RSS Feed by Calculated Risk on 7/29/2018 11:11:00 AM
Sunday, July 29, 2018
July 2018: Unofficial Problem Bank list declines to 89 Institutions
Note: Surferdude808 compiles an unofficial list of Problem Banks compiled only from public sources.
Here is the unofficial problem bank list for July 2018.
Here are the monthly changes and a few comments from surferdude808:
Update on the Unofficial Problem Bank List for July 2018. The list had a decline of three insured institutions to 89 banks. Aggregate assets declined during the month by $2.7 billion to $57.3 billion. A year ago, the list held 134 institutions with assets of $32.8 billion.
Actions were terminated against Amboy Bank, Old Bridge, NJ ($2.3 billion); McHenry Savings Bank, McHenry, IL ($225 million); and EH National Bank, Beverly Hills, CA ($182 million).
Saturday, July 28, 2018
Schedule for Week of July 29, 2018
by Calculated Risk on 7/28/2018 08:11:00 AM
The key report this week is the July employment report on Friday.
Other key indicators include Personal Income and Outlays for June, Case-Shiller house prices for May, the July ISM manufacturing and non-manufacturing indexes, July auto sales, and the June trade deficit.
The FOMC meets on Tuesday and Wednesday, and no change to policy is expected at this meeting.
10:00 AM: Pending Home Sales Index for June. The consensus is for a 0.8% increase in the index.
10:30 AM: Dallas Fed Survey of Manufacturing Activity for July. This is the last of the regional surveys for July.
8:30 AM: Personal Income and Outlays for June. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.2%.
9:00 AM ET: S&P/Case-Shiller House Price Index for May.This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).
The consensus is for a 6.6% year-over-year increase in the Comp 20 index for May.
9:45 AM: Chicago Purchasing Managers Index for July. The consensus is for a reading of 62.0, down from 64.1 in June.
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
8:15 AM: The ADP Employment Report for July. This report is for private payrolls only (no government). The consensus is for 172,000 payroll jobs added in July, up from 177,000 added in June.
10:00 AM: ISM Manufacturing Index for July. The consensus is for the ISM to be at 59.4, down from 60.2 in June.Here is a long term graph of the ISM manufacturing index.
The PMI was at 60.2% in June, the employment index was at 56.0%, and the new orders index was at 63.5%.
10:00 AM: Construction Spending for June. The consensus is for a 0.3% increase in construction spending.
All day: Light vehicle sales for July. The consensus is for light vehicle sales to be 17.1 million SAAR in July, down from 17.5 million in June (Seasonally Adjusted Annual Rate).This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the current sales rate.
2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce no change to policy at this meeting.
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 218 thousand initial claims, up from 217 thousand the previous week.
8:30 AM: Employment Report for July. The consensus is for an increase of 188,000 non-farm payroll jobs added in July, down from the 213,000 non-farm payroll jobs added in June. The consensus is for the unemployment rate to decline to 3.9%.
This graph shows the year-over-year change in total non-farm employment since 1968.
In June the year-over-year change was 2.374 million jobs.
A key will be the change in wages.
8:30 AM: Trade Balance report for June from the Census Bureau. This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.
The consensus is for the U.S. trade deficit to be at $45.6 billion in June from $43.1 billion in May.
10:00 AM: the ISM non-Manufacturing Index for July. The consensus is for index to decrease to 58.8 from 59.1 in June.
Friday, July 27, 2018
Housing comments from Soylent Green
by Calculated Risk on 7/27/2018 04:23:00 PM
Long term readers will remember mortgage broker "Soylent Green is People". He sent me these comments on housing that I'll pass along:
"A bit of a panic is breaking out amongst my Realtor friends. Sales are down. There are more cancellations right before closings than usual. Builders are getting a few drop outs as well on some of their units, but that could be tied to overseas buyers with other concerns. If this sales "air pocket" continues, we might see some Agents have to actually marketing, rather than just shilling their homes at the first buyer through the door. A few Agents have seen their listings grow long in the tooth, even some traditionally priced towards first time home buyers. That's a deja vu event today for 2013 vintage agents, but not so for old dogs like me.CR Note: Higher mortgage rates and the new tax policy appear to be impacting home sales in some areas. But this is a slowdown from a hot market, and I expect the key sectors - single family starts and new home sales - will see further growth.
On the mortgage side of things, more and more loans have begun funding in the upper 4's to low 5's. Customers are really chafing at anything priced above 4.75%. In order to expand volume, some lenders are duking it out on price while others are expanding their debt to income ratios, lowering the buying threshold, just as we saw back in 2006."
