by Calculated Risk on 12/15/2010 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.4 percent in November after a decline of 0.2 percent in October. The rate of change for industrial production was revised down in October but up in September; the net effect of the revisions from June to October left the level of industrial production in October about the same as was previously reported. ... At 93.9 percent of its 2007 average, total industrial production in November was 5.4 percent above its level a year earlier. The capacity utilization rate for total industry rose to 75.2 percent, a rate 5.4 percentage points below its average from 1972 to 2009.

Click on graph for larger image in new window.

This graph shows Capacity Utilization. This series is up 10.3% from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 75.2% is still far below normal - and well below the pre-recession levels of 81.2% in November 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 November, but production is still 6.8% below the pre-recession levels at the end of 2007.

This was slightly above consensus expectations of a 0.3% increase in Industrial Production, and an increase to 75.0% for Capacity Utilization. The increases in Industrial Production and Capacity Utilization have slowed significantly since May.

by Calculated Risk on 12/15/2010 08:30:00 AM

• From the Financial Times: Spain threatened with fresh downgrade

Moody’s ... has said it may downgrade Spanish government bonds because of the country’s likely difficulty in raising large sums of money next year, the problems of its savings banks and the debts incurred by its autonomous regions.
excerpt with permission

This has pushed the yields on Spain 10-year bonds to a new record high of 5.52%.

• From the NY Fed: Empire State Manufacturing Survey

The Empire State Manufacturing Survey indicates that conditions improved in December for New York State manufacturers. After dropping sharply into negative territory in November, the general business conditions index bounced back above zero, climbing 22 points to 10.6. The new orders and shipments indexes also rose above zero, while the unfilled orders index remained negative. The inventories index was negative, indicating that inventory levels were lower over the month. The indexes for both prices paid and prices received were positive and higher than last month, suggesting that prices rose, while employment indexes were negative, indicating that employment declined.

This was the one regional survey that indicated contraction in November.

• From the BLS: Consumer Price Index increased 0.1 percent in November

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.1 percent before seasonal adjustment.
...
The index for all items less food and energy rose 0.1 percent in November [Core CPI], its first increase since July. The index for shelter rose 0.1 percent in November, the same increase as the previous month. The rent index rose 0.2 percent, its largest increase since March 2009, while the index for owners' equivalent rent rose 0.1 percent ...

by Calculated Risk on 12/15/2010 07:35:00 AM

The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 0.7 percent from the previous week. This is the fifth straight weekly decline for the Refinance Index. The seasonally adjusted Purchase Index decreased 5.0 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.84 percent from 4.66 percent, with points increasing to 1.34 from 0.94 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The four-week moving average of the purchase index is at about the levels of 1997 - and about 17% below the levels of April this year - suggesting weak existing home sales through the end of the year and into January.

by Calculated Risk on 12/14/2010 11:07:00 PM

The Senate will "convene and resume consideration" of the tax legislation tomorrow at 10 AM ET. There will be some posturing debate, followed by the vote. The bill is expected to pass the House within a few days.

Earlier today:
• NFIB Small Business Optimism Index Rises. NFIB graphs here.
• Retail Sales increased 0.8% in November
• FOMC Statement: No Change
• Lawler: Early Read on November Existing Home Sales: 4.57 million SAAR

Wednesday:
• 7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.
• 8:30 AM: Consumer Price Index for November.
• 8:30 AM: NY Fed Empire Manufacturing Survey for December.
• 9:15 AM ET: The Fed will release Industrial Production and Capacity Utilization for November.
• 10 AM: The December NAHB homebuilder survey.

Best to all
posturing

by Calculated Risk on 12/14/2010 07:14:00 PM

From "Soylent Green is People":

My favorite word of the day, remarked by another LO, is "gruesome". That's what's going on in the mortgage market.
...
A "true" -0- point, -0- lender fee refinance rate is in the mid 5's which is wholly unappealing to consumers. Benchmark FHA 30 fixed loans are in the 4.75% rate range, also for 1.0 point origination.

From economist Tom Lawler:

The US MBS market had a very bad day, and secondary market yields surged from early this morning. For example, Freddie Mac’s required net yield on a 60-day commitment to purchase conventional conforming 30-year fixed-rate mortgages went from 4.50% at 8:30 this morning to 4.64% at 3:00 PM. For Freddie “PMMS” mortgage rate followers, such a level would, if sustained, suggest that next week’s “Freddie 30-year primary mortgage market rate” would be somewhere in the neighborhood of 4 7/8% and 0.8 point.

Usually I track Freddie Mac's Primary Mortgage Market Survey® (PMMS®) and it appears 30 year rates will be pushing 5% this week. "Gruesome" is the word for those in the mortgage industry, especially for refinance activity.

by Calculated Risk on 12/14/2010 04:27:00 PM

CR Note: This is from housing economist Tom Lawler:

"Based on available data I’ve seen so far, I estimate that existing home sales ran at a seasonally adjusted annual rate of 4.57 million in November, up 3.2% from October’s pace, though down 29.6% from last November’s tax-credit-goosed pace. The YOY % decline in sales on an unadjusted basis should be around 27.2-27.3%, with the “SA/NSA” difference related to the calendar/different business day counts.

The incoming data from MLS/realtors/boards are broadly consistent with the realtor.com data pointing to a 3.4% drop in the existing homes-for-sale inventory in November, and if anything the local reports suggest the possibility of a somewhat larger decline."

CR Note: A 3.4% decline in inventory, and sales of 4.57 million SAAR would put the months-of-supply at about 9.8 months in November. That would follow four straight months of double digit supply. Based on this early forecast, inventory would be up about 6% YoY.

Sales are seasonally adjusted, but inventory is not. There is a clear seasonal pattern for inventory (inventory will be even lower in December as sellers take their homes off the market for the holidays). So the seasonal decline in inventory makes the months-of-supply look better.

This is about the same level of sales as in September. Here is the graph gallery for existing home sales through October.

Existing home sales for November will be released on Wednesday December 22nd at 10 AM ET.