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Finance and Economics



Updated: 2018-01-18T17:21:49.937-05:00

 



Mortgage Rates close to 4.25%, "highest in more than 9 months"

2018-01-18T17:21:50.272-05:00

From Matthew Graham at Mortgage News Daily: Be Careful With News on Mortgage Rates Today
Rates spiked more than normal yesterday and then repeated the feat today. Combine that with weakness in underlying bond markets (which drive mortgage rates) that began on Tuesday afternoon, and the average lender is roughly an eighth of a percentage point higher in rate today. Freddie's headline of 4.04% is the stuff of dreams as far as most borrowers are concerned. While rates near 4.0% are available in some of the best cases, the average top-tier quote is now easily 4.125% and many lenders are up to 4.25%. If you're not putting 20% down or have less than perfect qualifications, it would be even higher. [30YR FIXED - 4.125%-4.25%]

Like yesterday, these are the highest rates in more than 9 months.
emphasis added
Friday:
• At 10:00 AM ET, University of Michigan's Consumer sentiment index (Preliminary for January). The consensus is for a reading of 97.0, up from 95.9.(image)



Earlier: Philly Fed Manufacturing Survey showed "Growth Continued" in January

2018-01-18T14:13:06.367-05:00

Earlier from the Philly Fed: January 2018 Manufacturing Business Outlook Survey
Economic growth continued in January, according to the firms responding to this month’s Manufacturing Business Outlook Survey. The broadest measures of current conditions remained positive this month, although indexes for general activity, new orders, and employment declined from their readings in December. The firms reported higher prices for both inputs and their own manufactured goods this month. The future indexes reflecting expected growth over the next six months remained at high levels, although the indexes fell from their readings in December.
...
The index for current manufacturing activity in the region decreased from a revised reading of 27.9 in December to 22.2 this month. Although now at its lowest reading in five months, the index has stayed within a relatively narrow range over the past eight months ... The current employment index, while still positive, fell 3 points to 16.8. The percentage of firms reporting an increase in employment (24 percent) exceeded the percentage reporting a decrease (8 percent). The firms reported a slight increase in work hours this month: The average workweek index increased 4 points to 16.7.
emphasis added
Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

(image) Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through January), and five Fed surveys are averaged (blue, through December) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through December (right axis).

This suggests the ISM manufacturing index night decrease slightly in January, but still show solid expansion again.(image)



Comments on December Housing Starts

2018-01-18T11:30:03.870-05:00

Earlier: Housing Starts decreased to 1.192 Million Annual Rate in DecemberThe housing starts report released this morning showed starts were down 8.2% in December compared to November, and starts were down 6.0% year-over-year compared to December 2016. On a yearly basis, starts in 2017 were up 2.4% to 1.202 million compared to 1.174 million in 2016.  Single family starts were up 8.5% in 2017 (compared to 2016) and multi-family starts were down 10.1%.This was the highest level for total housing starts and single family starts since 2007. Here is a table of housing starts since the bubble peak in 2005.Housing Starts (000s)TotalHousingStartsChangeSingleFamilyStartsChange20052,068---1,716---20061,801-12.9%1,465-14.6%20071,355-24.8%1,046-28.6%2008906-33.2%622-40.5%2009554-38.8%445-28.4%20105875.9%4715.9%20116093.7%431-8.6%201278128.2%53524.3%201392518.5%61815.4%20141,0038.5%6484.9%20151,11210.9%71510.3%20161,1745.6%7829.4%20171,2022.4%8488.5%This first graph shows the month to month comparison between 2016 (blue) and 2017 (red).Click on graph for larger image.Starts were down 6.0% in December 2017 compared to December 2016, and starts were only up 2.4% for the yearNote that single family starts were up 8.5% in 2017, and the weakness (as expected) was in multi-family starts.Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years - but has turned down recently.  Completions (red line) have lagged behind - and completions have caught up to starts (more deliveries).  Completions lag starts by about 12 months, so completions will probably turn down in about a year.As I've been noting for a couple of years, the growth in multi-family starts is behind us - multi-family starts peaked in June 2015 (at 510 thousand SAAR).The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.Note the low level of single family starts and completions.  The "wide bottom" was what I was forecasting following the recession, and now I expect a few more years of increasing single family starts and completions.[...]