Top Twenty Five GDP Quarters since 2000
by Calculated Risk on 7/27/2018 01:24:00 PM
With the release of Q2 GDP data, and the 2018 Comprehensive Update to GDP (including revisions), here is an update to the table showing the top 25 quarters since Q1 2000.
Q2 2018 is the eleventh best quarter for real annualized GDP since Q1 2000. Note: unrounded, Q2 2018 was at 4.06%, just behind Q4 2004 at 4.07%.
Q2 GDP was solid..
As I've noted before, based on demographics, 2% is the new 4% (that is just simple arithmetic). I've also noted that a large government program (such as a war, or a tax cut) can give a short term boost to GDP.
| Top 25 GDP Quarters since 2000 Real GDP, Annualized Rate | ||||
|---|---|---|---|---|
| GDP | Year | Quarter | President | |
| 1 | 7.5% | 2000 | Q2 | Clinton |
| 2 | 7.0% | 2003 | Q3 | G.W.Bush |
| 3 | 5.4% | 2006 | Q1 | G.W.Bush |
| 4 | 5.1% | 2014 | Q2 | Obama |
| 5 | 4.9% | 2014 | Q3 | Obama |
| 6 | 4.7% | 2011 | Q4 | Obama |
| 7 | 4.7% | 2003 | Q4 | G.W.Bush |
| 8 | 4.5% | 2005 | Q1 | G.W.Bush |
| 9 | 4.5% | 2009 | Q4 | Obama |
| 10 | 4.1% | 2004 | Q4 | G.W.Bush |
| 11 | 4.1% | 2018 | Q2 | Trump |
| 12 | 3.8% | 2004 | Q3 | G.W.Bush |
| 13 | 3.7% | 2010 | Q2 | Obama |
| 14 | 3.6% | 2005 | Q3 | G.W.Bush |
| 15 | 3.6% | 2013 | Q1 | Obama |
| 16 | 3.5% | 2002 | Q1 | G.W.Bush |
| 17 | 3.5% | 2003 | Q2 | G.W.Bush |
| 18 | 3.4% | 2006 | Q4 | G.W.Bush |
| 19 | 3.3% | 2015 | Q2 | Obama |
| 20 | 3.3% | 2015 | Q1 | Obama |
| 21 | 3.2% | 2013 | Q4 | Obama |
| 22 | 3.2% | 2013 | Q3 | Obama |
| 23 | 3.2% | 2012 | Q1 | Obama |
| 24 | 3.1% | 2004 | Q2 | G.W.Bush |
| 25 | 3.0% | 2017 | Q2 | Trump |
Q2 GDP: Investment
by Calculated Risk on 7/27/2018 10:17:00 AM
The first graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.
In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.
The dashed gray line is the contribution from the change in private inventories.
Click on graph for larger image.
Residential investment (RI) was decreased in Q2 (-1.1% annual rate in Q2). Equipment investment increased at a 3.9% annual rate, and investment in non-residential structures increased at a 13.3% annual rate.
On a 3 quarter trailing average basis, RI (red) is up slightly, equipment (green) is solidly positive, and nonresidential structures (blue) is also up.
Recently real RI has been soft.
I'll post more on the components of non-residential investment once the supplemental data is released.
The second graph shows residential investment as a percent of GDP.
Residential Investment as a percent of GDP decreased in Q2, however RI has generally been increasing. RI as a percent of GDP is only just above the bottom of the previous recessions - and I expect RI to continue to increase for the next couple of years.
The increase is now primarily coming from single family investment and home remodeling.
I'll break down Residential Investment into components after the GDP details are released.
Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.
The third graph shows non-residential investment in structures, equipment and "intellectual property products". Investment in non-residential structures - as a percent of GDP - picked up.
BEA: Real GDP increased at 4.1% Annualized Rate in Q2
by Calculated Risk on 7/27/2018 08:34:00 AM
Note: This release includes the 2018 Comprehensive Update to GDP, and includes revisions to previous GDP releases.
From the BEA: Gross Domestic Product: Second Quarter 2018 (Advance Estimate)
Real gross domestic product increased at an annual rate of 4.1 percent in the second quarter of 2018, according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.2 percent (revised).The advance Q2 GDP report, with 4.1% annualized growth, was close to expectations.
...
