by Calculated Risk on 10/03/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 54.9%, up from 51.5% last month. The employment index decreased to 48.1%, from 50.1%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 54.9% September 2024 2024 Services ISM® Report On Business®

Economic activity in the services sector expanded for the third consecutive month in September, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 54.9 percent, which is the highest reading since February 2023 and indicates sector expansion for the 49th time in 52 months.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In September, the Services PMI® registered 54.9 percent, 3.4 percentage points higher than August’s figure of 51.5 percent. The reading in September marked the seventh time the composite index has been in expansion territory this year. The Business Activity Index registered 59.9 percent in September, 6.6 percentage points higher than the 53.3 percent recorded in August, indicating a third month of expansion after a contraction in June. The New Orders Index expanded to 59.4 percent in September, 6.4 percentage points higher than August’s figure of 53 percent. The Employment Index contracted for the first time in three months; the reading of 48.1 percent is a 2.1-percentage point decrease compared to the 50.2 percent recorded in August.
emphasis added

The PMI was well above expectations.

by Calculated Risk on 10/03/2024 08:30:00 AM

The DOL reported:

In the week ending September 28, the advance figure for seasonally adjusted initial claims was 225,000, an increase of 6,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 218,000 to 219,000. The 4-week moving average was 224,250, a decrease of 750 from the previous week's revised average. The previous week's average was revised up by 250 from 224,750 to 225,000.
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 decreased to 224,250.

The previous week was revised up.

Weekly claims were above the consensus forecast.

by Calculated Risk on 10/02/2024 07:01:00 PM

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

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 224 thousand initial claims, up from 218 thousand last week.

• At 10:00 AM, the ISM Services Index for September.

by Calculated Risk on 10/02/2024 02:03:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the September 2024 seasonally adjusted annual sales rate (SAAR) of 477 thousand.

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new record high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 288 thousand SAAR in May 2020.  

Heavy truck sales were at 477 thousand SAAR in September, down from 501 thousand in August, and down 4.7% from 501 thousand SAAR in September 2023.  

Usually, heavy truck sales decline sharply prior to a recession.   Heavy truck sales are solid. 

by Calculated Risk on 10/02/2024 11:04:00 AM

Today, in the Calculated Risk Real Estate Newsletter: FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

A brief excerpt:

Here are some graphs on outstanding mortgages by interest rate, the average mortgage interest rate, borrowers’ credit scores and current loan-to-value (LTV) from the FHFA’s National Mortgage Database through Q2 2024 (just released).
...
Here is some data showing the distribution of interest rates on closed-end, fixed-rate 1-4 family mortgages outstanding at the end of each quarter since Q1 2013 through Q2 2024.

This shows the surge in the percent of loans under 3%, and also under 4%, starting in early 2020 as mortgage rates declined sharply during the pandemic. The percent of outstanding loans under 4% peaked in Q1 2022 at 65.2% (now at 56.2%), and the percent under 5% peaked at 85.5% (now at 74.6%). These low existing mortgage rates makes it difficult for homeowners to sell their homes and buy a new home since their monthly payments would increase sharply. This is a key reason existing home inventory levels are so low.

There is much more in the article.

by Calculated Risk on 10/02/2024 08:15:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 143,000 Jobs in September; Annual Pay was Up 4.7%

Private sector employment increased by 143,000 jobs in September and annual pay was up 4.7 percent year-over-year, according to the September ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). ...

“Stronger hiring didn't require stronger pay growth last month,” said Nela Richardson, chief economist, ADP. “Typically, workers who change jobs see faster pay growth. But their premium over job-stayers shrank to 1.9 percent, matching a low we last saw in January.”
emphasis added

This was above the consensus forecast of 110,000. The BLS report will be released Friday, and the consensus is for 145,000 non-farm payroll jobs added in September.

by Calculated Risk on 10/02/2024 07:00:00 AM

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

Mortgage applications decreased 1.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending September 27, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week and was 186 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 9 percent higher than the same week one year ago.

“Last week’s incoming data showed an economy that is still growing at a solid pace, even as inflation continues to decline. As a result, mortgage rates were up modestly, with the 30-year fixed mortgage rate increasing slightly to 6.14 percent,” said Mike Fratantoni, MBA’s SVP and Chief Economist. With this move, refinance application volume declined on the week but remains almost three-times as high as last year’s pace.”

Added Fratantoni, “The news for the week was that more homebuyers appear to be entering the market. Purchase application activity was up for the week and increased more than 9 percent compared to last year at this time. Inventories of both new and existing homes have been increasing over the course of 2024, meaning that potential buyers have properties to look at and now have somewhat lower mortgage rates leading to better affordability.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.14 percent from 6.13 percent, with points increasing to 0.61 from 0.57 (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 MBA mortgage purchase index.

According to the MBA, purchase activity is up 9% year-over-year unadjusted. 

Red is a four-week average (blue is weekly).  

Purchase application activity is up about 19% from the lows in late October 2023, but still about 1% below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index declined sharply in 2022 - and mostly flat lined for two years - but has increased significantly recently as mortgage rates declined.

by Calculated Risk on 10/01/2024 09:37:00 PM

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

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 September. This report is for private payrolls only (no government). The consensus is for 110,000 jobs added, up from 99,000 in August.

by Calculated Risk on 10/01/2024 05:00:00 PM

Wards Auto released their estimate of light vehicle sales for September: September U.S. Light-Vehicle Sales up Slightly on SAAR basis; Q3 Volume Down 1.9% (pay site).

Sales over the past six months have been mostly in negative territory even though inventory continued to rise. Affordability and a slowdown in fleet orders have been the bane to growth. September saw the continuation of gains in the most affordable segments, but it was more than offset by weakness among higher priced vehicles – a theme of the past two quarters. (Hurricane Helene also slightly dampened deliveries in September.) Despite downturns in Q2 and Q3 of 0.5% and 1.9%, respectively, Q1’s strong 4.9% increase was enough to keep year-to-date volume through September above the year-ago total, albeit less than 1%.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards' estimate for August (red).

Sales in September (15.77 million SAAR) were up 3.7% from August, and up 0.5% from September 2023.

Sales in August were slightly above the consensus forecast.

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

by Calculated Risk on 10/01/2024 12:44:00 PM

From the Census Bureau reported that overall construction spending decreased:

Construction spending during August 2024 was estimated at a seasonally adjusted annual rate of $2,131.9 billion, 0.1 percent below the revised July estimate of $2,133.9 billion. The August figure is 4.1 percent above the August 2023 estimate of $2,047.4 billion.
emphasis added

Private spending decreased and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,642.2 billion, 0.2 percent below the revised July estimate of $1,645.8 billion. ...

In August, the estimated seasonally adjusted annual rate of public construction spending was $489.8 billion, 0.3 percent above the revised July estimate of $488.2 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Residential (red) spending is 8.2% below the peak in 2022.

Non-residential (blue) spending is 0.5% below the peak in June 2024.

Public construction spending at the peak.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 2.7%. Non-residential spending is up 3.6% year-over-year. Public spending is up 7.8% year-over-year.

This was below consensus expectations for 0.1% increase in spending.