by Calculated Risk on 2/05/2020 10:45:00 AM

The January ISM Non-manufacturing index was at 55.5%, up from 54.9% in December. The employment index decreased to 53.1%, from 54.8%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: January 2020 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in January for the 120th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: “The NMI® registered 55.5 percent, which is 0.6 percentage point higher than the seasonally adjusted December reading of 54.9 percent. This represents continued growth in the non-manufacturing sector, at a slightly faster rate. The Non-Manufacturing Business Activity Index increased to 60.9 percent, 3.9 percentage points higher than the seasonally adjusted December reading of 57.0 percent, reflecting growth for the 126th consecutive month. The New Orders Index registered 56.2 percent; 0.9 percentage point higher than the seasonally adjusted reading of 55.3 percent in December. The Employment Index decreased 1.7 percentage points in January to 53.1 percent from the seasonally adjusted December reading of 54.8 percent. The Prices Index of 55.5 is 3.8 percentage points lower than the seasonally adjusted December reading of 59.3 percent, indicating that prices increased in January for the 32nd consecutive month. According to the NMI®, 12 non-manufacturing industries reported growth. The non-manufacturing sector exhibited continued growth in January. The respondents remain mostly positive about business conditions and the overall economy. Respondents continue to have difficulty with labor resources.”
emphasis added

This suggests faster expansion in January than in December.

by Calculated Risk on 2/05/2020 08:39:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $48.9 billion in December, up $5.2 billion from $43.7 billion in November, revised.

December exports were $209.6 billion, $1.6 billion more than November exports. December imports were $258.5 billion, $6.8 billion more than November imports.

Click on graph for larger image.

Both exports and imports increased in December.

Exports are 27% above the pre-recession peak and up 2% compared to December 2018; imports are 11% above the pre-recession peak, and down 3% compared to December 2018.

In general, trade both imports and exports have moved more sideways or down recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

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.

Note that the U.S. exported a slight net positive petroleum products in recent months.

Oil imports averaged $51.48 per barrel in December, down from $51.92 in November, and up from $50.26 in December 2018.

The trade deficit with China decreased to $24.8 billion in December, from $36.8 billion in December 2018.

by Calculated Risk on 2/05/2020 08:18:00 AM

From ADP:

Private sector employment increased by 291,000 jobs from December to January according to the January ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
“The labor market experienced expanded payrolls in January,” said Ahu Yildirmaz, vice president and cohead of the ADP Research Institute. “Goods producers added jobs, particularly in construction and manufacturing, while service providers experienced a large gain, led by leisure and hospitality. Job creation was strong among midsized companies, though small companies enjoyed the strongest performance in the last 18 months.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Mild winter weather provided a significant boost to the January employment gain. The leisure and hospitality and construction industries in particular experienced an outsized increase in jobs. Abstracting from the vagaries of the data underlying job growth is close to 125,000 per month, which is consistent with low and stable unemployment.”

This was well above the consensus forecast for 159,000 private sector jobs added in the ADP report.

The BLS report will be released Friday, and the consensus is for 161,000 non-farm payroll jobs added in January.

by Calculated Risk on 2/05/2020 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 5.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 31, 2020. The previous week’s results included an adjustment for the Martin Luther King Jr. holiday.

... The Refinance Index increased 15 percent from the previous week – its highest level since June 2013 – and was 183 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 10 percent from one week earlier. The unadjusted Purchase Index increased 8 percent compared with the previous week and was 11 percent higher than the same week one year ago.
...
“The 10-year Treasury yield fell around 20 basis points over the course of last week, driven mainly by growing concerns over a likely slowdown in Chinese economic growth from the spread of the coronavirus. This drove mortgage rates lower, with the 30-year fixed rate decreasing for the fifth time in six weeks to 3.71 percent, its lowest level since October 2016,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinance activity jumped as a result, with an increase in the number of applications and a spike in the average loan amount, as homeowners with jumbo loans reacted more resoundingly to lower rates.”

Added Kan, “Prospective buyers weren’t as responsive to the decline in mortgage rates – likely because of suppressed supply levels. Purchase applications took a step back, but still remained 7.7 percent higher than a year ago.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.71 percent from 3.81 percent, with points remaining unchanged at 0.28 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

With lower rates, we saw a sharp increase in refinance activity, but mortgage rates would have to decline further to see a huge refinance boom.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 11% year-over-year.

by Calculated Risk on 2/04/2020 06:21:00 PM

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

• At 8:15 AM, The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 159,000 payroll jobs added in January, down from 202,000 added in December.

