by Calculated Risk on 8/25/2022 09:08:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays, July 2022. The consensus is for a 0.6% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.3%.  PCE prices are expected to be up 6.4% YoY, and core PCE prices up 4.7% YoY.

• At 10:00 AM, Speech, Fed Chair Jerome Powell, Economic Outlook, At the Jackson Hole Economic Policy Symposium

• Also at 10:00 AM, University of Michigan's Consumer sentiment index (Final for August). The consensus is for a reading of 55.1.

On COVID (focus on hospitalizations and deaths):

COVID Metrics
	Now	Week Ago	Goal
New Cases per Day2	90,675	97,183	≤5,0001
Hospitalized2	32,903	35,314	≤3,0001
Deaths per Day2	389	441	≤501
1my goals to stop daily posts, 27-day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7-day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

Click on graph for larger image.

This graph shows the daily (columns) and 7-day average (line) of deaths reported.

Average daily deaths bottomed in July 2021 at 214 per day.

by Calculated Risk on 8/25/2022 07:31:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in July was 0.73%, down from 0.76% June. Freddie's rate is down year-over-year from 1.74% in July 2021.

Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble and peaked at 3.17% in August 2020 during the pandemic.

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

Click on graph for larger image

Mortgages in forbearance are being counted as delinquent in this monthly report but are not reported to the credit bureaus.

This is very different from the increase in delinquencies following the housing bubble.   Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes - and they will be able to restructure their loans once they are employed.

The serious delinquency rate was at 0.60% just prior to the pandemic - almost back.

by Calculated Risk on 8/25/2022 01:12:00 PM

Today, in the Calculated Risk Real Estate Newsletter: The Sellers Strike and Housing Inventory

A brief excerpt:

Starting in July, new listings declined year-over-year according to my local market data, and also Realtor.com and Redfin. Realtor.com economist Jiayi Xu noted today:

New listings–a measure of sellers putting homes up for sale–were again down 12% from one year ago. This week marks a seventh straight week of year over year declines in the number of new listings coming up for sale and a second consecutive week with double digit declines, suggesting that homeowners are less eager to list homes for sale compared to last year, even though today’s median listing price is more than 14% higher.
emphasis added

And from Redfin: Housing Market Update: Slowdown Starts to Ease as Drop in New Listings Hampers Supply
...
The bottom line is inventory is still increasing due to less demand, but inventory growth has slowed due to fewer new listings.

This could delay the return to more normal inventory levels (I’ve been comparing to 2019). As always, I’ll be watching inventory closely.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 8/25/2022 10:37:00 AM

From WardsAuto: August U.S. Light-Vehicle Sales Running Flat with July; Inventory Set to Increase (pay content).  Brief excerpt:

"The overriding factor is that even without headwinds such as higher interest rates, low consumer confidence, elevated fuel prices and an inventory mix favoring more expensive models, the general lack of availability of new vehicles would keep sales from being significantly stronger."

Click on graph for larger image.

This graph shows actual sales from the BEA (Blue), and Wards forecast for August (Red).

The Wards forecast of 13.3 million SAAR, would be mostly unchanged from last month, and up 2% from a year ago (sales started to weaken in mid-2021, due to supply chain issues).

Vehicle sales are usually a transmission mechanism for Federal Open Market Committee (FOMC) policy (far behind housing).  However, this time, vehicle sales have been suppressed by supply chain issues, and will probably not be significantly impacted by higher interest rates. 

by Calculated Risk on 8/25/2022 08:41:00 AM

From the BEA: Gross Domestic Product (Second Estimate) and Corporate Profits (Preliminary), Second Quarter 2022

Real gross domestic product (GDP) decreased at an annual rate of 0.6 percent in the second quarter of 2022, according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 1.6 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 decrease in real GDP was 0.9 percent. The update primarily reflects upward revisions to consumer spending and private inventory investment that were partly offset by a downward revision to residential fixed investment
...
Real gross domestic income (GDI) increased 1.4 percent in the second quarter, compared with an increase of 1.8 percent in the first quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 0.4 percent in the second quarter, compared with an increase of 0.1 percent in the first quarter.
emphasis added

Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 1.0% to 1.5%. Residential investment was revised down from -14.0% to -16.2%.

by Calculated Risk on 8/25/2022 08:34:00 AM

The DOL reported:

In the week ending August 20, the advance figure for seasonally adjusted initial claims was 243,000, a decrease of 2,000 from the previous week's revised level. The previous week's level was revised down by 5,000 from 250,000 to 245,000. The 4-week moving average was 247,000, an increase of 1,500 from the previous week's revised average. The previous week's average was revised down by 1,250 from 246,750 to 245,500.
emphasis added

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 increased to 247,000.

