by Calculated Risk on 6/24/2019 12:14:00 PM

Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

Inventory, on a national basis, was up 2.7% year-over-year (YoY) in May this was the tenth consecutive month with a YoY increase, following over three years of YoY declines.

The graph below shows the YoY change for non-contingent inventory in Houston, Las Vegas, and Sacramento and Phoenix, and total existing home inventory as reported by the NAR (through May).

Click on graph for larger image.

The black line is the year-over-year change in inventory as reported by the NAR.

Note that inventory was up 98% YoY in Las Vegas in May (red), the tenth consecutive month with a YoY increase.

Houston is a special case, and inventory was up for several years due to lower oil prices, but declined YoY last year as oil prices increased.  Inventory was up 10.5% year-over-year in Houston in May.

Inventory is a key for the housing market.  Right now it appears the inventory build that started last year is slowing.

Also note that inventory in Seattle was up 124% year-over-year in May (not graphed)!

by Calculated Risk on 6/24/2019 10:34:00 AM

From the Dallas Fed: Texas Manufacturing Expansion Continues but Pace Slows

Texas factory activity continued to expand in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 6.3 to 8.9, indicating output growth accelerated slightly from May.

Other measures of manufacturing activity exhibited mixed movements in June. The new orders index edged up to 3.7, a reading still below average. The growth rate of orders index fell eight points to -6.7, reaching its lowest reading in nearly three years. The capacity utilization index inched up to 9.6, while the shipments index retreated six points to 1.7, a two-year low. The capital expenditures index posted a double-digit decline, falling 11 points to 6.9, also a two-year low.

Perceptions of broader business conditions shifted down again in June. The general business activity index pushed further into negative territory as more firms noted worsened activity this month than last. The index declined from -5.3 to -12.1, hitting a three-year low. Similarly, the company outlook index fell from -1.7 to -5.5, also a three-year low. The index measuring uncertainty regarding companies’ outlooks pushed up to 21.6, its highest reading since the question was added to the survey in January 2018.

Labor market measures suggested solid, but somewhat slower, growth in employment and work hours in June. The employment index slipped from 11.6 to 8.8 but remained slightly above average.
emphasis added

Another weak regional report. This was the worst reading for the general activity index since 2016.

by Calculated Risk on 6/24/2019 08:41:00 AM

From the Chicago Fed: Index points to a pickup in economic growth in May

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to –0.05 in May from –0.48 in April. Three of the four broad categories of indicators that make up the index increased from April, but only one of the four categories made a positive contribution to the index in May. The index’s three-month moving average, CFNAI-MA3, moved up to –0.17 in May from –0.37 in April.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity was below the historical trend in May (using the three-month average).

According to the Chicago Fed:

The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.
...
A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.

by Calculated Risk on 6/23/2019 08:48:00 PM

Weekend:
• Schedule for Week of June 23, 2019

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for May. This is a composite index of other data.

• At 10:30 AM, Dallas Fed Survey of Manufacturing Activity for June.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 1 and DOW futures are up 13 (fair value).

Oil prices were up over the last week with WTI futures at $57.87 per barrel and Brent at $65.56 barrel.  A year ago, WTI was at $69, and Brent was at $73 - so oil prices are down about 10% to 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.65 per gallon. A year ago prices were at $2.84 per gallon, so gasoline prices are down about 7% year-over-year.

by Calculated Risk on 6/23/2019 11:04:00 AM

By request, here is an update to the chart showing market performance under Presidents Trump and Obama.

Note: I don't think the stock market is a great measure of policy performance, but some people do - and I'm having a little fun with them.

There are some observers who think the stock market is the key barometer of policy success.  My view is there are many measures of success - and that the economy needs to work well for a majority of the people - not just stock investors.

However, for example, Treasury Secretary Steven Mnuchin was on CNBC on Feb 22, 2017, and was asked if the stock market rally was a vote of confidence in the new administration, he replied: "Absolutely, this is a mark-to-market business, and you see what the market thinks."

And Larry Kudlow wrote in 2007: A Stock Market Vote of Confidence for Bush: "I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today's stock market message is an unmistakable vote of confidence for the president."

Note: Kudlow's comments were made a few months before the market started selling off in the Great Recession. For more on Kudlow, see: Larry Kudlow is usually wrong

And from White House chief economic advisor Gary Cohn on December 20, 2017:

"I think there is a lot more momentum in the stock market. ... "The stock market is reflecting the reality of what's going in the business environment today," said Cohn, director of the National Economic Council. "There is going to be a continuation [of the] rally in the equity markets based on real underlying fundamentals of the U.S. economy ... as well as companies having more earnings power because of lower tax rates."

For fun, here is a graph comparing S&P500 returns (ex-dividends) under Presidents Trump and Obama:

Click on graph for larger image.

Blue is for Mr. Obama, Orange is for Mr. Trump.

At this point, the S&P500 is up 30% under Mr. Trump - compared to up 58% under Mr. Obama for the same number of market days.

by Calculated Risk on 6/22/2019 08:11:00 AM

The key reports this week are the third estimate of Q1 GDP, May New Home Sales, Case-Shiller house prices, and Personal Income and Outlays for May.