• At 8:30 AM, Trade Balance report for December from the Census Bureau. The consensus is the trade deficit to be $48.0 billion.  The U.S. trade deficit was at $43.1 billion in November.

• At 10:00 AM, the ISM non-Manufacturing Index for January.

by Calculated Risk on 2/04/2020 04:33:00 PM

From the U.S. Courts: Bankruptcy Filings Increase Slightly

Bankruptcy filings increased slightly for the 12-month period ending Dec. 31, 2019, compared with cases for the year ending Dec. 31, 2018, according to statistics released by the Administrative Office of the U.S. Courts. It was the second straight quarter that bankruptcy filings rose, after annual declines lasting nearly a decade.

Annual bankruptcy filings totaled 774,940, compared with 773,418 cases in December 2018. That is an increase of 0.2 percent.

The level of filings is still 51 percent below the peak reached in 2010, during the aftermath of the Great Recession, 2007-2009. A national wave of bankruptcies that began in 2008 reached a peak in the year ending September 2010, when nearly 1.6 million bankruptcy cases were filed.

Click on graph for larger image.

This graph shows the business and non-business bankruptcy filings by calendar year since 2001.

The sharp decline in 2006 was due to the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". (a good example of Orwellian named legislation since this was more a "Lender Protection Act").

This was the first increase in filings since 2010, but the increase was very small.   Bankruptcy filings have been at about the same level for the last four years.

by Calculated Risk on 2/04/2020 12:15:00 PM

The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the January 2020 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009. Then sales increased more than 2 1/2 times, and hit 480 thousand SAAR in June 2015.

Heavy truck sales declined again in 2016 - mostly due to the weakness in the oil sector - and bottomed at 363 thousand SAAR in October 2016.


Click on graph for larger image.

Following the low in 2016, heavy truck sales increased to a new all time high of 575 thousand SAAR in September 2019.  However heavy truck sales have declined since then and are off 11% year-over-year.

Heavy truck sales were at 467 thousand SAAR in January, down from 473 thousand SAAR in December, and down from 527 thousand SAAR in January 2019.   The recent weakness is probably due to the weakness in manufacturing and the decline in oil prices.

by Calculated Risk on 2/04/2020 09:22:00 AM

The BEA released their estimate of January vehicle sales this morning. The BEA estimated light vehicle sales of 16.84 million SAAR in January 2020 (Seasonally Adjusted Annual Rate), up 1.2% from the December sales rate, and up 0.8% from January 2019.

Light vehicle sales in 2019 were revised down slightly to 16.95 million, down 1.5% from 17.21 million in 2018.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and an estimate for January 2020 (red).

A small decline in sales last year isn't a concern - I think sales will move mostly sideways at near record levels.

This means the economic boost from increasing auto sales is over (from the bottom in 2009, auto sales boosted growth every year through 2016).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate of 16.84 million SAAR.

Sales have been generally decreasing slightly, but are still at a high level.

by Calculated Risk on 2/04/2020 09:02:00 AM

Notes: This CoreLogic House Price Index report is for December. The recent Case-Shiller index release was for November. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports December Home Prices Increased by 4.0% Year Over Year

Home prices nationwide, including distressed sales, increased year over year by 4% in December 2019 compared with December 2018 and increased month over month by 0.3% in December 2019 compared with November 2019.
...
“Moderately priced homes are in high demand and short supply, pushing up values and eroding affordability for first-time buyers. Homes that sold for 25% or more below the local median price experienced a 5.9% price gain in 2019, compared with a 3.7% gain for homes that sold for 25% or more above the median.” Dr. Frank Nothaft, Chief Economist for CoreLogic
emphasis added

CR Note: The YoY change in the CoreLogic index decreased over the last year, but lately the YoY change has been increasing.

by Calculated Risk on 2/03/2020 07:17:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Digging Deeper Into Multi-Year Lows

Now, as the new week begins, Treasury yields and MBS alike are indicating slightly higher rates than Friday, but because lenders played it so safe, they were instead able to offer slightly LOWER rates today. Simply put, mortgage rates are even deeper into multi-year lows now, even though the bond market is pointing to slightly higher rates versus last Friday. [Most Prevalent Rates For Top Tier Scenarios 30YR FIXED 3.375-3.5%]
emphasis added

Tuesday:
• Early: the BEA will release Light vehicle sales for January. The consensus is for light vehicle sales to be 16.8 million SAAR in January, up from 16.7 million in December (Seasonally Adjusted Annual Rate).

• At 10:00 AM ET, Corelogic House Price index for December.