RSS Feed by Calculated Risk on 3/17/2014 08:37:00 AM
Monday, March 17, 2014
NY Fed: Empire State Manufacturing Activity indicates "business conditions improved" in March
From the NY Fed: Empire State Manufacturing Survey
The March 2014 Empire State Manufacturing Survey indicates that business conditions continued to improve for New York manufacturers, though activity grew slowly. At 5.6, the general business conditions index was little changed from last month. [up from 4.5] ...This is the first of the regional surveys for March. The general business conditions index was close to the consensus forecast of a reading of 6.5, and indicates slightly faster expansion in March than in February.
The new orders index climbed three points to 3.1, pointing to a slight increase in orders. ...
Labor market conditions continued to improve. The employment index fell five points but, at 5.9, indicated a small increase in employment levels. The average workweek index, holding steady at 4.7, pointed to a small increase in hours worked.
emphasis added
Sunday, March 16, 2014
Monday: Industrial Production, Empire State Mfg Survey, Builder Confidence
by Calculated Risk on 3/16/2014 08:05:00 PM
Monday:
• At 8:30 AM ET, the NY Fed Empire State Manufacturing Survey for March. The consensus is for a reading of 6.5, up from 4.5 in February (above zero is expansion).
• At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for February. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 78.6%.
• At 10:00 AM, the March NAHB homebuilder survey. The consensus is for a reading of 50, up from 46 in February. Any number above 50 indicates that more builders view sales conditions as good than poor.
Weekend:
• Schedule for Week of March 16th
• FOMC Preview: More Tapering, Change to Guidance
From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 3 and DOW futures are down 33 (fair value).
Oil prices are down with WTI futures at $99.11 per barrel and Brent at $108.21 per barrel.
Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.50 per gallon (up sharply over the last month, but still down from the same week a year ago). If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.
| Orange County Historical Gas Price Charts Provided by GasBuddy.com |
FOMC Preview: More Tapering, Change to Guidance
by Calculated Risk on 3/16/2014 10:26:00 AM
Fed Chair Janet Yellen will chair her first FOMC meeting this week on Tuesday and Wednesday, and hold her first post-FOMC press conference following the meeting. It appears the FOMC will reduce monthly asset purchases by another $10 billion per month, from $65 billion to $55 billion. The weaker than expected recent data will probably not derail another round of tapering, and the focus this month will be on the change to the forward guidance.
From Goldman Sachs economist Sven Jari Stehn: March FOMC Preview: All about Guidance
[W]ill the Committee’s forward guidance change? The January minutes revealed disagreement within the Committee about the future direction of its forward guidance, with “some” favoring additional quantitative guidance and “others” preferring a switch to qualitative form of guidance. Since then, however, both President Dudley and President Evans have argued in favor of qualitative guidance and we expect the Committee to move into this direction. We see two options for doing so.It will also be interesting to see if there are any changes to the FOMC projections. I expect any change to be minor.
The first would be to split the current guidance paragraph into two: one that reaffirms policy intentions above 6.5% and one that describes policy intentions below 6.5% in qualitative terms. For example, the Committee could state: “although the unemployment rate is approaching 6-1/2 percent, the Committee judges that employment remains well below its maximum sustainable level. Once the unemployment rate has declined below 6-1/2 percent, the Committee therefore intends to maintain the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent as long as employment or inflation remain well below their longer-run goals.” Once the unemployment rate has fallen below 6.5% they could simply delete the “6.5%” paragraph and be left with a qualitative description of their intentions. This approach would follow the Bank of England’s approach which simply added a paragraph to their guidance statement that describes policy intentions after the threshold (in their case 7%) has been reached, but kept the original threshold statement.
The second option would be for the Committee to switch entirely to qualitative guidance and drop the 6.5% threshold at next week’s meeting. For example, Fed officials could simply state that “the Committee intends to maintain the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent as long as employment or inflation remain well below their longer-run goals.” The FOMC could then follow the Bank of England in providing additional color on the Committee’s view on how far away the economy currently is from full employment and price stability. While the Bank of England published a separate document providing those details, Fed officials could include this information in Yellen’s prepared remarks at the start of the press conference.
Either option is possible in our view.
For review, here are the previous projections. Several FOMC members have blamed the recent weak economic data on the severe winter weather, so any downward revision to the 2014 GDP projections will probably be small.
| GDP projections of Federal Reserve Governors and Reserve Bank presidents | ||||
|---|---|---|---|---|
| Change in Real GDP1 | 2013 | 2014 | 2015 | 2016 |
| Dec 2013 Meeting Projections | 2.2 to 2.3 | 2.8 to 3.2 | 3.0 to 3.4 | 2.5 to 3.2 |
| Sept 2013 Meeting Projections | 2.0 to 2.3 | 2.9 to 3.1 | 3.0 to 3.5 | 2.5 to 3.3 |
The unemployment rate was at 6.7% in February.
