2017-03-24T19:08:40.996-04:00A few comments from Steven Kopits of Princeton Energy Advisors LLC on Mar 24, 2017:
• US oil rig count was up an eye-popping 21 this week to 652(image) Click on graph for larger image.
• US horizontal oil rigs were up by 13 to 543
• Despite a major correction in oil prices, rig additions continue at a rapid pace.
2017-03-24T16:22:10.208-04:00Here is a report from CoreLogic: US Residential Foreclosure Crisis: 10 Years Later. There are several interesting graphs in the report, including foreclosures completed by year.
|Completed foreclosure by Year|
2017-03-24T14:20:28.815-04:00The automakers will report March vehicle sales on Tuesday, April 4th.
A WardsAuto forecast calls for U.S. automakers to deliver 1.61 million light vehicles in March, a 17-year high for the month. The forecasted daily sales rate of 59,776 over 27 days is a best-ever March result. This DSR represents a 2.6% improvement from like-2016 (also 27 days). March is anticipated to be the first month in 2017 to outpace prior-year.From J.D. Power: March U.S. auto sales seen up nearly 1.9 pct -JD Power and LMC
The report puts the seasonally adjusted annual rate of sales for the month at 17.2 million units, below the 17.4 million SAAR from the first two months of 2017 combined, but well above the 16.6 million from same-month year-ago. ...
U.S. auto sales in March will increase almost 1.9 percent from a year earlier, even as consumer discounts continue to remain at record levels, industry consultants J.D. Power and LMC Automotive said on Friday.Looks like another strong month for vehicle sales, but incentives are at record levels and inventories are high.(image)
March U.S. new vehicle sales will be about 1.62 million units, up about 1.9 percent from 1.59 million units a year earlier, the consultancies said. The forecast was based on the first 16 selling days of the month.
The seasonally adjusted annualized rate for the month will be 17.3 million vehicles, up from 16.8 million a year earlier.
2017-03-24T11:53:01.853-04:00The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the February 2017 seasonally adjusted annual sales rate (SAAR).
2017-03-24T10:11:43.310-04:00From the BLS: Regional and State Employment and Unemployment Summary
Unemployment rates were significantly lower in February in 10 states, higher in 1 state, and stable in 39 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Nine states had notable jobless rate decreases from a year earlier, and 41 states and the District had no significant change. The national unemployment rate, at 4.7 percent, was little changed from January but 0.2 percentage point lower than in February 2016.(image) Click on graph for larger image.
New Hampshire had the lowest unemployment rate in February, 2.7 percent, closely followed by Hawaii and South Dakota, 2.8 percent each, and Colorado and North Dakota, 2.9 percent each. The rates in both Arkansas (3.7 percent) and Oregon (4.0 percent) set new series lows. ... New Mexico had the highest jobless rate, 6.8 percent, followed by Alaska and Alabama, 6.4 percent and 6.2 percent, respectively.
2017-03-23T12:51:25.243-04:00New home sales for February were reported at 592,000 on a seasonally adjusted annual rate basis (SAAR). This was well above the consensus forecast, however the three previous months combined were revised down slightly. Overall this was a solid report.
2017-03-23T11:00:15.405-04:00From the Kansas City Fed: Tenth District Manufacturing Activity Strengthened Further
The Federal Reserve Bank of Kansas City released the March Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity strengthened further with strong expectations for future activity.The Kansas City region was hit hard by the decline in oil prices, but activity is expanding solidly again. The regional Fed surveys released so far suggest another strong reading for the ISM manufacturing index for March.(image)
“Our composite index accelerated again, and has only been higher one time in the last 15 years,” said Wilkerson. “The future employment index was the strongest in the 23-year history of the survey."
The month-over-month composite index was 20 in March, its highest reading since March 2011, up from 14 in February and 9 in March. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Activity in both durable and nondurable goods plants increased, particularly for metals, computer, electronic, and aircraft products. Most month-over-month indexes rose further in March. The production and shipments indexes increased considerably, while the new orders and order backlog indexes rose more moderately but remained high. The employment index moderated slightly from 17 to 13, and the new orders for exports index also eased. Both inventory indexes increased for the second straight month.
2017-03-23T10:12:42.286-04:00The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 592 thousand. The previous three months combined were revised down slightly."Sales of new single-family houses in February 2017 were at a seasonally adjusted annual rate of 592,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.1 percent above the revised January rate of 558,000 and is 12.8 percent above the February 2016 estimate of 525,000."emphasis addedClick on graph for larger image.The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.Even with the increase in sales over the last several years, new home sales are still fairly low historically.The second graph shows New Home Months of Supply.The months of supply declined in February to 5.4 months. The all time record was 12.1 months of supply in January 2009.This is now in the normal range (less than 6 months supply is normal)."The seasonally-adjusted estimate of new houses for sale at the end of February was 266,000. This represents a supply of 5.4 months at the current sales rate."On inventory, according to the Census Bureau: "A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.The third graph shows the three categories of inventory starting in 1973.The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).In February 2017 (red column), 49 thousand new homes were sold (NSA). Last year, 45 thousand homes were sold in February. The all time high for February was 109 thousand in 2005, and the all time low for February was 22 thousand in 2011.This was above expectations of 565,000 sales SAAR. I'll have more later today.[...]
