by Calculated Risk on 3/20/2023 12:32:00 AM

Weekend:
• Schedule for Week of March 19, 2023

Monday:
• No major economic releases scheduled.

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

Oil prices were down over the last week with WTI futures at $66.37 per barrel and Brent at $72.57 per barrel. A year ago, WTI was at $105, and Brent was at $114 - so WTI oil prices are DOWN 37% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.40 per gallon. A year ago, prices were at $4.23 per gallon, so gasoline prices are down $0.83 per gallon year-over-year.

by Calculated Risk on 3/19/2023 11:48:00 AM

There is uncertainty regarding FOMC policy this month due to the banking issues.  Just two weeks ago, the debate appeared to be between a 25bp hike and a 50 bp hike at the March meeting.  On March 7th, Fed Chair Powell said:

… the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.
emphasis added

However, expectations are now that the FOMC will announce a 25bp rate increase in the federal funds rate at the FOMC meeting this week, and they might even pause.

Nick Timiraos reviews the Fed's situation at the WSJ: Fed’s Rate Path In Question After Silicon Valley Bank Collapse

On the meeting this week from BofA:

"[W]e look for the Fed to raise its target range for the federal funds rate by 25bp to 4.75-5.0%. The recent market turbulence stemming from distress in several regional banks certainly calls for more caution ... In the absence of further events, policymakers are likely to conclude that inflation stability remains a key monetary policy priority and, given that the economic data point to real side resilience and inflation persistence, a view a 25bp rate hike is warranted. Forward guidance, however, is likely to be somewhat dovish, highlighting the emergence of downside risk to the outlook and the policy rate path."
emphasis added

Projections will be released at this meeting. For review, here are the December projections.  Since the last projections were released, the economy has performed better than the FOMC expected, and inflation was close to expectations (after revisions).

The BEA reported real GDP was above the December projections for 2022.  And GDP tracking estimates show decent growth in Q1 (although there is a wide range of estimates).  GDP projections for 2023 will likely be revised up.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2023	2024	2025
Dec 2022	0.4 to 1.0	1.3 to 2.0	1.6 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.6% in February, just above the 50-year low. The FOMC has been criticized for projecting a significant employment recession this year, and they will probably revise down their projected unemployment rate for Q4 2023.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2023	2024	2025
Dec 2022	4.4 to 4.7	4.3 to 4.8	4.0 to 4.7

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of January 2023, PCE inflation was up 5.4% year-over-year from January 2022, and, in general, inflation has been close to expectations.  However, after accounting for the unusual dynamics related to the pandemic, inflation is likely lower than expected.  The FOMC will likely leave their inflation projections mostly unchanged.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2023	2024	2025
Dec 2022	2.9 to 3.5	2.3 to 2.7	2.0 to 2.2

PCE core inflation was up 4.7% in January year-over-year. 

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2023	2024	2025
Dec 2022	3.2 to 3.7	2.3 to 2.7	2.0 to 2.2

by Calculated Risk on 3/18/2023 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

• Pandemic Economics, Housing and Monetary Policy: Part 2

• Current State of the Housing Market; Overview for mid-March

• Lawler: Early Read on Existing Home Sales in February

• February Housing Starts: Average Length of Time from Start to Completion increased Sharply in 2022

• Q4 Update: Delinquencies, Foreclosures and REO

• 2nd Look at Local Housing Markets in February

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

You can subscribe at https://calculatedrisk.substack.com/

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by Calculated Risk on 3/18/2023 08:11:00 AM

The key reports this week are February New and Existing Home Sales.

The FOMC meets this week, and there is some uncertainty on rate hikes due to the recent banking issues.

----- Monday, March 20th -----
No major economic releases scheduled.

----- Tuesday, March 21st -----
10:00 AM: Existing Home Sales for February from the National Association of Realtors (NAR). The consensus is for 4.15 million SAAR, up from 4.00 million.

The graph shows existing home sales from 1994 through the report last month.

Housing economist Tom Lawler expects the NAR to report sales of 4.51 million SAAR for February (well above consensus).

----- Wednesday, March 22nd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

During the day: The AIA's Architecture Billings Index for February (a leading indicator for commercial real estate).

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to raise the Fed Funds rate by 25bps at this meeting, although there is some uncertainty due to the bank issues.

2:00 PM: FOMC Projections. This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with updated economic projections.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, March 23rd -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 190 thousand initial claims, down from 192 thousand last week.

8:30 AM ET: Chicago Fed National Activity Index for February. This is a composite index of other data.