Housing Starts decreased to 1.192 Million Annual Rate in December

2018-01-18T08:44:59.538-05:00

From the Census Bureau: Permits, Starts and Completions
Housing Starts:
Privately-owned housing starts in December were at a seasonally adjusted annual rate of 1,192,000. This is 8.2 percent below the revised November estimate of 1,299,000 and is 6.0 percent below the December 2016 rate of 1,268,000. Single-family housing starts in December were at a rate of 836,000; this is 11.8 percent below the revised November figure of 948,000. The December rate for units in buildings with five units or more was 352,000.

An estimated 1,202,100 housing units were started in 2017. This is 2.4 percent above the 2016 figure of 1,173,800.

Building Permits:
Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,302,000. This is 0.1 percent below the revised November rate of 1,303,000, but is 2.8 percent above the December 2016 rate of 1,266,000. Single-family authorizations in December were at a rate of 881,000; this is 1.8 percent above the revised November figure of 865,000. Authorizations of units in buildings with five units or more were at a rate of 382,000 in December.
emphasis added
(image) Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) increased slightly in December compared to November.   However Multi-family starts were down sharply year-over-year.

Multi-family is volatile month-to-month, but has been mostly moving sideways to down recently.

Single-family starts (blue) decreased in December, but are still up year-over-year.

(image) The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically fairly low).

Total housing starts in December were below expectations.  However starts for October and November were revised up slightly.

I'll have more later ...(image)



Weekly Initial Unemployment Claims decrease to 220,000

2018-01-18T08:34:32.121-05:00

The DOL reported:
In the week ending January 13, the advance figure for seasonally adjusted initial claims was 220,000, a decrease of 41,000 from the previous week's unrevised level of 261,000. This is the lowest level for initial claims since February 24, 1973 when it was 218,000. The 4-week moving average was 244,500, a decrease of 6,250 from the previous week's unrevised average of 250,750.

Claims taking procedures continue to be disrupted in the Virgin Islands. The claims taking process in Puerto Rico has still not returned to normal.
emphasis added
The previous week was unrevised.

The following graph shows the 4-week moving average of weekly claims since 1971.

(image) Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 244,500.

This was much lower than the consensus forecast. The low level of claims suggest relatively few layoffs.(image)



Thursday: Housing Starts, Unemployment Claims, Philly Fed Mfg

2018-01-17T18:46:06.479-05:00

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 250 thousand initial claims, up from 261 thousand the previous week.

• Also at 8:30 AM, Housing Starts for December. The consensus is for 1.280 million SAAR, down from 1.297 million SAAR in November.

• Also at 8:30 AM, the Philly Fed manufacturing survey for January. The consensus is for a reading of 25.0, down from 26.2.(image)



Fed's Beige Book: "Modest to moderate"expansion, "on-going labor market tightness"

2018-01-17T14:06:51.088-05:00

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Atlanta based on information collected on or before January 8, 2018."
Reports from the 12 Federal Reserve Districts indicated that the economy continued to expand from late November through the end of the year, with 11 Districts reporting modest to moderate gains and Dallas recording a robust increase. The outlook for 2018 remains optimistic for a majority of contacts across the country.
...
On balance, employment continued to grow at a modest pace since the previous report. Most Districts cited on-going labor market tightness and challenges finding qualified workers across skills and sectors, which, in some instances, was described as constraining growth. Several Districts noted elevated demand for manufacturing and construction labor. Most Districts said that wages increased at a modest pace. A few Districts observed that firms were raising wages in a broader range of industries and positions since the previous report. Some Districts reported that firms expect wages to increase in the months ahead.
emphasis added
(image)



NAHB: Builder Confidence decreased to 72 in January

2018-01-17T10:04:40.596-05:00

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 72 in January, down from 74 in December. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Remains Strong as New Year Starts
Builder confidence in the market for newly-built single-family homes dropped two points to a level of 72 in January on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) after reaching an 18-year high in December 2017.

“Builders are confident that changes to the tax code will promote the small business sector and boost broader economic growth,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Our members are excited about the year ahead, even as they continue to face building material price increases and shortages of labor and lots.”

“The HMI gauge of future sales expectations has remained in the 70s, a sign that housing demand should continue to grow in 2018,” said NAHB Chief Economist Robert Dietz. “As the overall economy strengthens, owner-occupied household formation increases and the supply of existing home inventory tightens, we can expect the single-family housing market to make further gains this year.”
...
The three HMI components registered relatively minor losses in January. The index gauging current sales conditions dropped one point to 79, the component charting sales expectations in the next six months fell a single point to 78, and the index measuring buyer traffic fell four points to 54.