| Unemployment projections of Federal Reserve Governors and Reserve Bank presidents | ||||
|---|---|---|---|---|
| Unemployment Rate2 | 2013 | 2014 | 2015 | 2016 |
| Dec 2013 Meeting Projections | 7.0 to 7.1 | 6.3 to 6.6 | 5.8 to 6.1 | 5.3 to 5.8 |
| Sept 2013 Meeting Projections | 7.1 to 7.3 | 6.4 to 6.8 | 5.9 to 6.2 | 5.4 to 5.9 |
As of January, PCE inflation was up 1.2% from January 2012, and core inflation was up 1.1%. The FOMC expects inflation to increase in 2014, but remain below their 2% target (Note: the FOMC target is symmetrical around 2%, so this is about the same miss as 2.9% inflation).
| Inflation projections of Federal Reserve Governors and Reserve Bank presidents | ||||
|---|---|---|---|---|
| PCE Inflation1 | 2013 | 2014 | 2015 | 2016 |
| Dec 2013 Meeting Projections | 0.9 to 1.0 | 1.4 to 1.6 | 1.5 to 2.0 | 1.7 to 2.0 |
| Sept 2013 Meeting Projections | 1.1 to 1.2 | 1.3 to 1.8 | 1.6 to 2.0 | 1.7 to 2.0 |
Here are the FOMC's recent core inflation projections:
| Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents | ||||
|---|---|---|---|---|
| Core Inflation1 | 2013 | 2014 | 2015 | 2016 |
| Dec 2013 Meeting Projections | 1.1 to 1.2 | 1.4 to 1.6 | 1.6 to 2.0 | 1.8 to 2.0 |
| Sept 2013 Meeting Projections | 1.2 to 1.3 | 1.5 to 1.7 | 1.7 to 2.0 | 1.9 to 2.0 |
Saturday, March 15, 2014
Schedule for Week of March 16th
by Calculated Risk on 3/15/2014 01:11:00 PM
The key reports this week are February housing starts on Tuesday, and February existing home sales on Thursday.
For manufacturing, the February Industrial Production and Capacity Utilization report, and the March NY Fed (Empire State) and Philly Fed surveys, will be released this week.
For prices, CPI will be released on Tuesday.
The FOMC meets on Tuesday and Wednesday, and the FOMC is expected to taper QE3 asset purchases another $10 billion per month at this meeting.
8:30 AM ET: NY Fed Empire Manufacturing Survey for March. The consensus is for a reading of 6.5, up from 4.5 in February (above zero is expansion).
9:15 AM: The Fed will release Industrial Production and Capacity Utilization for February.This graph shows industrial production since 1967.
The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 78.6%.
10:00 AM: The March NAHB homebuilder survey. The consensus is for a reading of 50, up from 46 in February. Any number above 50 indicates that more builders view sales conditions as good than poor.
8:30 AM: Consumer Price Index for February. The consensus is for a 0.1% increase in CPI in January and for core CPI to increase 0.1%.
8:30 AM: Housing Starts for February. Total housing starts were at 880 thousand (SAAR) in January. Single family starts were at 573 thousand SAAR in January.
The consensus is for total housing starts to increase to 915 thousand (SAAR) in February.
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
During the day: The AIA's Architecture Billings Index for February (a leading indicator for commercial real estate).
2:00 PM: FOMC Meeting Announcement. The FOMC is expected to reduce monthly QE3 asset purchases from $65 billion per month to $55 billion per month at this meeting.
2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.
2:30 PM: Fed Chair Janet Yellen holds a press briefing following the FOMC announcement.
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 325 thousand from 315 thousand.
10:00 AM: the Philly Fed manufacturing survey for March. The consensus is for a reading of 4.0, up from -6.3 last month (above zero indicates expansion).
10:00 AM: Existing Home Sales for February from the National Association of Realtors (NAR). The consensus is for sales of 4.64 million on seasonally adjusted annual rate (SAAR) basis. Sales in January were at a 4.62 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 4.60 million SAAR.
As always, a key will be inventory of homes for sale.
No economic releases scheduled.
Unofficial Problem Bank list declines to 559 Institutions
by Calculated Risk on 3/15/2014 08:24:00 AM
This is an unofficial list of Problem Banks compiled only from public sources.
Here is the unofficial problem bank list for March 14, 2014.
Changes and comments from surferdude808:
For the week, there were five bank removals with assets of $2.1 billion from the Unofficial Problem Bank List. After removal, the list includes 559 institutions with assets of $178.0 billion. A year ago, the list held 801 institutions with assets of $295.6 billion.
Omnibank, National Association, Houston, TX ($285 million) found a merger partner in order to depart the list. Actions were terminated against FSGBank, National Association, Chattanooga, TN ($977 million Ticker: FSGI); Northside Community Bank, Gurnee, IL ($290 million); Landmark Bank, National Association, Fort Lauderdale, FL ($269 million); and Community Resource Bank, Northfield, MN ($237 million).
Next Friday, we anticipate the OCC will provide an update on its enforcement action activity.