The previous week was revised down.

Weekly claims were below the consensus forecast.

by Calculated Risk on 8/24/2022 08:58:00 PM

Thursday:
• At 8:30 AM ET, Gross Domestic Product, 2nd quarter 2022 (second estimate). The consensus is that real GDP decreased 0.8% annualized in Q2, up from the advance estimate of -0.9% in Q2.

• Also at 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for an increase to 253 thousand from 250 thousand last week.

• At 11:00 AM, the Kansas City Fed manufacturing survey for August.

On COVID (focus on hospitalizations and deaths):

COVID Metrics
	Now	Week Ago	Goal
New Cases per Day2	89,698	99,736	≤5,0001
Hospitalized2	33,247	35,597	≤3,0001
Deaths per Day2	390	443	≤501
1my goals to stop daily posts, 27-day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7-day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

Click on graph for larger image.

This graph shows the daily (columns) and 7-day average (line) of deaths reported.

Average daily deaths bottomed in July 2021 at 214 per day.

by Calculated Risk on 8/24/2022 01:22:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Update: Housing Completions will Increase Sharply in Late 2022 and Early 2023

A brief excerpt:

Even as housing starts slow, there will be a sharp increase in new supply in 2022 (and into 2023) including both single family homes and apartments.

This graph shows total housing completions and placements since 1968 with an estimate for 2022. Note that the net additional to the housing stock is less because of demolitions and destruction of older housing units.

My current estimate is total completions (single family, multi-family, manufactured homes) will increase about 10% in 2022 to almost 1.6 million. If correct, this would be the same level of completions as in 2007.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 8/24/2022 12:42:00 PM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture Billings Index slows but remains healthy

For the eighteenth consecutive month architecture firms reported increasing demand for design services in July, according to a new report today from The American Institute of Architects (AIA).

The AIA Architecture Billings Index (ABI) score for July was 51.0. While this score is down from June’s score of 53.2, it still indicates stable business conditions for architecture firms (any score above 50 indicates an increase in billings from the prior month). Also in July, both the new project inquiries and design contracts indexes moderated from June but remained strong with scores of 56.1 and 52.9 respectively.

“Despite architecture services employment recently surpassing pre-pandemic levels, the ABI score this month reflects the slowest growth since January, and marks the fourth straight month with a lower score than the previous month, indicating a slowing trajectory in billings activity,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “With a variety of economic storm clouds continuing to gather, we are likely looking at a period of slower growth going forward.”
...
• Regional averages: South (53.6); Midwest (52.2); West (51.7); Northeast (48.4)

• Sector index breakdown: multi-family residential (52.8); commercial/industrial (52.2); mixed practice (52.1); institutional (49.6)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 51.0 in July, down from 53.2 in June. Anything above 50 indicates expansion in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

This index has been positive for 18 consecutive months.   This index usually leads CRE investment by 9 to 12 months, so this index suggests a pickup in CRE investment in 2022 and into 2023.

by Calculated Risk on 8/24/2022 10:10:00 AM

The BLS released the preliminary annual benchmark revision showing 462,000 more payroll jobs as of March 2022. The final revision will be published when the January 2023 employment report is released in February 2023. Usually, the preliminary estimate is pretty close to the final benchmark estimate.

The annual revision is benchmarked to state tax records. From the BLS:

In accordance with usual practice, the Bureau of Labor Statistics (BLS) is announcing the preliminary estimate of the upcoming annual benchmark revision to the establishment survey employment series. The final benchmark revision will be issued in February 2023 with the publication of the January 2023 Employment Situation news release.

Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For National CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus one-tenth of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates an upward adjustment to March 2022 total nonfarm employment of 462,000 (0.3 percent).
emphasis added

Using the preliminary benchmark estimate, this means that payroll employment in March 2022 was 462,000 higher than originally estimated. In February 2023, the payroll numbers will be revised up to reflect the final estimate. The number is then "wedged back" to the previous revision (March 2021).

Construction was revised up by 62,000 jobs, and manufacturing revised up by 22,000 jobs.

This preliminary estimate showed 571,000 more private sector jobs, and 109,000 fewer government jobs (as of March 2022) than originally estimated.