Looking at the three-month moving averages for regional HMI scores, the West rose two points to 81, the South increased one point to 73, the Midwest inched up a single point to 70 and Northeast climbed five points to 59.
emphasis added
(image) Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was slightly below the consensus forecast, and a strong reading.(image)



Industrial Production Increased 0.9% in December

2018-01-17T09:26:41.118-05:00

From the Fed: Industrial production and Capacity Utilization
Industrial production rose 0.9 percent in December even though manufacturing output only edged up 0.1 percent. Revisions to mining and utilities altered the pattern of growth for October and November, but the level of the overall index in November was little changed. For the fourth quarter as a whole, total industrial production jumped 8.2 percent at an annual rate after being held down in the third quarter by Hurricanes Harvey and Irma. At 107.5 percent of its 2012 average, the index has increased 3.6 percent since December 2016 for its largest calendar-year gain since 2010.

The gain in manufacturing output in December was its fourth consecutive monthly increase. The output of utilities advanced 5.6 percent for the month, while the index for mining moved up 1.6 percent. Capacity utilization for the industrial sector was 77.9 percent, a rate that is 2.0 percentage points below its long-run (1972–2016) average.
emphasis added
(image) Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 11.2 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 77.9% is 2.0% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.

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

(image) The second graph shows industrial production since 1967.

Industrial production increased in December to 107.5. This is 23% above the recession low, and 2% above the pre-recession peak.(image)



MBA: Mortgage Applications Increase in Latest Weekly Survey

2018-01-17T07:00:25.431-05:00

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey
Mortgage applications increased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 12, 2018.

... The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 35 percent compared with the previous week and was 7 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since March 2017, 4.33 percent, from 4.23 percent, with points increasing to 0.54 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
(image) Click on graph for larger image.


The first graph shows the refinance index since 1990.

Refinance activity will not pick up significantly unless mortgage rates fall well below 4%.



(image) The second graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 7% year-over-year.(image)



Wednesday: Industrial Produciton, Homebuilder Survey, Beige Book

2018-01-16T18:58:09.030-05:00

From Matthew Graham at Mortgage News Daily: Mortgage Rates Still Working on That Ceiling
Mortgage rates didn't move much today. Most lenders were just slightly lower/better this morning, but mid-day market weakness prompted several of them to reissue higher rates. In the bigger picture, however, the past several days represent a welcome stint of relative calm. The general trend had been toward higher rates beginning in mid-December. [30YR FIXED - 4.125%]
emphasis added
Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for December. The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 77.3%.

• At 10:00 AM, The January NAHB homebuilder survey. The consensus is for a reading of  73, down from 74 in December. Any number above 50 indicates that more builders view sales conditions as good than poor.

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.(image)