2017-03-23T08:39:47.200-04:00The DOL reported:
In the week ending March 18, the advance figure for seasonally adjusted initial claims was 258,000, an increase of 15,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 241,000 to 243,000. The 4-week moving average was 240,000, an increase of 1,000 from the previous week's revised average. The previous week's average was revised up by 1,750 from 237,250 to 239,000.The previous week was revised up.
2017-03-23T07:00:02.198-04:00From Black Knight: Black Knight Financial Services’ First Look at February Mortgage Data: Prepayment Activity Continues to Decline, Down 40 Percent So Far in 2017
• Prepayment speeds (historically a good indicator of refinance activity) declined 15 percent in February, marking a 40 percent overall year-to-date decline and the lowest monthly rate in three yearsAccording to Black Knight's First Look report for February, the percent of loans delinquent decreased 1.0% in February compared to January, and declined 5.5% year-over-year.
• Delinquencies continued their seasonal decline, ticking down .98 percent from January
• Foreclosure starts fell 18 percent from last month to 31 percent below last year’s levels
• Active foreclosure inventory now stands at 470,000, the lowest such level since June 2007
|Black Knight: Percent Loans Delinquent and in Foreclosure Process|
|Number of properties:|
|Number of properties that are delinquent, but not in foreclosure:||2,135,000||2,162,000||2,252,000||2,671,000|
|Number of properties in foreclosure pre-sale inventory:||470,000||481,000||655,000||866,000|
2017-03-22T18:32:06.594-04:00The warmer weather probably didn't impact February existing home sales, because existing home sales are counted when the contract closes. However the warm February may have boosted New Home sales since new home sales are counted when contracts are signed - and there were probably more people out looking in some parts of the country with the warmer weather.
2017-03-22T14:39:11.242-04:00Earlier: NAR: "Existing-Home Sales Stumble in February"
2017-03-22T12:24:10.148-04:00Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
The Architecture Billings Index (ABI) returned to growth mode in February, after a weak showing in January. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 50.7, up from a score of 49.5 in the previous month. This score reflects a minor increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.5, up from a reading of 60.0 the previous month, while the new design contracts index climbed from 52.1 to 54.7.(image) Click on graph for larger image.
“The sluggish start to the year in architecture firm billings should give way to stronger design activity as the year progresses,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “New project inquiries have been very strong through the first two months of the year, and in February new design contracts at architecture firms posted their largest monthly gain in over two years.”
• Regional averages: Midwest (52.4), South (50.5), Northeast (50.0), West (47.5)
• Sector index breakdown: institutional (51.8), multi-family residential (49.3), mixed practice (49.2), commercial / industrial (48.9)
2017-03-22T10:12:54.666-04:00From the NAR: Existing-Home Sales Stumble in February
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, retreated 3.7 percent to a seasonally adjusted annual rate of 5.48 million in February from 5.69 million in January. Despite last month's decline, February's sales pace is still 5.4 percent above a year ago.(image) Click on graph for larger image.
Total housing inventory 3 at the end of February increased 4.2 percent to 1.75 million existing homes available for sale, but is still 6.4 percent lower than a year ago (1.87 million) and has fallen year-over-year for 21 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (3.5 months in January).
2017-03-22T07:00:12.642-04:00From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey
Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 17, 2017.(image) Click on graph for larger image.
... The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 5 percent higher than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.46 percent, with points increasing to 0.41 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
2017-03-21T17:43:17.398-04:00First, I expect existing home sales to be below consensus tomorrow. See: Existing Home Sales: Take the Under
2017-03-21T11:52:03.730-04:00Note: This appears to be a leading indicator for industrial production.
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted its strongest year-over-year gain in nearly seven years. The 5.5 percent increase over this time last year reflects elevated consumer and business confidence and an overall rising optimism in the U.S. economy. Speaking last week, Federal Reserve Chairwoman Janet Yellen also referenced a “confidence in the robustness of the economy” as a reason to move forward with an interest rate hike.(image) Click on graph for larger image.
The barometer posted a 0.5 percent gain in March, following a 0.5 percent gain in February and 0.4 percent gain in January. All data is measured on a three-month moving average (3MMA). Coupled with consecutive monthly gains in the fourth quarter of 2016, the pattern shows consistent, accelerating activity. On an unadjusted basis the CAB climbed 0.4 percent in March, following a 0.4 percent gain in February and a 0.6 percent increase in January.
