by Calculated Risk on 2/14/2025 09:15:00 AM

From the Fed: Industrial Production and Capacity Utilization

Industrial production (IP) increased 0.5 percent in January after moving up 1.0 percent in December. In January, gains in the output of aircraft and parts contributed 0.2 percentage point to total IP growth following the earlier resolution of a work stoppage at a major aircraft manufacturer. Manufacturing output declined 0.1 percent in January, held down by a 5.2 percent decrease in the index for motor vehicles and parts. The index for mining fell 1.2 percent, while the index for utilities jumped 7.2 percent, as cold temperatures boosted the demand for heating. At 103.5 percent of its 2017 average, total IP in January was 2.0 percent above its year-earlier level. Capacity utilization stepped up to 77.8 percent, a rate that is 1.8 percentage points below its long-run (1972–2024) average.
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Click on graph for larger image.

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

Capacity utilization at 77.8% is 1.8% below the average from 1972 to 2023.  This was above 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 increased to 103.5. This is above the pre-pandemic level.

Industrial production was above consensus expectations.

Weekly Schedule

by Calculated Risk on 2/14/2025 08:30:00 AM

On a monthly basis, retail sales decreased 0.9% from December to January (seasonally adjusted), and sales were up 4.2 percent from January 2024.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for January 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $723.9 billion, down 0.9 percent from the previous month, and up 4.2 percent from January 2024. ... The November 2024 to December 2024 percent change was revised from up 0.4 percent to up 0.7 percent.
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Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline was down 1.0% in January.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales, ex-gasoline, increased by 4.2% on a YoY basis.

The change in sales in January were well below expectations, however sales in November and December were revised up, combined.

by Calculated Risk on 2/13/2025 07:21:00 PM

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

Friday:
• At 8:30 AM ET, Retail sales for January is scheduled to be released.  The consensus is for a no change in retail sales.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for January. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 77.7%.

by Calculated Risk on 2/13/2025 03:03:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-February 2025

A brief excerpt:

Earlier this week, in Part 1: Current State of the Housing Market; Overview for mid-February 2025 I reviewed home inventory, housing starts and sales.

In Part 2, I will look at house prices, mortgage rates, rents and more.
...
The Case-Shiller National Index increased 3.8% year-over-year (YoY) in November and will be about the same YoY - or slightly higher - in the December report (based on other data).
...
Other measures of house prices suggest prices will be up about the same - or maybe a little higher - YoY in the December Case-Shiller index as in the November report.

There is much more in the article.

by Calculated Risk on 2/13/2025 01:01:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Q4 NY Fed Report: Mortgage Originations by Credit Score, Delinquencies Increase, Foreclosures Remain Low

A brief excerpt:

The first graph shows mortgage originations by credit score (this includes both purchase and refinance). Look at the difference in credit scores in the recent period compared to the during the bubble years (2003 through 2006). Recently there have been almost no originations for borrowers with credit scores below 620, and few below 660. A significant majority of recent originations have been to borrowers with credit score above 760.
...
Solid underwriting is a key reason I’ve argued Don't Compare the Current Housing Boom to the Bubble and Bust, Look instead at the 1978 to 1982 period for lessons

There is much more in the article.

by Calculated Risk on 2/13/2025 11:00:00 AM

From the NY Fed: Household Debt Balances Continue Steady Increase; Delinquency Transition Rates Remain Elevated for Auto and Credit Cards

The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit. The report shows total household debt increased by $93 billion (0.5%) in Q4 2024, to $18.04 trillion. The report is based on data from the New York Fed’s nationally representative Consumer Credit Panel. It includes a one-page summary of key takeaways and their supporting data points.

The New York Fed also issued an accompanying Liberty Street Economics blog post examining delinquency rates in the auto loan market.

“While mortgage delinquency rates are similar to pre-pandemic levels, auto loan delinquency transition rates remain elevated.” said Wilbert van der Klaauw, Economic Research Advisor at the New York Fed. “High auto loan delinquency rates are broad-based across credit scores and income levels.”

Credit card balances increased by $45 billion from the previous quarter and reached $1.21 trillion at the end of December 2024. Auto loan balances saw a $11 billion increase and stood at $1.66 trillion. Mortgage balances increased by $11 billion and currently stand at $12.61 trillion. HELOC balances rose by $9 billion to $396 billion, representing the eleventh consecutive quarterly increase since Q1 2022. Other balances, which include retail cards and other consumer loans, grew by $8 billion. Student loan balances grew by $9 billion, and now stand at $1.62 trillion.

