by Calculated Risk on 9/26/2019 08:23:00 PM

Friday:
• At 8:30 AM ET, Durable Goods Orders for August from the Census Bureau. The consensus is for a 1.2% decrease in durable goods orders.

• At 8:30 AM, Personal Income and Outlays for August. The consensus is for a 0.4% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for September). The consensus is for a reading of 92.0.

by Calculated Risk on 9/26/2019 04:51:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in August was 0.61%, unchanged from 0.61% in July. Freddie's rate is down from 0.73% in August 2018.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

This matches last month as the lowest serious delinquency rate for Freddie Mac since November 2007.

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

Click on graph for larger image

I expect the delinquency rate to decline to a cycle bottom in the 0.4% to 0.6% range - so this is close to a bottom.

Note: Fannie Mae will report for August soon.

by Calculated Risk on 9/26/2019 02:23:00 PM

A few excerpt from a Merrill Lynch research report:

We expect next Friday's Bureau of Labor Statistics (BLS) employment situation report to show that nonfarm payrolls grew by 145k in September following an increase of 130k in August. ... For private payrolls which exclude government workers, we look for an increase of 125k …

Since the last employment report, labor market indicators on balance have been reading softer and portend to tepid hiring activity. … Elsewhere, we expect the unemployment rate to hold at 3.7% for the 4th consecutive month

CR note: I expect temporary Decennial Census Hiring of about 15,000 in September (following 25,000 hires in August).  

by Calculated Risk on 9/26/2019 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Edged Down in September

The Federal Reserve Bank of Kansas City released the September 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 edged down in September, and expectations for future activity moderated but remained positive.

“Regional factory activity continued to decline in September, though not as much as last month,” said Wilkerson. “Although the employment index dropped further this month, firms as a whole indicated 2019 employment expectations have increased slightly since the beginning of the year.”
...
The month-over-month composite index was -2 in September, up slightly from -6 in August and similar to -1 in July. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The dip in manufacturing activity was driven by continued declines at durable goods plants, especially from decreases in nonmetallic mineral products, primary metal, computer and electronic products, and transportation equipment manufacturing. While the month-over-month employment index dropped further in September, the production and shipments indexes rebounded considerably. Year-over-year factory indexes were somewhat mixed in September, but the composite index was unchanged at -1. The future composite index remained positive, but slowed from 9 to 5, the lowest future composite index since May 2016.
emphasis added

Another weak regional manufacturing report.

by Calculated Risk on 9/26/2019 10:04:00 AM

From the NAR: Pending Home Sales Grow 1.6% in August

Pending home sales increased in August, a welcome rebound after a prior month of declines, according to the National Association of Realtors®. Each of the four major regions reported both month-over-month growth and year-over-year gains in contract activity.

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, climbed 1.6% to 107.3 in August, reversing the prior month’s decrease. Year-over-year contract signings jumped 2.5%. An index of 100 is equal to the average level of contract activity.
...
All regional indices are up from July, with the highest gain in the West region. The PHSI in the Northeast rose 1.4% to 94.3 in August and is now 0.7% higher than a year ago. In the Midwest, the index increased 0.6% to 101.7 in August, 0.2% higher than August 2018.

Pending home sales in the South increased 1.4% to an index of 124.4 in August, a 1.8% bump from last August. The index in the West grew 3.1% in August 2019 to 96.4, an increase of 8.0% from a year ago.
emphasis added

This was above expectations of a 0.6% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in September and October.

by Calculated Risk on 9/26/2019 08:38:00 AM

The DOL reported:

In the week ending September 21, the advance figure for seasonally adjusted initial claims was 213,000, an increase of 3,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 208,000 to 210,000. The 4-week moving average was 212,000, a decrease of 750 from the previous week's revised average. The previous week's average was revised up by 500 from 212,250 to 212,750.
emphasis added

The previous week was revised up.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 212,000.

This was close to the consensus forecast.

by Calculated Risk on 9/26/2019 08:34:00 AM

From the BEA: Gross Domestic Product, Second Quarter 2019 (Second Estimate); Corporate Profits, Second Quarter 2019 (Preliminary Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.0 percent in the second quarter of 2019, according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.1 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was also 2.0 percent. Downward revisions to personal consumption expenditures (PCE) and nonresidential fixed investment were primarily offset by upward revisions to state and local government spending and exports. Imports, which are a subtraction in the calculation of GDP, were revised down
emphasis added

PCE growth was revised down from 4.7% to 4.6%. Residential investment was revised down from -2.9% to -3.0%. This was at the consensus forecast.

Here is a Comparison of Third and Second Estimates.

by Calculated Risk on 9/25/2019 07:15:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 211 thousand initial claims, up from 208 thousand the previous week.

• At 8:30 AM, Gross Domestic Product, 2nd quarter 2018 (Third estimate). The consensus is that real GDP increased 2.0% annualized in Q2, unchanged from the second estimate of 2.0%.

• At 10:00 AM, Pending Home Sales Index for August. The consensus is 0.6% increase in the index.

• At 11:00 AM, the Kansas City Fed manufacturing survey for September. This is the last of the regional surveys for September.

by Calculated Risk on 9/25/2019 05:04:00 PM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Rises in September

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), was up 0.1 percent in September on a three-month moving average (3MMA) basis following a 0.1 percent decline in August and gains averaging 0.2 percent per month during the second quarter. On a year-over-year (Y/Y) basis, the barometer was flat at 0.0 percent (3MMA).
...
“Although one month does not make a trend, the positive September CAB reading and upward revisions in the data are encouraging signs,” said Kevin Swift, chief economist at ACC. “The barometer indicates gains in U.S. commerce into the second quarter of 2020, but at a slow pace.”
...
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 change in the CAB suggests that the YoY change in industrial production might be near a short term bottom.

by Calculated Risk on 9/25/2019 03:29:00 PM

The Case-Shiller house price indexes for July were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Matthew Speakman at Zillow: July Case-Shiller Results and August Forecast: Summer Turning Point?

Annual home price growth continued to cool in July, but more-recent data suggest the market may have begun to turn over the summer, showing modest acceleration in growth compared to earlier in the year.
…
The latest home sales and building data offer further proof that the recent bout of housing malaise may be nearing an end. August existing home sales, starts and permits all easily exceeded industry expectations and posted some of their strongest readings in years. This strength, teamed with steady home builder sentiment, growing home construction employment and still-low mortgage rates, show the housing market still has plenty of fight as summer turns to fall.

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 3.2% in August, unchanged from 3.2% in July.

The Zillow forecast is for the 20-City index to decline to 1.8% YoY in August from 2.0% in July, and for the 10-City index to decline to 1.3% YoY compared to 1.6% YoY in July.