For manufacturing, the June Dallas, Richmond and Kansas City Fed manufacturing surveys will be released.

On Tuesday, Fed Chair Jerome Powell speaks on the Economic Outlook and Monetary Policy.

----- Monday, June 24th -----
8:30 AM ET: Chicago Fed National Activity Index for May. This is a composite index of other data.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for June.

----- Tuesday, June 25th -----
9:00 AM: S&P/Case-Shiller House Price Index for April.

This graph shows the year-over-year change in the 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 2.5% year-over-year increase in the Comp 20 index for April.

9:00 AM: FHFA House Price Index for April 2019. This was originally a GSE only repeat sales, however there is also an expanded index.

10:00 AM: New Home Sales for May from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the sales rate for last month.

The consensus is for 680 thousand SAAR, up from 673 thousand in April.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for June.

1:00 PM: Speech by Fed Chair Jerome H. Powell, Economic Outlook and Monetary Policy Review, At C. Peter McColough Series on International Economics: A Conversation with Jerome H. Powell, New York, N.Y.

----- Wednesday, June 26th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Durable Goods Orders for May from the Census Bureau. The consensus is for no change in durable goods orders.

----- Thursday, June 27th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 218 thousand initial claims, up from 216 thousand last week.

8:30 AM: Gross Domestic Product, 1st quarter 2019 (Third estimate). The consensus is that real GDP increased 3.1% annualized in Q1, unchanged from the second estimate of 3.1%.

10:00 AM: Pending Home Sales Index for May. The consensus is for a 0.6% increase in the index.

11:00 AM: the Kansas City Fed manufacturing survey for June. This is the last of regional manufacturing surveys for June.

----- Friday, June 28th -----
8:30 AM ET: Personal Income and Outlays, May 2019. The consensus is for a 0.3% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.1%.

9:45 AM: Chicago Purchasing Managers Index for June.

10:00 AM: University of Michigan's Consumer sentiment index (Final for June). The consensus is for a reading of 97.9.

by Calculated Risk on 6/21/2019 07:50:00 PM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were lower in May in 6 states, higher in 2 states, and stable in 42 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today.
...
Vermont had the lowest unemployment rate in May, 2.1 percent. The rates in Texas (3.5 percent) and Vermont (2.1 percent) set new series lows. (All state series begin in 1976.) Alaska had the highest jobless rate, 6.4 percent.
emphasis added

Click on graph for larger image.

This graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 1976.

At the worst of the great recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently only one state, Alaska, has an unemployment rate at or above 6% (dark blue).  Note that the series low for Alaska is above 6%.  Three states and the D.C. have unemployment rates above 5%; Alaska, Mississippi and New Mexico.

A total of nine states are at the series low.

by Calculated Risk on 6/21/2019 03:22:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 15 June

The U.S. hotel industry reported mixed year-over-year results in the three key performance metrics during the week of 9-15 June 2019, according to data from STR.

In comparison with the week of 10-16 June 2018, the industry recorded the following:

• Occupancy: -0.6% to 73.7%
• Average daily rate (ADR): +1.9% to US$134.59
• Revenue per available room (RevPAR): +1.3% to US$99.22
emphasis added

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 2019, dash light blue is 2018 (record year), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

Occupancy has been solid in 2019, close - to-date - compared to the previous 4 years.

Seasonally, the occupancy rate will now increase during the Summer travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 6/21/2019 12:26:00 PM

From Merrill Lynch:

1Q GDP is likely to be revised slightly higher to 3.2% in the final release next week, up from the second estimate of 3.1%. We continue to track 2.5% for 2Q GDP. [June 21 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 1.4% for 2019:Q2 and 1.3% for 2019:Q3. [June 21 estimate].

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2019 is 2.0 percent on June 18, down from 2.1 percent on June 14. [June 18 estimate]

CR Note: These estimates suggest real GDP growth will be around 2% annualized in Q2.

by Calculated Risk on 6/21/2019 11:15:00 AM

Earlier: NAR: Existing-Home Sales Increased to 5.34 million in May

A few key points:

1) The key for housing - and the overall economy - is new home sales, single family housing starts and overall residential investment.

Overall, this is still a somewhat reasonable level for existing home sales.  No worries.

2) Inventory is still low, but was up 2.7% year-over-year (YoY) in May. This was the tenth consecutive month with a year-over-year increase in inventory, although the YoY increase was fairly small in May.

Click on graph for larger image.

3) Year-to-date sales are down about 3.3% compared to the same period in 2018.   On an annual basis, that would put sales around 5.15 million in 2019.  Sales slumped at the end of 2018 and in January 2019 due to higher mortgage rates, the stock market selloff, and fears of an economic slowdown.

The comparisons will be easier towards the end of the year.

The second graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA in May (540,000, red column) were above sales in May 2018 (535,000, NSA), but sales were lower than in May 2017.