by Calculated Risk on 12/03/2012 11:27:00 AM

Three key construction spending themes:

• Residential construction is usually the largest category for construction spending, but there was a huge collapse in spending following the housing bubble (as expected). Looking forward, private residential construction spending will be the largest category again very soon - but spending is still very low (at 1998 levels not adjusted for inflation).

• Private non-residential construction spending picked up last year mostly due to energy spending (power and electric), but spending on office buildings, hotels and malls is still very low.

• Public construction spending declined for several years, but the decline appears to be mostly over. Note: Public construction spending is mostly state and local spending, and the drag from state and local cutbacks appears to be ending.

The Census Bureau reported that overall construction spending increased in October:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during October 2012 was estimated at a seasonally adjusted annual rate of $872.1 billion, 1.4 percent above the revised September estimate of $860.4 billion. The October figure is 9.6 percent above the October 2011 estimate of $795.7 billion.

Both private and public construction spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $592.1 billion, 1.6 percent above the revised September estimate of $582.7 billion. ... In October, the estimated seasonally adjusted annual rate of public construction spending was $280.1 billion, 0.8 percent above the revised September estimate of $277.7 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.

Private residential spending is 57% below the peak in early 2006, and up 32% from the post-bubble low. Non-residential spending is 28% below the peak in January 2008, and up about 31% from the recent low.

Public construction spending is now 14% below the peak in March 2009 and just above the post-bubble low.

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

On a year-over-year basis, private residential construction spending is now up 21%. Non-residential spending is also up 11% year-over-year mostly due to energy spending (power and electric). Public spending is down 1% year-over-year.

All Housing Investment and Construction Graphs

by Calculated Risk on 12/03/2012 10:00:00 AM

The ISM manufacturing index indicated contraction in November. PMI was at 49.5% in November, down from 51.7% in October. The employment index was at 48.4%, down from 52.1%, and the new orders index was at 50.3%, down from 54.2%.

From the Institute for Supply Management: November 2012 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector contracted in November following two months of modest expansion, while the overall economy grew for the 42nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 49.5 percent, a decrease of 2.2 percentage points from October's reading of 51.7 percent, indicating contraction in manufacturing for the fourth time in the last six months. This month's PMI™ reading reflects the lowest level since July 2009 when the PMI™ registered 49.2 percent. The New Orders Index registered 50.3 percent, a decrease of 3.9 percentage points from October, indicating growth in new orders for the third consecutive month. The Production Index registered 53.7 percent, an increase of 1.3 percentage points, indicating growth in production for the second consecutive month. The Employment Index registered 48.4 percent, a decrease of 3.7 percentage points, which is the index's lowest reading since September 2009 when the Employment Index registered 47.8 percent. The Prices Index registered 52.5 percent, reflecting a decrease of 2.5 percentage points. Comments from the panel this month generally indicate that the second half of the year continues to show a slowdown in demand; respondents also express concern over how and when the fiscal cliff issue will be resolved."

Click on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was well below expectations of 51.7% and suggests manufacturing contracted in November.

by Calculated Risk on 12/03/2012 08:44:00 AM

CR Note: Usually I post this on Saturday - sorry for the delay. The first unofficial problem bank list was published in August 2009 with 389 institutions. The number of unofficial problem banks grew steadily and peaked at 1,002 institutions on June 10, 2011. The list has been declining recently.

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Nov 30, 2012.

Changes and comments from surferdude808:

This week, the FDIC released its enforcement actions through October but did not release industry results for the third quarter. Changes to the Unofficial Problem Bank List include six removals and five additions that leave the list at 856 institutions with assets of $326.4 billion. A year ago, the list held 980 institutions with assets of $400.5 billion. For the month of November, the list declined by eight institutions after 13 action terminations, three failures, two unassisted mergers, and 10 additions.

The six removals were for action terminations against Johnson Bank, Racine, WI ($3.8 billion); NexBank, SSB, Dallas, TX ($607 million); Ohana Pacific Bank, Honolulu, HI ($94 million Ticker: OHPB): Lead Bank, Garden City, MO ($84 million); Prosper Bank, Prosper, TX ($64 million); and Millennium Bank, Des Plaines, IL ($44 million).

Additions this week were Inland Bank and Trust, Oak Brook, IL ($1.3 billion); Cornerstone Bank, Moorestown, NJ ($351 million Ticker: CFIC); Devon Bank, Chicago, IL ($250 million); First Citizens Bank of Georgia, Dawsonville, GA ($95 million); and Community State Bank, Norwalk, WI ($27 million).

Look for the FDIC to release industry third quarter results this Tuesday.

CR Note: The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public. (CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.)

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

When the list was increasing, the official and "unofficial" counts were about the same. Now with the number of problem banks declining, the unofficial list is lagging the official list. This probably means regulators are changing the CAMELS rating on some banks before terminating the formal enforcement actions.

Weekend:
• Summary for Week Ending Nov 30th
• Schedule for Week of Dec 2nd

by Calculated Risk on 12/02/2012 08:43:00 PM

This will be another week of sausage making - uh, "fiscal cliff", or more accurately "austerity slope" - negotiations. The key question for the economy is: When and how much austerity will the US fiscal authorities enact?

My guess is an agreement will be reached in early January, and Federal austerity will subtract 1% to 1.5% from GDP in 2013. Note: There is no drop dead date – despite the silly countdown timers on some sites.

Monday economic releases:
• At 10:00 AM ET, the ISM Manufacturing Index for November will be released. The consensus is for be PMI to be unchanged at 51.7. (above 50 is expansion).

• Also at 10:00 AM, the Construction Spending for October. The consensus is for a 0.4% increase in construction spending.

• All day: Light vehicle sales for November. The consensus is for light vehicle sales to increase to 15.0 million SAAR in November (Seasonally Adjusted Annual Rate) from 14.2 million in October (October sales were impacted by Hurricane Sandy).

The Asian markets are mostly green tonight, with the Nikkei up 0.4% and the Shanghai Composite is up 0.8%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 2 and DOW futures are up 20.

Oil prices are down slightly with WTI futures at $88.82 per barrel and Brent at $111.18 per barrel.

Weekend:
• Summary for Week Ending Nov 30th
• Schedule for Week of Dec 2nd

Four more questions this week for the December economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 12/02/2012 03:12:00 PM

From the Financial Times: Merkel prepared to consider Greek losses

"If Greece one day handles its revenues again without taking on new debt, then we must take a look at the situation and assess it,” the [Chancellor Angela Merkel] told Germany’s Bild am Sonntag newspaper ... even Wolfgang Schäuble, Germany’s finance minister, last week hinted [a haircut on official debt] could come eventually.
excerpt with permission

Eventually some of the official debt will have to be forgiven. This will not happen until after the German election next September, and probably not until 2014 at the earliest.

Note: Long term readers probably remember the "Lord of the Dark Matter" who provided excellent insights on the derivative market. We discussed Europe about a week ago, and his view was a "short of full blown restructuring, there is no solution".  Maybe - just maybe - the Germans are starting to realize that there will have to an official restructuring for Greece - and that would be a positive step.