by Calculated Risk on 10/01/2010 12:30:00 PM

Catching up with all the data this morning ...

The Census Bureau reported overall construction spending increased slightly in August.

[C]onstruction spending during August 2010 was estimated at a seasonally adjusted annual rate of $811.8 billion, 0.4 percent (±1.8%)* above the revised July estimate of $808.6 billion.

However private construction spending declined again:

Spending on private construction was at a seasonally adjusted annual rate of $498.2 billion, 0.9 percent (±1.1%)* below the revised July estimate of $502.6 billion. Residential construction was at a seasonally adjusted annual rate of $238.5 billion in August, 0.3 percent (±1.3%)* below the revised July estimate of $239.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $259.7 billion in August, 1.4 percent (±1.1%) below the revised July estimate of $263.5 billion.

Click on graph for larger image in new window.

This graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

Both residential and non-residential private construction spending declined in August. Residential spending is 64.7% below the peak early 2006, and 4.7% above the recent low in 2009.

Non-residential spending is 37.3% from the peak in January 2008.

On a year-over-year basis, residential spending has turned slightly negative after the tax credit expired - and this indicates residential investment (RI) will be a drag on Q3 GDP.

Non-residential spending is still off sharply from last year (down 24%), but the rate of decline might be slowing. As major projects are completed, I expect private non-residential spending to fall below residential spending later this year or in early 2011.

by Calculated Risk on 10/01/2010 10:58:00 AM

Note: in September 2009 U.S. light vehicle sales were 9.3 million (SAAR). There was a sharp decline in sales following the "Cash-for-clunkers" program that ended in August 2009, so the year-over-year comparisons look good. The real key is the seasonally adjusted sales rate compared to the last few months (total U.S. light vehicle sales have been mostly flat since March 2010).

From MarketWatch: GM September U.S. sales up 10.5% to 173,155 units

General Motors Co. said Friday that U.S. sales in September rose 10.5% to 173,155 vehicles from 156,673 in September 2009.

I'll add reports from the other major auto companies as updates to this post.

Update1: from MarketWatch: Chrysler U.S. September sales surge 61% to 100,077

Update2: from MarketWatch: Ford U.S. Sept. sales jump 46.3% to 160,873 units

Update3: from MarketWatch: Toyota U.S. Sept. sales rise 16.8% to 147,162

NOTE: Once all the reports are released, I'll post a graph of the estimated total September light vehicle sales (SAAR: seasonally adjusted annual rate) - usually around 4 PM ET. Most estimates are for an increase to 11.6 million SAAR in September from the 11.44 million SAAR in August.

by Calculated Risk on 10/01/2010 10:00:00 AM

PMI at 54.4% in September down from 56.3% in August. The consensus was for a decline to 54.5 percent.

From the Institute for Supply Management: September 2010 Manufacturing ISM Report On Business®

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging. The growth of new orders continued to slow, as the index is down significantly from its cyclical high of 65.9 percent (January 2010). Production is currently growing at a faster rate than new orders, but it typically lags and would be expected to weaken further in the fourth quarter. Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter. Both the Inventories and Backlog of Orders Indexes are sending strong negative signals of weakening performance in the sector."

Click on graph for larger image in new window.

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

In addition to the decrease in the PMI, the ISM's new orders index fell to 51.1 from 53.1 in August, and the production index declined to 56.5 from 59.9.

The employment index declined to 56.5 from 60.4 in August.

And the inventory index was up for the 3rd month in a row to 55.6 from 51.4.

With new order growth slowing, and inventory increasing - further declines in the ISM PMI are very likely. Or as Ore noted, these indexes are "sending strong negative signals of weakening performance in the [manufacturing] sector".

by Calculated Risk on 10/01/2010 08:30:00 AM

From the BEA: Personal Income and Outlays, August 2010

Personal income increased $59.3 billion, or 0.5 percent ... Personal consumption expenditures (PCE) increased $41.3 billion, or 0.4 percent.
...
Real PCE increased 0.2 percent, the same increase as in July.
...
Personal saving as a percentage of disposable personal income was
5.8 percent in August, compared with 5.7 percent in July.

Click on graph for large image.

This graph shows monthly real PCE since Q4 2009.  the dashed red lines are the quarterly PCE (note: left scale doesn't start at zero to show the change).

Using the two-month method to estimate PCE, it looks like real PCE growth will be about 2.0% annualized Q3 2010 - or about the same as in the previous two quarters.

This month the saving rate increased slightly ...

This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the July Personal Income report. The saving rate increased to 5.8% in August from 5.7% in July.

I expect the saving rate to rise further - perhaps to 8% or more.

The key in this report is that PCE growth in Q3 will probably be around 2.0% - barring a significant change in September.  This suggests sluggish GDP growth in Q3.

by Calculated Risk on 9/30/2010 11:49:00 PM

A little economics humor ...

by Calculated Risk on 9/30/2010 09:04:00 PM

Hotel occupancy is one of several industry specific indicators I follow ...

From HotelNewsNow.com: STR: Chain scales report strong RevPAR gains

Overall, the U.S. hotel industry rose 7.5% in occupancy to 64.2%, average daily rate was up 2.6% to US$103.09, and RevPAR ended the week up 10.3% to US$66.15.

The following graph shows the four week moving average for the occupancy rate by week for 2008, 2009 and 2010 (and a median for 2000 through 2007).

Click on graph for larger image in new window.

Notes: the scale doesn't start at zero to better show the change. The graph shows the 4-week average, not the weekly occupancy rate.

On a 4-week basis, occupancy is up 6.0% compared to last year (the worst year since the Great Depression) and 5.2% below the median for 2000 through 2007.

The occupancy rate is slightly below the levels of 2008 - and 2008 was a tough year for the hotel industry!

Important: Even though the occupancy rate is close to 2008 levels, 2010 is a much more difficult year. The average daily rate (ADR) is off close to 8% from 2008 levels - so even with the similar occupancy rates, hotel room revenue is off sharply compared to two years ago.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com