Update: Predicting the Next Recession

2018-01-16T13:59:12.482-05:00

CR January 2018 Update: In 2013, I wrote a post "Predicting the Next Recession". I repeated the post in January 2015 (and in the summer of 2015, in January 2016, in August 2016, and in April 2017) because of all the recession calls. In late 2015, the recession callers were out in force - arguing the problems in China, combined with the impact on oil producers of lower oil prices (and defaults by energy companies) - would lead to a global recession and drag the US into recession.  I didn't think so - and I was correct.I've added a few updates in italics by year.  Most of the text is from January 2013.A few thoughts on the "next recession" ... Forecasters generally have a terrible record at predicting recessions. There are many reasons for this poor performance. In 1987, economist Victor Zarnowitz wrote in "The Record and Improvability of Economic Forecasting" that there was too much reliance on trends, and he also noted that predictive failure was also due to forecasters' incentives. Zarnowitz wrote: "predicting a general downturn is always unpopular and predicting it prematurely—ahead of others—may prove quite costly to the forecaster and his customers".Incentives motivate Wall Street economic forecasters to always be optimistic about the future (just like stock analysts). Of course, for the media and bloggers, there is an incentive to always be bearish, because bad news drives traffic (hence the prevalence of yellow journalism).In addition to paying attention to incentives, we also have to be careful not to rely "heavily on the persistence of trends". One of the reasons I focus on residential investment (especially housing starts and new home sales) is residential investment is very cyclical and is frequently the best leading indicator for the economy. UCLA's Ed Leamer went so far as to argue that: "Housing IS the Business Cycle". Usually residential investment leads the economy both into and out of recessions. The most recent recovery was an exception, but it was fairly easy to predict a sluggish recovery without a contribution from housing.Since I started this blog in January 2005, I've been pretty lucky on calling the business cycle.  I argued no recession in 2005 and 2006, then at the beginning of 2007 I predicted a recession would start that year (made it by one month with the Great Recession starting in December 2007).  And in 2009, I argued the economy had bottomed and we'd see sluggish growth.Finally, over the last 18 months, a number of forecasters (mostly online) have argued a recession was imminent.  I responded that I wasn't even on "recession watch", primarily because I thought residential investment was bottoming.[CR 2015 Update: this was written two years ago - I'm not sure if those calling for a recession then have acknowledged their incorrect forecasts and / or changed theirs views (like ECRI and various bloggers). Clearly they were wrong.] [CR April 2017 Update: Now it has been over four years!  And yes, ECRI has admitted their recession calls were incorrect.  Not sure about the rest of the recession callers.][CR January 2018 Update: Now it has been five years!]Now one of my blogging goals is to see if I can get lucky again and call the next recession correctly.  Right now I'm pretty optimistic (see: The Future's so Bright ...) and I expect a pickup in growth over the next few years (2013 will be sluggish with all the austerity).The next recession will probably be caused by one of the following (from least likely to most likely):3) An exogenous event such as a pandemic, significant military conflict, disruption of energy supplies for any reason, a major natural disaster (meteor strike, super volcano, etc), and a number o[...]



Q4 GDP Forecasts

2018-01-16T10:39:30.391-05:00

The advance estimate of Q4 GDP will be released on Friday, January 26th.

Here are a few estimates, from Merrill Lynch:
The strength of the retail sales report [last Friday] lifted our 4Q GDP tracking estimate by 0.6pp to 2.8% qoq saar.
emphasis added
From the Altanta Fed: GDPNow
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 3.3 percent on January 12, up from 2.8 percent on January 10.
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 3.9% for 2017:Q4 and 3.2% for 2018:Q1.
CR Note: It looks likely that GDP will be close or over 3% again in Q4.(image)



NY Fed: "Business activity continued to grow at a solid clip"

2018-01-16T08:38:37.570-05:00

From the NY Fed: Empire State Manufacturing Survey
Manufacturing firms in New York State reported that business activity continued to expand strongly. The general business conditions index was little changed at 17.7. ... The index for number of employees fell nineteen points to 3.8, a level suggesting only a small increase in employment levels. The average workweek index fell to a level near zero, indicating that hours worked were unchanged.

Looking ahead, firms remained optimistic about the six-month outlook. The index for future business conditions edged up two points to 48.6. The index for future inventories rose to 20.3, a record high, indicating that firms expect to build up inventories significantly in the months ahead. The index for future number of employees rose three points to 26.9, a multiyear high.
emphasis added
This was slightly below expectations, but still a solid report. (image)



Monday Night Futures

2018-01-15T18:34:18.527-05:00

Weekend:
Schedule for Week of Jan 14, 2018

Tuesday:
• At 8:30 AM ET: The New York Fed Empire State manufacturing survey for January. The consensus is for a reading of 18.6, up from 18.0.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 7, and DOW futures are up 160 (fair value).

Oil prices were up over the last week with WTI futures at $64.73 per barrel and Brent at $70.26 per barrel.  A year ago, WTI was at $52, and Brent was at $54 - so oil prices are up solidly year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.54 per gallon. A year ago prices were at $2.34 per gallon - so gasoline prices are up 20 cents per gallon year-over-year.(image)



Goldman: "Recession Risk is Low … For Now"

2018-01-15T10:46:05.590-05:00

A few excerpts from a note by Goldman Sachs economists:
• We expect strong global growth this year, given firm current momentum, easing financial conditions, and supportive fiscal policy. But high asset valuations and the prospect of labor market overheating suggest that the recent strength might be “too much of a good thing” further down the road.
...
• Our model suggests that near-term recession risk is low. The probability of a downturn is also below normal over the next 2-3 years, but has been rising steadily in economies that are seeing unusually easy financial conditions and tightening labor markets. These include the US, Germany, the UK and a number of smaller G10 economies ...

