The ISM manufacturing index indicated expansion in July at 57.1%. The employment index was at 58.2%, and the new orders index was at 63.4%.

10:00 AM: Construction Spending for July. The consensus is for a 0.8% increase in construction spending.

----- Wednesday, September 3rd -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

All day: Light vehicle sales for August. The consensus is for light vehicle sales to increase to 16.5 million SAAR in August from 16.4 million in July (Seasonally Adjusted Annual Rate).

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

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for July. The consensus is for a 10.5% increase in July orders.

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, September 4th -----
1:45 PM CET (7:45 AM ET): Press conference following the Governing Council meeting of the ECB in Frankfurt with Mario Draghi. Here is the ECB website and press conference page.

8:15 AM: The ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for 213,000 payroll jobs added in August, down from 218,000 in July.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 305 thousand from 298 thousand.

8:30 AM: Trade Balance report for July from the Census Bureau.

Imports decreased and exports increased in June.

The consensus is for the U.S. trade deficit to be at $42.7 billion in July from $41.5 billion in June.

10:00 AM: ISM non-Manufacturing Index for August. The consensus is for a reading of 57.1, down from 58.7 in July. Note: Above 50 indicates expansion.

----- Friday, September 5th -----
8:30 AM: Employment Report for August. The consensus is for an increase of 210,000 non-farm payroll jobs added in August, up slightly from the 209,000 non-farm payroll jobs added in July.

The consensus is for the unemployment rate to decrease to 6.1% in August. 

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

In July, the year-over-year change was 2.570 million jobs, and it generally appears the pace of hiring is increasing.

Right now it looks possible that 2014 will be the best year since 1999 for both total nonfarm and private sector employment growth.

As always, a key will be the change in real wages - and as the unemployment rate falls, wage growth should eventually start to pickup.

by Calculated Risk on 8/30/2014 08:33:00 AM

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

Here is the unofficial problem bank list for Aug 29, 2014.

Changes and comments from surferdude808:

As expected, the FDIC released q2 industry results and provided an update on its latest enforcement action activity. The update led to six removals from the Unofficial Problem Bank List pushing the list total down to 439 institutions with assets of $139.97 billion. A year ago, the list held 707 institutions with assets of $250.6 billion.

Actions were terminated against First State Bank, Lonoke, AR ($256 million); The Business Bank, Appleton, WI ($253 million); First Financial Bank, Bessemer, AL ($183 million); Citizens State Bank, Hudson, WI ($146 million); South Georgia Bank, Glennville, GA ($125 million); and Golden State Bank, Upland, CA ($92 million Ticker: GSBB).

The FDIC told there are 354 institutions with assets of $110 billion on the Official Problem Bank List. Since their last update, the official list declined by 13.9 percent or 57 institutions, which the largest percentage decline over the past 13 quarters since the official list peaked at 888 institutions in the first quarter of 2011. The unofficial list fell by an identical 57 institutions since the last update from the FDIC on May 28, 2014.

CR Note: The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public. (CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.)

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

When the list was increasing, the official and "unofficial" counts were about the same. Now with the number of problem banks declining, the unofficial list is lagging the official list. This probably means regulators are changing the CAMELS rating on some banks before terminating the formal enforcement actions.

by Calculated Risk on 8/29/2014 08:22:00 PM

The August employment report will be released next Friday, September 5th and the consensus is that 210 thousand payroll jobs were added in August. Here are two forecasts:

From economist Kris Dawsey at Goldman Sachs:

Employment indicators have strengthened a bit in August vs. July, including the employment components of the available service sector surveys, the Conference Board labor differential, and initial jobless claims. Our preliminary forecast for August payroll job growth is 240k, with the important caveat that we have yet to receive a few key pieces of data for the month, most notably the ISM nonmanufacturing report. ... With no special factors on weather, strikes, unusual composition in the prior month, fiscal policy issues, or obvious seasonal distortions, we think the August report should be a fairly “clean read” on the likely-strengthening underlying trend. We also anticipate a downtick of one-tenth in the unemployment rate to 6.1%, matching its prior cycle low set two months back. Should the participation rate give up its small July increase, the risk is skewed toward 6.0%, in our view.

From Merrill Lynch:

The August employment report is likely to be healthy with nonfarm payroll growth of 245,000 and a decline in the unemployment rate to 6.1% from 6.2%. ... Early indicators of the labor market have all been encouraging with the conference board labor differential narrowing to -12.4% as an increase in respondents believe jobs have become plentiful. Initial jobless claims have remained low, hovering around 300,000, consistent with little firing. Moreover, manufacturing job growth should be strong as suggested by healthy surveys and recent industrial production data.

We expect the unemployment rate to fall back to 6.1%, reversing the increase last month.

by Calculated Risk on 8/29/2014 04:10:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in July to 2.00% from 2.05% in June. The serious delinquency rate is down from 2.70% in July 2013, and this is the lowest level since October 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier this week, Freddie Mac reported that the Single-Family serious delinquency rate declined in July to 2.02% from 2.07% in June. Freddie's rate is down from 2.70% in July 2013, and is at the lowest level since January 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Both Fannie and Freddie's serious delinquency rates will probably be below 2% in August.