The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The estimates released today also reflect the results of the 15th comprehensive update of the National Income and Product Accounts (NIPAs). The updated estimates reflect previously announced improvements, and include the introduction of new not seasonally adjusted estimates for GDP, GDI, and their major components. For more information, see the Technical Note.
emphasis added
Personal consumption expenditures (PCE) increased at 4.0% annualized rate in Q2, up from 0.5% in Q1. Residential investment (RI) decreased 1.1% in Q2. Equipment investment increased at a 3.9% annualized rate, and investment in non-residential structures increased at a 13.3% pace.
I'll have more later ...
Thursday, July 26, 2018
Friday: GDP
by Calculated Risk on 7/26/2018 08:04:00 PM
On GDP, remember that the release will include the 2018 Comprehensive Update to GDP. In addition to revisions and changes in methodology, the entire series of GDP (annually all the way back to 1929, and quarterly back to 1947) will be updated with new seasonal adjustments.
Also the BEA will now release GDP Not Seasonally Adjusted. This will be interesting since every year GDP NSA declines in Q1.
And the final pre-release update from the Altanta Fed: GDPNow
The final GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2018 is 3.8 percent on July 26, down from 4.5 percent on July 18. [July 26 estimate]Friday:
emphasis added
• At 8:30 AM ET, Gross Domestic Product, 2nd quarter 2018 (Advance estimate). The consensus is that real GDP increased 4.2% annualized in Q2, up from 2.0% in Q1.
• At 10:00 AM,: University of Michigan's Consumer sentiment index (Final for July). The consensus is for a reading of 97.2, up from 97.1.
Freddie Mac: Mortgage Serious Delinquency Rate Decreased in June
by Calculated Risk on 7/26/2018 04:43:00 PM
Freddie Mac reported that the Single-Family serious delinquency rate in June was 0.82%, down from 0.87% in May. Freddie's rate is down from 0.85% in June 2017.
Freddie's serious delinquency rate peaked in February 2010 at 4.20%.
This is the lowest serious delinquency for Freddie Mac since April 2008.
These are mortgage loans that are "three monthly payments or more past due or in foreclosure".
Click on graph for larger image
The increase in the delinquency rate late last year was due to the hurricanes - no worries about the overall market (These are serious delinquencies, so it took three months late to be counted).
After the hurricane bump, maybe the rate will decline to a cycle bottom in the 0.5% to 0.8% range - but this is close to a bottom.
Note: Fannie Mae will report for June soon.
Chemical Activity Barometer Increased in July
by Calculated Risk on 7/26/2018 02:35:00 PM
Note: This appears to be a leading indicator for industrial production.
From the American Chemistry Council: Chemical Activity Barometer Continues to Signal Gains in U.S. Commercial and Industrial Activity
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 0.1 percent in July on a three-month moving average (3MMA) basis, improving upon June and May performances which were essentially flat. The barometer is up 3.9 percent year-over-year (Y/Y/), a slower pace than of that earlier in the year. The unadjusted CAB also increased, notching a 0.2 percent gain, up from a 0.1 percent gain in June. July readings indicate a continued expansion of U.S. commercial and industrial activity well into the first quarter 2019.
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added
Click on graph for larger image.This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production. It does appear that CAB (red) generally leads Industrial Production (blue).
The year-over-year increase in the CAB has been solid over the last year, suggesting further gains in industrial production in 2018 and early 2019.
Kansas City Fed: Regional Manufacturing Activity "Continued to Expand Solidly" in July
by Calculated Risk on 7/26/2018 11:00:00 AM
From the Kansas City Fed: Tenth District Manufacturing Activity Continued to Expand Solidly
The Federal Reserve Bank of Kansas City released the July Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity continued to expand solidly, and expectations for future growth remained strong.All of the regional surveys for July have been solid so far.
“Our composite index came down slightly from record highs in recent months,” said Wilkerson. “Many firms remain concerned about labor availability and tariffs, but optimism is still high.”
...
The month-over-month composite index was 23 in July, down from readings of 28 in June and 29 in May. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Factory activity increased solidly at durable and nondurable goods plants, particularly for petroleum and coal products, minerals, fabricated metal, computers and electronics, and transportation equipment. Month-over-month indexes were mixed compared with the previous month, but most indexes remained at high levels. The employment index inched up while the order backlog and new orders for exports indexes were virtually unchanged. The production and shipments indexes fell moderately, and the new orders index eased somewhat. The raw materials index fell modestly and the finished goods inventory index also dipped slightly.
emphasis added
