MBA Mortgage Applications

- Purchase Index Week/Week -3.0 %. Previous weeks were -4.0%, +2.0%, -1.4%, +0.3%, and +4.0%.
- Refinance Index Index Week/Week -12.0 %. Previous weeks were -8.0%, +3.0%, +0.3%, +5.0% and +6.0%.
- Composite Index Index Week/Week -9.8 %.  Previous weeks were -7.3%, +7.0%, +1.8%, +0.2%, +4.8%, +4.5%.

The decrease in refinancing is due to rates having moved up. The decrease in the Purchase Index is more troubling for the housing market and the economy.  I do not believe that any significant number of people have been driven out of purchasing when rates are this low.

Existing Home Sales  (April 2013)

- Existing Home Sales (seasonally adjusted annualized rate) 4,970,000. Previous month was 4,920,000
- Existing Home Sales Month/Month Change  +0.6%. Previous was -0.6%
- Existing Home Sales Year/Year Change +9.7%.

What is more important is that supply is starting to show some elasticity with 230,000 units added making the supply go from 4.7 to 5.2 months of sales. The "Elasticity" of any commodity means that supply should increase when price increases.  Inelastic supply had been caused by so many underwater potential sellers.

Existing Home Sales are at a 3 year high but just barely above (by 1,000) where they were last October.  Existing Home Sales have been flat for 7 months.

Chain Store Sales Data Confuses.

Chain Store Sales (week ended 5/18/2013)

ISCS/Goldman

- Store Sales Week/Week +0.2%. Previous was -2.0%
- Store Sales Year/Year +3.1%. Previous was 1.2%. 

Redbook

- Store Sales Year/Year +2.4%. Previous was +2.8%.

For the month of May Redbook sees a 0.5% gain from April and ICSS sees the same period as flat at best.

The Consumer Metrics Institute Index of online discretionary spending has been flat for the past 8 days.

While the instinct is simply to throw up one's hands at such contradictory data I think it best to conclude that Chain Store Sales are seeing modest growth.

Treasury markets will pay particular attention to speeches today by two Regional Fed Presidents and Bernanke's testimony before Congress tomorrow.  Markets expect some indication as to when QE III will end or, at least, start decreasing in the size of the monthly increase in money supply.

 

Manufacturing Still Hurting

Chicago Federal National Activity Index  (April 2013)

- Index Level -0.53.  Previous was -0.23. 

This is a national index produced by the Chicago Fed.  This is not a survey index but rather a  weighted average of 85 existing monthly indicators of  economic activity at the national level.  Just as every other recent manufacturing index, this shows that manufacturing in the U.S. is not recovering.  Manufacturing jobs in the U.S. are simply not likely to return despite media hype at the end of last year.  We will have periods of growth but nothing resembling a Renaissance.

Consumer Sentiment and Leading Indicators up.

Leading Economic Indicators (April 2013)

- LEI Month/Month +0.6%. Previous was -0.1%.

LEI is produced by the Conference Board and weighs the 10 following bits of data:

- Average weekly hours, manufacturing
- Average weekly initial claims for unemployment insurance
- Manufacturers’ new orders, consumer goods and materials
- ISM Index of New Orders
- Manufacturers' new orders, nondefense capital goods excluding aircraft orders
- Building permits, new private housing units
- Stock prices, 500 common stocks
- Leading Credit Index™
- Interest rate spread, 10-year Treasury bonds less federal funds
- Average consumer expectations for business conditions.

The Conference Board is a 501(c)(3) non-profit business membership and research group organization. 

U Michigan Consumer Sentiment (May 2013)

- Sentiment Index 83.7.  Previous was 76.4.

This is supposed to measure consumers' predisposition to spend.

Housing Starts Weaker, Initial Jobless Claims up.

Housing Starts  (April 2013)

Starts (seasonally adjusted, annualized) 853,000. Previous was 1,036,000
Permits (seasonally adjusted, annualized) 1,017,000. Previous was 902,000.

Housing Starts are at a 5 month low.

Housing Starts are in units.  An 80 unit apartment building is 80 Housing Starts. Last month multifamily Starts fell 38.9% and single-family fell 2.1%.  A lot of the recent increase in Housing Starts is in what will become rental units.  One of the effects of the bursting of the housing bubble was that lending standards tightened and fewer people can qualify for a mortgage to own their own home.

Consumer Price Index (April 2013)

- CPI core (less food & energy) Month/Month  0.1%. Previous was +0.1%.
- CPI core (less food & energy) Y/Y change  1.7%. Previous was +1.9%.
- CPI Month/Month -0.4%. Previous was -0.2%
- CPI Year/Year   1.1%. Previous was 1.5%

As I say each month, core is what is important for the economy because it filters out the jittery energy and food components.  The present data is ideal, showing core inflation well-contained despite a gigantic increase in monetary base and it shows overall CPI down. Folks have more money for discretionary spending, at least more money in April than March.

Jobless Claims  (week ended 5/11/2013)

- New Claims (seasonally adjusted)  360,000. Previous was 323,000
- Unadjusted Claims totaled 318,203 in the week ending May 11, a decrease of 15,436 from the previous week.
- 4-week Moving Average 339,250. Previous was 336,750.

I do not see the increase as much more that a consequence of the way the Labor Department adjusts the weekly data.  Sometimes the adjustments overwhelm the actual data.  What I find both amusing and distressing is the way the media and the markets look only at the surfaces of this and other fundamentals.