10:00 AM: New Home Sales for February 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 650 thousand SAAR, down from 670 thousand in January.

11:00 AM: the Kansas City Fed manufacturing survey for March.

----- Friday, March 24th -----
8:30 AM: Durable Goods Orders for February from the Census Bureau. The consensus is for a 1.2% increase in durable goods orders.

10:00 AM: State Employment and Unemployment (Monthly), February 2023

by Calculated Risk on 3/17/2023 08:45:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

On COVID (focus on hospitalizations and deaths).  Data is now weekly.

The winter surge was much smaller in 2023 than for the previous two years, and hopefully cases, hospitalizations and deaths will set new pandemic lows soon.

COVID Metrics
	Now	Week Ago	Goal
New Cases per Week2	149,955	186,793	≤35,0001
Hospitalized2	17,348	19,629	≤3,0001
Deaths per Week2	1,706	2,100	≤3501
1my goals to stop weekly posts, 2Weekly for Cases, Currently Hospitalized, and Deaths 🚩 Increasing number weekly for Cases, Hospitalized, and Deaths ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported.

After the first few weeks, the pandemic low for weekly deaths was the week of July 7, 2021, at 1,690 deaths.  For cases, the low was 82,186.  

For hospitalizations, the low was 9,821. 

by Calculated Risk on 3/17/2023 03:16:00 PM

Notes: The expansion to the Panama Canal was completed in 2016 (As I noted several years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12-month average.

Click on graph for larger image.

On a rolling 12-month basis, inbound traffic decreased 3.4% in February compared to the rolling 12 months ending in January.   Outbound traffic decreased 0.8% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year.

Imports were down 38% YoY in February, and exports were down 9% YoY.  The volume of containers unloaded last year was much stronger because of all the ships waiting to unload.

It is possible that exports have bottomed after declining for several years (even prior to the pandemic).

by Calculated Risk on 3/17/2023 01:12:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Early Read on Existing Home Sales in February 3rd Look at Local Housing Markets in February

A brief excerpt:

This is the third look at local markets in February. I’m tracking about 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.
...
California doesn’t report monthly inventory numbers, but they do report the change in months of inventory. Here is the press release from the California Association of Realtors® (C.A.R.): More favorable interest rates perk up California home sales for third straight month in February, C.A.R. reports

• Existing, single-family home sales totaled 284,010 in February on a seasonally adjusted annualized rate, up 17.6 percent from January and down 33.2 percent from February 2022.

• February’s statewide median home price was $735,480, down 2.1 percent from January and down 4.8 percent from February 2022.

...
In February, sales in these markets were down 23.7%. In January, these same markets were down 34.1% YoY Not Seasonally Adjusted (NSA).

This is a significantly smaller YoY decline NSA than in January for these early reporting markets.

This data suggests NAR reported sales will rebound in February. This will still be a significant YoY decline, and the 18th consecutive month with a YoY decline.
...
More local markets to come!

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

by Calculated Risk on 3/17/2023 10:33:00 AM

From BofA:

On net, since the last weekly publication, this pushed up our 1Q US GDP tracking estimate from 0.7% q/q saar to 0.9% q/q saar and left 4Q unchanged at 2.9% q/q saar. [Mar 17th estimate]
emphasis added

From Goldman:

We left our Q1 GDP tracking estimate unchanged at 2.6% (qoq ar). [Mar 16th estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2023 is 3.2 percent on March 16, unchanged from March 15 after rounding. After this morning's releases from the US Census Bureau and the US Bureau of Labor Statistics, an increase in the nowcast of first-quarter real net exports was offset by a decrease in the nowcast of first-quarter real residential investment growth. [Mar 16th estimate]

by Calculated Risk on 3/17/2023 09:21:00 AM

From the Fed: Industrial Production and Capacity Utilization

Industrial production was unchanged in February, and manufacturing output edged up 0.1 percent. The index for mining fell 0.6 percent, while the index for utilities rose 0.5 percent. At 102.6 percent of its 2017 average, total industrial production in February was 0.2 percent below its year-earlier level. Capacity utilization was unchanged in February at 78.0 percent, a rate that is 1.6 percentage points below its long-run (1972–2022) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).

Capacity utilization at 78.0% is 1.6% below the average from 1972 to 2021.  This was below consensus expectations.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production was unchanged in February at 102.6. This is above the pre-pandemic level.

Industrial production was below consensus expectations and previous months were revised down.

by Calculated Risk on 3/16/2023 09:01:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Friday:
• At 9:15 AM ET, The Fed will release Industrial Production and Capacity Utilization for February. The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 78.5%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for March).