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

Click on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.70 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in early 2016.

Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be close to normal in 2016.

by Calculated Risk on 8/29/2014 02:06:00 PM

From HotelNewsNow.com: STR: US results for week ending 23 August

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 17-23 August 2014, according to data from STR.

In year-over-year measurements, the industry’s occupancy rate rose 5.0 percent to 70.6 percent. Average daily rate increased 5.4 percent to finish the week at US$116.13. Revenue per available room for the week was up 10.7 percent to finish at US$82.04.
emphasis added

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The occupancy rate has peaked for the year.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and is slightly above the level for the same week in 2000 (the previous high). 

Right now it looks like 2014 will be the best year since 2000 for hotels.   Since it takes some time to plan and build hotels, I expect 2015 will be a record year for hotel occupancy. Note: Smith Travel analysts say that supply growth will pickup next year, but remain relatively slow, "hotel supply growth in the United States is forecast to be 1% this year and 1.3% in 2015".

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 8/29/2014 09:59:00 AM

Click on graph for larger image.

The final Reuters / University of Michigan consumer sentiment index for August was at 82.5, up from the preliminary reading of 79.2, and up from 81.8 in July.

This was above the consensus forecast of 80.3. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011.

by Calculated Risk on 8/29/2014 08:41:00 AM

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

Personal income increased $28.6 billion, or 0.2 percent ... in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $13.6 billion, or 0.1 percent.
...
Real PCE -- PCE adjusted to remove price changes -- decreased 0.2 percent in July, in contrast to an increase of 0.2 percent in June. ... The price index for PCE increased 0.1 percent in July, compared with an increase of 0.2 percent in June. The PCE price index, excluding food and energy, increased 0.1 percent in July, the same increase as in June.

The following graph shows real Personal Consumption Expenditures (PCE) through July 2014 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

PCE is off to a slow start in Q3. NOTE: Graph corrected.

On inflation: The PCE price index increased 1.6 percent year-over-year, and at a 1.0% annualized rate in July. The core PCE price index (excluding food and energy) increased 1.5 percent year-over-year in July, and at a 1.1% annualized rate in July.

by Calculated Risk on 8/28/2014 07:46:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays for July. The consensus is for a 0.3% increase in personal income, and for a 0.1% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:45 AM, the Chicago Purchasing Managers Index for August. The consensus is for an increase to 56.0, up from 52.6 in July.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (final for August). The consensus is for a reading of 80.3, up from the preliminary reading of 79.2, and down from the July reading of 82.5.

And on the GDP revision from the BEA: Gross Domestic Product, Second Quarter 2014 (Second Estimate); Corporate Profits, Second Quarter 2014 (Preliminary Estimate)

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.2 percent in the second quarter of 2014, according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 2.1 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 4.0 percent. With this second estimate for the second quarter, the general picture of economic growth remains the same; the increase in nonresidential fixed investment was larger than previously estimated, while the increase in private inventory investment was smaller than previously estimated

Here is a Comparison of Second and Advance Estimates.

Below is a table comparing the contributions to the percent change for a few categories.  Less inventory, more investment ... a positive.

Revision: Contributions to Percent Change in Real Gross Domestic Product
	Advance	2nd Release	Revision
GDP, Percent change at annual rate:	4.0	4.2	0.2
PCE, Percentage points at annual rates:
Personal consumption expenditures	1.69	1.69	0.0
Investment, Percentage points at annual rates:
Nonresidential Structures	0.15	0.26	0.11
Equipment	0.40	0.59	0.19
Intellectual property products	0.14	0.17	0.03
Residential	0.23	0.22	-.01
Change in private inventories	1.66	1.39	-0.27
Trade, Percentage points at annual rates:
Net exports of goods and services	-0.61	-0.43	0.18
Government, Percentage points at annual rates:
Federal Government	-0.05	-0.06	-0.01
State and Local	0.35	0.33	-0.02

by Calculated Risk on 8/28/2014 02:15:00 PM

From the Kansas City Fed: Growth in Tenth District Manufacturing Activity Slowed Slightly

The Federal Reserve Bank of Kansas City released the August Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that growth in Tenth District manufacturing activity slowed slightly, but producers’ expectations for future activity remained solid.

“Growth eased a bit from last month’s pace,” Wilkerson said. “Still, August represented the eighth straight month of expansion in the region, and plant managers remained generally optimistic.”
...
The month-over-month composite index was 3 in August, down from 9 in July and 6 in June. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.

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 (dashed green, through August), and five Fed surveys are averaged (blue, through August) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through July (right axis).

All of the regional surveys showed expansion in August, and it seems likely the ISM index will be in mid-to-high 50 range again this month.  The ISM index for August will be released Tuesday, September 2nd.