• Although our model is subject to a number of caveats, it confirms that we need to worry little about recession risk this year. But our analysis suggests that we should pay attention to measures of imbalances that signal rising recession risk further down the road.
CR Note: My view is recession risk is low this year, and I expect further growth in the US in 2018.(image)



Bank Failures by Year

2018-01-14T08:09:04.375-05:00

In 2017, eight FDIC insured banks failed. This was up from 5 in 2016.

The great recession / housing bust / financial crisis related failures are behind us.

The first graph shows the number of bank failures per year since the FDIC was founded in 1933.

(image) Click on graph for larger image.

Typically about 7 banks fail per year, so the 8 failures in 2017 was close to normal.

Note: There were a large number of failures in the '80s and early '90s. Many of these failures were related to loose lending, especially for commercial real estate.  Also, a large number of the failures in the '80s and '90s were in Texas with loose regulation.

Even though there were more failures in the '80s and early '90s then during the recent crisis, the recent financial crisis was much worse (larger banks failed and were bailed out).

(image) The second graph includes pre-FDIC failures. In a typical year - before the Depression - 500 banks would fail and the depositors would lose a large portion of their savings.

Then, during the Depression, thousands of banks failed. Note that the S&L crisis and recent financial crisis look small on this graph.(image)



Schedule for Week of Jan 14, 2018

2018-01-13T08:11:06.828-05:00

The key economic report this week is December Housing Starts.

For manufacturing, December industrial production, and the January New York, and Philly Fed manufacturing surveys, will be released this week.

----- Monday, Jan 15th -----

All US markets will be closed in observance of Martin Luther King Jr. Day

----- Tuesday, Jan 16th-----

8:30 AM ET: The New York Fed Empire State manufacturing survey for January. The consensus is for a reading of 18.6, up from 18.0.

----- Wednesday, Jan 17th -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

(image) 9:15 AM: The Fed will release Industrial Production and Capacity Utilization for December.

This graph shows industrial production since 1967.

The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 77.3%.

10:00 AM: The January NAHB homebuilder survey. The consensus is for a reading of  73, down from 74 in December. Any number above 50 indicates that more builders view sales conditions as good than poor.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, Jan 18th -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 250 thousand initial claims, up from 261 thousand the previous week.

(image) 8:30 AM: Housing Starts for December.

This graph shows single and total housing starts since 1968.

The consensus is for 1.280 million SAAR, down from 1.297 million SAAR in November.

8:30 AM: the Philly Fed manufacturing survey for January. The consensus is for a reading of 25.0, down from 26.2.

----- Friday, Jan 19th -----

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for January). The consensus is for a reading of 97.0, up from 95.9.(image)



Oil Rigs "Total US oil rigs were up 10 to 752 this week"

2018-01-12T14:48:51.634-05:00

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Jan 12, 2017:
• Total US oil rigs were up 10 to 752 this week

• Horizontal oil rigs were up 4 to 654

• We have expected rig counts to rise sharply in recent weeks, and we saw some – but still insufficient – vindication this week.
...
• Incredible price action again this week, with WTI breaching the $64 threshold, but with the Brent spread falling below $6.00.
(image) Click on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.(image)



Key Measures Show Inflation Increased in December

2018-01-12T11:16:17.789-05:00

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 0.3% (3.5% annualized rate) in December. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.8% 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 rose 0.1% (1.8% annualized rate) in December. The CPI less food and energy rose 0.3% (3.4% annualized rate) on a seasonally adjusted basis.
Note: The Cleveland Fed released the median CPI details for December here.

(image) 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 2.4%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy rose 1.8%. Core PCE is for November and increased 1.5% year-over-year.

On a monthly basis, median CPI was at 3.5% annualized, trimmed-mean CPI was at 2.8% annualized, and core CPI was at 3.4% annualized.

Using these measures, inflation picked up a little year-over-year in December.  Overall, these measures are close, but still mostly below, the Fed's 2% target  (Median CPI is slightly above).(image)



Retail Sales increased 0.4% in December

2018-01-12T08:43:22.012-05:00

On a monthly basis, retail sales increased 0.8 percent from November to December (seasonally adjusted), and sales were up 5.4 percent from December 2016.

From the Census Bureau report:
Advance estimates of U.S. retail and food services sales for December 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $495.4 billion, an increase of 0.4 percent from the previous month, and 5.4 percent above December 2016. ... The October 2017 to November 2017 percent change was revised from up 0.8 percent to up 0.9 percent
(image) Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 0.4% in December.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

(image) Retail and Food service sales, ex-gasoline, increased by 4.9% on a YoY basis.