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
2017-03-21T10:03:51.060-04:00From Matthew Graham at Mortgage News Daily: Mortgage Rates at 2 Week Lows Amid Political Uncertainty
Mortgage rates were steady-to-slightly lower today, keeping them in line with the lowest levels in 2 weeks and very close to the lowest levels of the month. For most lenders, that means conventional 30yr fixed rate quotes of 4.25% on top tier scenarios. Some lenders are still up at 4.375% and an aggressive few are back down to 4.125%.Here is a table from Mortgage News Daily:
Last week, we discussed the motivations for the rate improvements in detail. To recap: longer-term rates like mortgages had already risen in anticipation of the Fed rate hike. It wasn't a surprise. Instead, markets were focused on the Fed's forward-looking rate hike forecasts, which came out slightly slower than markets expected. Thus, rates were overly-prepared for a fast rate hike timeline and had some room to return to early March levels.
From there, attention has turned to fiscal uncertainty as several policy objectives of the Trump administration have run into roadblocks. Specifically, investors are concerned that tax cuts will be significantly delayed as the health care debate seems to be front and center. The expectation of tax cuts (and other fiscal measures) was a major contributor to the move higher in rates and stocks after the election. To whatever extent those measures are delayed, investors can easily question if rates and stocks are higher than they should be.
2017-03-20T15:11:35.832-04:00Hotel occupancy has picked up in recent weeks and is now close to the record year (2015 was the record).
The U.S. hotel industry reported positive results in the three key performance metrics during the week of 5-11 March 2017, according to data from STR.The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.
In a year-over-year comparison with the week of 6-12 March 2016:
• Occupancy: +0.8% to 67.4%
• Average daily rate (ADR): +3.9% to US$128.61
• Revenue per available room (RevPAR): +4.8% to US$86.72
2017-03-20T10:33:05.523-04:00In a note today, Merrill Lynch economist Michelle Meyer notes a few upside and downside risks for housing. A few excerpts:
The housing market is being hit by several cross currents. On the upside, the warmer than-normal weather in the winter likely boosted housing activity over the past few months. The risk, however, is that this could be pulling activity forward from the spring. In addition, the general improvement in the economy and gain in consumer confidence could be underpinning housing activity. The NAHB homebuilder confidence index has climbed higher, reaching a new cyclical high of 71 in March. Clearly builders are optimistic. However, on the downside, interest rates have increased which weighs on affordability.CR note: If, later this year, the Fed starts to reduce their balance sheet, that might push up longer rates (and pushing up mortgage rates a little more). Another downside risk for housing is reduced foreign buying due to the strong dollar, U.S. political concerns, and capital controls in China.(image)
There are also a variety of potential policy changes which can impact the outlook for the housing market. High on the list is financial market deregulation and its impact on the flow of credit. In addition, there seems to be renewed focus on reforming the mortgage finance system and bringing Fannie Mae and Freddie Mac out of conservatorship. In addition, immigration reform could have significant impacts on the housing market over the medium term.
2017-03-20T08:44:01.219-04:00From the Chicago Fed: Economic Growth Increased in February
Led by improvements in employment-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.34 in February from –0.02 in January. All four broad categories of indicators that make up the index increased from January, and only one of the four categories made a negative contribution to the index in February.This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.
The index’s three-month moving average, CFNAI-MA3, improved to +0.25 in February from +0.07 in January, reaching its highest level since December 2014. February’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.
What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.(image)
A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.
2017-03-18T19:04:49.614-04:00A few brief excerpts from a note today by Goldman Sachs economist Daan Struyven: Balance Sheet Runoff: Sooner, Slower, Safer
The debate within the FOMC about balance sheet normalization is now underway. Fed officials have two basic choices. They can rely exclusively on the funds rate for now and leave balance sheet decisions to the new leadership team in 2018, or they can combine ongoing funds rate hikes with a turn to balance sheet runoff later this year.CR Note: This might depend on who is the next Fed Chair. Fed Chair Janet Yellen's term expires in Feb 2018 and the smart choice would be to reappoint her to another term (Like Reagan reappointing Democrat Volcker in 1983, Clinton reappointing Republican Greenspan, and Obama reappointing Republican Bernanke). (image)
A ... practical case for early balance sheet normalization is based on the upcoming Fed leadership transition. If the new appointments—especially the new Chair—are thought to favor aggressive balance sheet normalization, perhaps even including asset sales ... financial markets might experience heightened uncertainty during the transition. ...
The current FOMC could reduce that uncertainty by establishing an early “baseline” path for very gradual balance sheet rundown. Committee decisions are subject to change, of course, but markets would probably take comfort from the fact that most FOMC members will remain in their positions and that it is harder for the new leadership to radically change a policy that is already in place than to devise a new one. We therefore expect the committee to announce gradual tapering of reinvestments in December 2017, while holding the funds rate unchanged at that meeting.
2017-03-18T08:11:01.855-04:00The key economic report this week are February New and Existing Home sales.