by Calculated Risk on 1/16/2013 02:00:00 PM

Fed's Beige Book:

Reports from the twelve Federal Reserve Districts indicated that economic activity has expanded since the previous Beige Book report, with all twelve Districts characterizing the pace of growth as either modest or moderate. ... Overall, holiday sales were reported as being modestly higher than in 2011, though sales were below expectations for contacts in many of the Districts.

Since the previous Beige Book, consumer spending increased to some degree in all twelve Districts. Across the nation, holiday sales grew modestly compared with last year but came in below expectations in the New York, Cleveland, Atlanta, Chicago, and San Francisco Districts. ... Citing concerns that consumers will spend cautiously due to ongoing fiscal uncertainty, retail contacts and auto dealers reported a slightly dimmer, though positive, outlook for future sales.

And on real estate:

Existing residential real estate activity expanded in all Districts that reported; growth rates were described as moderate or strong in nine Districts. Contacts in the Boston District attributed their strong sales growth to low interest rates, affordable prices, and rising rents. All Districts reporting on price levels saw increases; New York and Chicago reported only very minor increases. The five Districts that reported on housing inventories all reported falling levels. New residential construction (including repairs) expanded in all but one District of those Districts that reported. Contacts in the Kansas City District reported that increased lumber and drywall costs limited construction, causing a slight decline this period. Hurricane Sandy disrupted construction activity initially in New York, but this has since led to increased work for subcontractors on repairs and reconstruction.

Though a little weaker than residential real estate, reports on sales and leasing of nonresidential real estate are still mostly positive--described as modest on average. The Boston District reported a drop in leasing beyond normal seasonal trends; contacts cited fiscal cliff uncertainty as a factor. Minneapolis and Kansas City reported increased demand and tightening commercial real estate markets. Philadelphia, St. Louis, and Dallas all reported more modest increases in nonresidential real estate activity. Nonresidential construction is weaker than residential, with only slight to modest growth.

This suggests sluggish growth overall, with "moderate or strong" growth for real estate.

by Calculated Risk on 1/16/2013 11:59:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (1.9% annualized rate) in December. The 16% trimmed-mean Consumer Price Index increased 0.1% (1.1% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers was virtually flat 0.0% (-0.2% annualized rate) in December. The CPI less food and energy increased 0.1% (1.2% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for December here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 1.9%, the CPI rose 1.7%, and the CPI less food and energy rose 1.9%. Core PCE is for November and increased 1.5% year-over-year.

On a monthly basis, median CPI was at 1.9% annualized, trimmed-mean CPI was at 1.1% annualized, and core CPI increased 1.2% annualized. Also core PCE for November increased 1.6% annualized. These measures suggest inflation is below the Fed's target of 2% on a year-over-year basis.

With this low level of inflation and the current high level of unemployment, the Fed will keep the "pedal to the metal".

by Calculated Risk on 1/16/2013 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was unchanged in January at 47. Any number under 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Holds Steady in January

Builder confidence in the market for newly built, single-family homes was unchanged in January, remaining at a level of 47 on the National Association of Home Builders/Wells Fargo Housing Market Index, released today. This means that following eight consecutive monthly gains, the index continues to hold at its highest level since April of 2006.
...
“Builders’ sentiment remains very close to the index’s tipping point of 50, where an equal number of builders view conditions as good and poor, and fundamentals indicate continued momentum in housing this year,” said NAHB Chief Economist David Crowe. “However, persistently tight mortgage credit conditions, difficulties in obtaining accurate appraisals and the ongoing stalemate in Washington over critical economic concerns continue to impede the housing recovery.”
...
The index’s components were mixed in January. The component gauging current sales conditions remained unchanged at 51. Meanwhile, the component gauging sales expectations in the next six months fell one point to 49 and the component gauging traffic of prospective buyers gained one point to 37.

The HMI three-month moving average was up across all regions, with the Northeast and Midwest posting a two-point gain to 36 and 50, respectively. The South registered a three-point gain to 49 and the West posted a four-point increase to 51.

Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the January release for the HMI and the November data for starts (December housing starts will be released tomorrow). This was slightly below the consensus estimate of a reading of 48.

Housing Investment and Construction Graphs

by Calculated Risk on 1/16/2013 09:28:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.3 percent in December after having risen 1.0 percent in November when production rebounded in the industries that had been negatively affected by Hurricane Sandy in late October. For the fourth quarter as a whole, total industrial production moved up at an annual rate of 1.0 percent. Manufacturing output advanced 0.8 percent in December following a gain of 1.3 percent in November; production edged up at an annual rate of 0.2 percent in the fourth quarter. The output at mines rose 0.6 percent in December, and the output of utilities fell 4.8 percent as unseasonably warm weather held down the demand for heating. At 98.1 percent of its 2007 average, total industrial production in December was 2.2 percent above its year-earlier level. Capacity utilization for total industry moved up 0.1 percentage point to 78.8 percent, a rate 1.5 percentage points below its long-run (1972--2011) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 12 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.8% is still 1.5 percentage points below its average from 1972 to 2010 and below the pre-recession level of 80.6% in December 2007.

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

The second graph shows industrial production since 1967.

Industrial production increased in December to 98.1. This is 17.5% above the recession low, but still 2.6% below the pre-recession peak.

Both Industrial Production and Capacity Utilization were slightly above expectations.

All current manufacturing graphs

by Calculated Risk on 1/16/2013 08:39:00 AM

From the Bureau of Labor Statistics (BLS): Consumer Price Index - December 2012

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment. The gasoline index declined again in December, but other indexes, notably food and shelter, increased, resulting in the seasonally adjusted all items index being unchanged.
...
The index for all items less food and energy increased 0.1 percent in December, the same increase as in November. ... The index for all items less food and energy rose 1.9 percent over the last 12 months, the same figure as last month.

On a year-over-year basis, CPI is up 1.7 percent, and core CPI is up 1.9 percent.  Both below the Fed's target. This was at the consensus forecast of no change for CPI, and a 0.1% increase in core CPI.

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.