The pace of mortgage originations increased slightly from the pace observed in the previous four quarters, with $465 billion of newly originated mortgages in Q4. Aggregate limits on credit card accounts increased moderately by $98 billion, representing a 1.3% increase from the previous quarter. Limits on HELOC continued to rise and saw an $8 billion increase.

Aggregate delinquency rates increased slightly from the previous quarter, with 3.6% of outstanding debt in some stage of delinquency. Delinquency transition rates held steady for nearly all debt types, excluding credit cards which had a small uptick in transitions from current to delinquent. Transition into serious delinquency, defined as 90 or more days past due, edged up for auto loans, credit cards, and HELOC balances but remained stable for mortgages.
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Click on graph for larger image.

Here are three graphs from the report:

The first graph shows household debt increased in Q4.  Household debt previously peaked in 2008 and bottomed in Q3 2013. Unlike following the great recession, there wasn't a decline in debt during the pandemic.

From the NY Fed:

Aggregate nominal household debt balances increased by $93 billion in the fourth quarter of 2024, a 0.5% rise from 2024Q3. Balances now stand at $18.04 trillion and have increased by $3.9 trillion since the end of 2019, just before the pandemic recession.

The second graph shows the percent of debt in delinquency.

The overall delinquency rate increased in Q4.  From the NY Fed:

Aggregate delinquency rates increased slightly in the fourth quarter of 2024. As of December, 3.6 percent of outstanding debt was in some stage of delinquency, up from 3.5 percent in the third quarter. Transition into early delinquency held steady for nearly all debt types; the exception was for credit card balances, which saw a small uptick in the rate at which balances went from current to delinquent. Transition into serious delinquency, defined as 90 or more days past due, edged up for auto loans, credit cards, and HELOC balances but remained stable for mortgages.

The third graph shows Mortgage Originations by Credit Score.

From the NY Fed:

The volume of mortgage originations, measured as appearances of new mortgages on consumer credit reports and including both refinance and purchase originations, increased slightly with $465 billion newly originated in 2024Q4. ... Credit quality of newly originated loans was mixed. The credit scores of newly originated auto loans and mortgages were mostly steady, although there was some deterioration in mortgages, as the tenth percentile score of newly originated mortgage loans declined by six points.

There is much more in the report.

by Calculated Risk on 2/13/2025 08:30:00 AM

The DOL reported:

In the week ending February 8, the advance figure for seasonally adjusted initial claims was 213,000, a decrease of 7,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 219,000 to 220,000. The 4-week moving average was 216,000, a decrease of 1,000 from the previous week's revised average. The previous week's average was revised up by 250 from 216,750 to 217,000.
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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 216,000.

The previous week was revised up.

Weekly claims were below the consensus forecast.

by Calculated Risk on 2/12/2025 08:15:00 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 an increase to 224 thousand from 219 thousand last week.

• Also at 8:30 AM, The Producer Price Index for January from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.3% increase in core PPI.

• At 11:00 AM, NY Fed: Q4 Quarterly Report on Household Debt and Credit

by Calculated Risk on 2/12/2025 03:18:00 PM

The BLS reported 143 thousand non-farm jobs were added in January.   During the Winter months, I like to look at the weather impact on the report.

The BLS reported 573 thousand people were employed in non-agriculture industries, with a job, but not at work due to bad weather. The average for January over the previous 10 years was 304 thousand (median 258 thousand), so more people than normal were impacted by bad weather.

The BLS also reported 1.175 million people that are usually full-time employees were working part time in January due to bad weather.  The average for January over the previous 10 years was 945 thousand (the median was 670 thousand).  This series suggests weather negatively impacted employment more than usual.

The San Francisco Fed estimates Weather-Adjusted Change in Total Nonfarm Employment (monthly change, seasonally adjusted). They use local area weather to estimate the impact on employment. For January, the San Francisco Fed estimated that weather reduced employment by 85 to 90 thousand jobs.

It appears weather adjusted job gains were around 230 thousand in January (seasonally adjusted)

by Calculated Risk on 2/12/2025 12:34:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: More Ruminations on the “Neutral” Rate of Interest

A brief excerpt:

When talking about the so-called “neutral” interest rate, many financial commentators, financial analysts, and even monetary policymakers talk about the nominal interest rate. However, the theoretical “neutral” interest rate is a real, or inflation-adjusted interest rate.
...
In sum, (1) the market’s view of the neutral fed funds rate is higher than the majority of FOMC participants; and (2) using implied market expectations the current stance of monetary policy is not meaningfully restrictive.

There is much more in the article.