Philadelphia Federal Reserve Survey (May 2013)

- General Business Conditions -5.2. Previous was +1.3%.  This as well as yesterday's Empire State Index for NY State and other recent Fed surveys make it clear that it is still difficult for businesses to justify manufacturing in the United States.  

Mortgage Applications and Manufacturing Weaker.

MBA Purchase Applications (week ended 5/10/2013)

- Purchase Index Week/Week  -4.0%. Previous weeks were +2.0%,-1.4%, +0.3%, and +4.0%%.
- Refinance Index Week/Week -8.0 %. Previous was +8.0%, +3.0%, +0.3%, +5.0% and +6.0%.
- Composite Index Week/Week -7.3%. Previous was +7.0%, +1.8%, +0.2%, +4.8%, +4.5%.

The dip in refinancing is, as always, driven by increased rates.  The Purchase Index only backs off the previous gain and could indicate that the purchase market is improving rather than booming.  Tightened mortgage lending standards are subduing any increases purchases.  It is the Purchase Index which is the important macroeconomic indicator.  Home buying spurs consumer spending and GDP.

NAHB Housing Market Index (May 2013)

- Index is 44. Previous was 42.  This is a survey of Home Builders. A reading below 50 indicates a pessimistic view on the part of builders.

Last month NAR (National Association of Realtors) indicated that supply was 17% below the previous year.  If supply is low and if prices have increased then there should be more home building.

Producer Price Index  (April 2013)

- PPI Month/Month -0.7%
- PPI Year/Year 0.7%
- PPI core (less food & energy)  Month/Month  0.1%
- PPI core (less food & energy)  1.7%

Both food and gasoline prices were down.  The important datum is core and it is sitting pretty.

 

Industrial Production (April 2013)

- Production Month/Month -0.5%. Previous was +0.4%.
- Capacity Utilization Rate 77.8%. Previous was 78.5%.
- Manufacturing Month/Month -0.4%. Previous was -0.1%.

That data is ugly and indicative of the continued disappearance of domestic manufacturing.

Empire State Manufacturing Survey  (May 2013)

- General Business Conditions Index -1.43.  Previous was 3.05.

I am not even sure why we continue to look at this.  New York State used to have many cities where manufacturing was big.  This decline started decades ago.

Chain Store Sales (week ended 5/11/2013)

ICSC-Goldman Store Sales

- Store Sales Week/Week -2.0%. Previous was -1.0%
- Store Sales Year/Year +1.2%. Previous was +2.4%

Redbook

- Store Sales Year/Year change +2.8%. Previous was +2.3%.

This is another case of these weekly running surrogates for the Commerce Department's Retail Sales giving opposite indications.

The Consumer Metrics Institute Absolute Demand Index (http://www.consumerindexes.com/) is a near real time measurement of online shopping for discretionary items and has been trending down for the past 8 days.

Import and Export Prices (April 2013)

Export Prices Month/Month -0.7%
Export Prices Year/Year -0.9%
Import Prices Month/Month -0.5%
Import Prices Year/Year -2.6%

Import and Export prices have been flat for 12 months.  This is
symptomatic of recession in the EU and slow growth in the U.S. Demand is soft.

NFIB Small Business Optimism Index (April 2013)

- Index Level 92.1. Previous was 89.5. 

Components Point to Flat GDP

Retail Sales (April 2013)

- Retail Sales Month/Month change +0.1%. Previous was -0.4%
- Retail Sales less autos  Month/Month change -0.1%. Previous was -0.4%
- Less Autos & Gas  Month/Month change +0.6%. Previous was -0.1%.

Retail Sales are consumer spending and constitute the largest component of GDP.  This data shows flat consumer spending and the sensitivity of discretionary spending to gasoline prices.

Business Inventories (March 2013)

- Inventories Month/Month change +0.0.  Previous was +0.1%.

This is the "I" in GDP =C+I+G+(X-M).  Together with Retail Sales which is the "C" in GDP, today is a picture of flat GDP.

 

Monetary Base

There are no fundamentals today but yesterday's H.3 report from the Federal Reserve is of some interest.  It shows Monetary Base over $3.040 trillion.  Monetary base is high-powered money because it stands ready to be spent or loaned.  Monetary base consists of currency either in circulation or in bank vaults plus excess bank reserves held by the Fed.  Excess reserves at the Fed are $1.769 trillion.  Both Monetary Base and Excess Reserves are at all-time highs.

The mortgage business is an example of government policies at cross-purposes:  1) pump up money supply and 2) tighten lending standards.  

Initial Jobless Claims (week ended 5/4/2013)

- New Claims 323,000.  Previous was 324,000
- 4-week Moving Average  336,750. Previous was 342,250.
- Unadjusted Claims totaled 298,497 a decrease of 2,638 from the previous week.

This data is positive for the economy but is not the entire employment picture.  The number of new jobless claims each month is only about 12% of the size of the number of people moving in or out of the jobs market. For example, the number of people who lose temporary jobs and are not eligible for unemployment is about 4 times the size of those eligible for unemployment.

Wholesale Trade (March 2013)

- Inventories Month/Month +0.4%. Previous was -0.3%.

This is the "I" component of the GDP formula GDP = C+I+G+(X-M).  It has the annoying habit of being bouncy because it needs to both anticipate retail sales and correct for any previous inaccuracies in trying to match inventories with sales.  Data for the past couple of months has been benign.