The increase in December was slightly below expectations, however sales in October and November were revised up. A solid report.(image)



Friday: Retail Sales, CPI

2018-01-11T20:22:18.581-05:00

Friday:
• At 8:30 AM ET: Retail sales for December will be released.  The consensus is for a 0.5% increase in retail sales.

• Also at 8:30 AM: The Consumer Price Index for December from the BLS. The consensus is for a 0.1% increase in CPI, and a 0.2% increase in core CPI.

• At 10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for November.  The consensus is for a 0.3% increase in inventories.(image)



Oil Prices Higher, Up 19% Year-over-year

2018-01-11T13:40:52.747-05:00

From Bloomberg: Crude Oil Prices Are Up 49%, and It’s Not All Thanks to OPEC
The bottom line: A 49 percent surge in benchmark North American crude futures since late June, putting prices at a three-year high.
...
"We expect inventories are going to build this year -- slightly,” said Michael Cohen, Barclays Head of Oil Markets Research, in an interview on Bloomberg TV. "You’re going to see a bunch of new crude supply coming on to the market this year from the U.S. So all in all, on a balanced basis, we don’t see the kind of shortage to bring us to $80 for a sustainable basis."
(image) Click on graph for larger image

The first graph shows WTI and Brent spot oil prices from the EIA. (Prices today added).

According to Bloomberg, WTI is at $64.29 per barrel today, and Brent is at $69.66.

Prices really collapsed at the end of 2014 - and then rebounded a little - and then collapsed again at the end of 2015 and in early 2016.

Now, with the global economy stronger and less domestic production, oil prices are rising.

(image) The second graph shows the year-over-year change in WTI based on data from the EIA.

Six times since 1987, oil prices have increased 100% or more YoY.  And several times prices have almost fallen in half YoY.

Currently WTI is up about 19% year-over-year.(image)



Sacramento Housing in December: Sales down 8% YoY, Active Inventory up 8% YoY

2018-01-11T11:34:45.900-05:00

Note: I'm going to retire the graph below.  The purpose was to see when the market shifted from distressed sales to more conventional sales.  For several years, not much changed. But in 2012 and 2013, we saw some significant changes with a dramatic shift from distressed sales to more normal equity sales.  Now almost all of the sales are conventional equity sales.

Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In December, total sales were down 8.0% from December 2016, and conventional equity sales were down 3.8% compared to the same month last year.

In December, 2.9% of all resales were distressed sales. This was up from 2.3% last month, and down from 4.8% in December 2016.

Sacramento Realtor Press Release: 2017 closes with less sales, less inventory, higher sales price
December recorded 1,408 closed escrows, a .9% increase from November(1,396 sales) and an 8% decrease from last year (1,530 sales).
...
Active Listing Inventory decreased, dropping 28.9% from 2,216 to 1,575. The Months of Inventory also decreased, dropping 31.3% from 1.6 Months to 1.1. A year ago the Months of inventory was 1 and Active Listing Inventory stood at 1,458 listings (7.4% below the current figure).
emphasis added
Here are the statistics.

(image) Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional (equity) sales that started in 2012 (blue) as the percentage of distressed sales declined sharply.

Active Listing Inventory for single family homes increased 8.0% year-over-year (YoY) in November.  This is the third consecutive month with a YoY inventory increase, following 29 consecutive months with a YoY decrease in inventory in Sacramento.

Cash buyers accounted for 12.9% of all sales - this has been generally declining (frequently investors).

Summary: This data suggests a normal market with few distressed sales, and less investor buying - but with limited inventory.  Keep an eye on inventory - this might be a change in trend.(image)



Weekly Initial Unemployment Claims increase to 261,000

2018-01-11T09:20:26.586-05:00

The DOL reported:
In the week ending January 6, the advance figure for seasonally adjusted initial claims was 261,000, an increase of 11,000 from the previous week's unrevised level of 250,000. The 4-week moving average was 250,750, an increase of 9,000 from the previous week's unrevised average of 241,750.

Claims taking procedures continue to be disrupted in the Virgin Islands. The claims taking process in Puerto Rico has still not returned to normal.
emphasis added
The previous week was unrevised.

The following graph shows the 4-week moving average of weekly claims since 1971.

(image) Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 250,750.

This was higher than the consensus forecast. The low level of claims suggest relatively few layoffs.(image)