by Calculated Risk on 1/01/2012 06:36:00 PM

Not much of a "happy new year" in Europe ...

From the Financial Times: Europe’s leaders warn of tough 2012

... Nicolas Sarkozy, president of France, said the gravest crisis Europe has faced since the second world war “is not over” and Angela Merkel, German chancellor, told German voters “next year will no doubt be more difficult than 2011”.
excerpt with permission

More quotes from Reuters: EU Officials Begin New Year With Calls to Save the Euro

And some more unfortunate comments from German Finance Minister Wolfgang Schaeuble:

German Finance Minister Wolfgang Schaeuble called the euro "a clear success story" and pledged the currency would remain stable ... "This is not a euro crisis, it is a debt crisis in some euro states," Schaeuble told German newspaper Bild ...

Yesterday:
• Summary for Week Ending December 30th
• Schedule for Week of Jan 1, 2012

by Calculated Risk on 1/01/2012 01:15:00 PM

One plus in 2011 was that residential investment made a small positive contribution to GDP growth for the first time since 2005 (mostly due to apartments). And construction employment probably added a few jobs in 2011, for the first time since 2006.

Now there is a growing consensus that new home sales and housing starts will increase in 2012. I think a small increase is likely, even with the large number of distressed homes, and I will be writing about the reasons soon.

Here is a forecast from Wells Fargo Friday:

"Even with continued worries about competition from foreclosure sales, we expect single-family construction to rise 7 percent in 2012. Sales of new homes should rise nearly 15 percent. Strong demand for apartments should help boost multi-family starts by at least 25 percent in 2012. Overall starts should rise to 690,000 units, which would be the best year since 2008."

From Goldman Sachs:

"We believe that housing starts have probably bottomed already, while nominal house prices are likely to bottom in the course of 2012."

And Doug Duncan at Fannie Mae is forecasting new home sales of 336 (edit) thousand in 2012.

A 15 per cent increase for new home sales would be to about 350 thousand. That would help, but it would still be third worst year since the Census Bureau started tracking new home sales in 1963. Doug Duncan's forecast of 336 thousand would be the 3rd worst year since 1963. Here are the worst years:

Worst Years for New Home Sales
Rank	Year	Sales (000s)
1	2011 est	305
2	2010	323
3	2009	375
4	1982	412
5	1981	436

Sales were really low in 1981 and 1982, and then bounced back strongly in 1983 to 623 thousand. That will not happen this time because the dynamics are very different - interest rate had been very high in '81 and '82 and declined sharply in '83 to 13%. And there wasn't a huge backlog of distressed homes in 1983. So don't expect a huge increase for new home sales, but we might see some increase in 2012.

Yesterday:
• Summary for Week Ending December 30th
• Schedule for Week of Jan 1, 2012

by Calculated Risk on 1/01/2012 08:11:00 AM

Earlier this week I noted that vehicle miles driven had declined in October. Most of the decline is probably due to high gasoline prices and the sluggish economy, but reader Dave sent me this article by Lisa Hymas: Driving has lost its cool for young Americans

In 2008, just 31 percent of American 16-year-olds had their driver's licenses, down from 46 percent in 1983, according to a new study in the journal Traffic Injury Prevention. The numbers were down for 18-year-olds too, from 80 percent in 1983 to 65 percent in 2008, and the percentage of twenty- and thirtysomethings with driver's licenses fell as well. And even those with driver's licenses are trying to drive less; a new survey by car-sharing company Zipcar found that more than half of drivers under the age of 44 are making efforts to reduce the time they spend packed like lemmings into shiny metal boxes.

The decline in driving by younger Americans is fed by many factors: the high cost of gas and insurance at a time of economic insecurity; tighter restrictions on teen drivers in many states; and roads that are more congested than ever, making driving less fun than ever.

But the impact of the internet is big too. "It is possible that the availability of virtual contact through electronic means reduces the need for actual contact among young people," says Michael Sivak, research professor at the University of Michigan Transportation Research Institute and coauthor of the study on driver's licenses. "Furthermore, some young people feel that driving interferes with texting and other electronic communication."

"American youth have fallen out of love with automobiles" because of the rising cost of driving and the fact that they are "living their lives online," says Wall Street Journal auto columnist Dan Neil.

Cruising is out. Facebook is in!

Earlier:
• Summary for Week Ending December 30th
• Schedule for Week of Jan 1, 2012

by Calculated Risk on 12/31/2011 08:30:00 PM

A cartoon from Eric G. Lewis

My New Year's resolution: Get lost in the mountains for a few weekends this year.

Happy New Year to all!

Earlier:
• Summary for Week Ending December 30th
• Schedule for Week of Jan 1, 2012

by Calculated Risk on 12/31/2011 01:06:00 PM

Earlier:
• Summary for Week Ending December 30th

Happy New Year! The key report for this week will be the December employment report to be released on Friday, Jan 6th. Other key reports include the ISM manufacturing index on Tuesday, vehicle sales on Wednesday, and the ISM non-manufacturing (service) index on Thursday.

Note: Reis is expected to release their Q4 Office, Mall and Apartment vacancy rate reports this week. Last quarter Reis reported falling vacancy rates for apartments, rising vacancy rates for regional malls, and a slight decline in the office vacancy rate.

----- Monday, Jan 2nd -----
All US markets will be closed in observance of the New Year's holiday.

----- Tuesday, Jan 3rd -----
10:00 AM: Construction Spending for November. The consensus is for a 0.5% increase in construction spending.

10:00 AM ET: ISM Manufacturing Index for December.

Here is a long term graph of the ISM manufacturing index. The consensus is for a slight increase to 53.2 from 52.7 in November.

2:00 PM: FOMC Minutes, Meeting of December 13, 2010.

----- Wednesday, Jan 4th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been especially weak all year, although this doesn't include cash buyers.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for November. The consensus is for a 1.9% decline in orders.

All day: Light vehicle sales for December. Light vehicle sales are expected to be unchanged at 13.6 million (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the November sales rate.

Growth in auto sales should make a strong positive contribution to Q4 GDP. Sales in Q3 averaged 12.45 million SAAR, and so far (October and November) sales have averaged 13.42 million SAAR in Q4, an increase of 7.6% over Q3.

Edmunds is forecasting:

[A] projected Seasonally Adjusted Annual Rate (SAAR) of 13.4 million units, forecasts Edmunds.com ... The sales pace is a slight dip from the 13.6 million SAAR recorded last month.

And TrueCar is forecasting:

The December 2011 forecast translates into a Seasonally Adjusted Annualized Rate (SAAR) of 13.5 million new car sales

----- Thursday, Jan 5th -----
8:15 AM: The ADP Employment Report for December. This report is for private payrolls only (no government). The consensus is for 160,000 payroll jobs added in November, down from the 206,000 reported in November.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decline to 375,000 from 381,000 last week. Last week was the lowest level for the 4-week average of weekly claims since mid-2008.

10:00 AM: ISM non-Manufacturing Index for December. The consensus is for an increase to 53.4 from 52.0 in November. Note: Above 50 indicates expansion, below 50 contraction.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

----- Friday, Jan 6th -----
8:30 AM: Employment Report for December. The consensus is for an increase of 150,000 non-farm payroll jobs in December, up from the 120,000 jobs added in November.

The consensus is for the unemployment rate to increase slightly to 8.7% in December from 8.6% in November.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through November.

Through the first eleven months of 2011, the economy has added 1.448 million total non-farm jobs or just 131 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.2 million fewer payroll jobs than at the beginning of the 2007 recession. The economy has added 1.711 million private sector jobs this year, or about 156 thousand per month.