MBA Mortgage Applications (week ended 4/24/2020)

- Purchase Index week/week +12.0%. Previous weeks were -2.0%., -2.0%, -12.0% -11.0%, -15.0%, -1.0%, 6.0%, -3.0%, +6.0%, -3.0%, -6.0%., -10.0%, and +5.0%
- Refinance Index Week/Week -7.0%. Previous weeks were -1.0%, +10.0%, -19.0%, +26.0%, -34.0%, -10.0%, 79%, +26.%, -1.0%, -8.0%, +5.0%, +15.0%, and +8.0%
- Composite Index Week/Week -3.3%. Previous weeks were  -0.3%, +7.3%, -17.9%, +15.3%, -29.4%, -8.4%, 55.4%, +15.1%, +1.5%, -6.4%, +1.1%, 5.0%, and +7.2%

This makes 6 consecutive weeks of decline in purchase applications. While it is clear that sales of existing homes will not recover any time soon there is an opportunity here for buyers

who are confident of their income in the near future. Buyers may find that theirs is the only offer rather than the situation of a year or two ago when it would have been one of 25 offers.

Source:  Mortgage Bankers Association

GDP (1stQ2020)

- Real GDP quarter/quarter, seasonally adjusted annualized   -4.8%. Previous was +2.1%
- Real Consumer Spending quarter/quarter, seasonally adjusted annualized -7.6%. Previous was +1.8%
- GDP price index quarter/quarter, seasonally adjusted annualized   1.3%. Previous was +1.3%

The strangest thing about this is that the largest contributor to the decline in Consumer Spending was a 2.25% drop in Health Care expenses. People avoided elective surgery and dental visits.   The second largest drop was in motor vehicles sales.

A drop in GDP was anticipated. Since recession is usually defined as 2 consecutive quarters of decline in GDP we will be in recession when 2ndQ2020 GDP is announced at the end of July.

This recession in unlike any other because it is not caused by bad fiscal, monetary or regulatory policies but is the result of government stay ay home mandates which shut down much economic activity.
 
Moreover, both the fiscal (massive deficit spending) and monetary (massive increases in  money supply) have already been deployed.

 

Personal Income and Outlays

Current-dollar personal income increased $95.2 billion in the first quarter, compared with an increase of $144.1 billion in the fourth quarter.

Disposable personal income increased $76.7 billion, or 1.9 percent, in the first quarter, compared with an increase of $123.7 billion, or 3.0 percent, in the fourth quarter. Real disposable personal income increased 0.5 percent, compared with an increase of 1.6 percent.

Personal outlays decreased $253.5 billion, after increasing $118.8 billion. The decrease was mainly accounted for by a decrease in PCE.

Personal saving was $1.60 trillion in the first quarter, compared with $1.27 trillion in the fourth quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.

Recovery from this and the drop we will see in 2ndQ GDP will take 3-5 years. The questions are to what extent the COVID crisis is judged to be passed and whether or not it will reappear in 2021.

Source:  Bureau of Economic Analysis  Details:  https://www.bea.gov/data/gdp/gross-domestic-product

 

Pending Home Sales Index  (March 2020)

- Pending Home Sales Index month/month  -20.8%. Previous was +2.2%
- Pending Home Sales Index  88.2. Previous was 111.4

If this continues there will be more TV shows about people buying homes than there will be people buying homes.

To be a bit more serious this is creating buying opportunities. Places with homes which can be purchased using conforming loans will be in better shape tham place necessitating jumbo loans.

Source: National Association of Realtors

Good Trade Deficit  (March 2020)

- deficit  $64.2 billion. Previous was $59.9 billion
- Exports change -6.7%. Previous was +0.5%
- Imports change -2.4%. Previous was -2.6%

Source:  Census 

Retail Inventories (March 2020)

- month/month change  0.9%. Previous was -0.3%

This is a component of 1stQ2020 GDP.

Source:  Census   

Wholesale Inventories (March 2020)

This is a component of 1stQ2020 GDP.

- month/month change -1.0%.  Previous was -0.5%

Source:  Census

Redbook Chain Store Sales (week ended 4/25/2019)

- Same Store Sales year/year -8.1. Previous was -6.9.
- Same Store Sales month/month -11.8%. Previous was -10.6.

We are now seeing the dramatic effect of the shutdown on retail.  Retail has been hard hit in terms of sales and jobs and some of the largest retail chains will declare bankruptcy.
COVID hit fast-forward on the "retail apocalypse"

Source: Redbook Research Inc.

 
S&P Corelogic Case-Shiller HPI (February 2020)

- 20-city, seasonally adjusted, month/month 0.4%. Previous was +0.3%
- 20-city, not seasonally adjusted, month/month 0.5%. Previous was 0.0%
- 20-city, not seasonally adjusted. year/year 3.5%. Previous was 3.1%

This is pre-COVID data.   We are not likely to see the effects of unemployment and shutdown until the April report which will be issued in June.

 
Consumer Confidence (April 2020)

- Consumer Confidence   86.9. Previous was 118.8

This measures consumers' intent to spend in the near future.

Source:  Conference Board

Initial Jobless Claims  (week ended 4/18/2020)

- Initial Claims seasonally adjusted   4,427,000. Previous was 5,237,000
- Initial Claims unadjusted, totaled 4,267,395  a decrease of 697,173 from  previous
- 4-week Moving Average seasonally adjusted 5,787,000. Previous was 5,507,000

In the last 7 weeks 36,122,000 people have filed Initial Unemployment claims.  The March BLS jobs report showed that the size of the Civilian Labor Force was 162,913,000. 22% of the labor force has filed for unemployment in these 7 weeks.

Source:  Labor Department  Details: https://www.dol.gov/ui/data.pdf

 
PMI Composite Flash  (April 2010)

- Composite   27.4. Previous was 40.5
- Manufacturing  36.9. Previous was 49.2
- Services   27.0. Previous was 39.1

Source:  Markit Economics  Details:  https://www.markiteconomics.com/public

 

New Home Sales  (March 2020)

- New Home Sales seasonally adjusted, annualized rate 627,000. Previous was 741,000

This is down 15.4% month/month and 9.5% year/year

Source: Census Bureau  Details:  https://www.census.gov/construction/nrs/pdf/newressales.pdf

MBA Mortgage Applications (week ended 4/17/2020)

- Purchase Index week/week -2.0%. Previous weeks were -2.0%, -12.0% -11.0%, -15.0%, -1.0%, 6.0%, -3.0%, +6.0%, -3.0%, -6.0%., -10.0%, +5.0%, and -2.0%
- Refinance Index Week/Week -1.0%. Previous weeks were +10.0%, -19.0%, +26.0%, -34.0%, -10.0%, 79%, +26.%, -1.0%, -8.0%, +5.0%, +15.0%, +8.0%, and -2.0%
- Composite Index Week/Week -3.0%. Previous weeks were  +7.3%, -17.9%, +15.3%, -29.4%, -8.4%, 55.4%, +15.1%, +1.5%, -6.4%, +1.1%, 5.0%, +7.2%, and -1.2%

This makes 6 consecutive weeks of decline in purchase applications. While it is clear that sales of existing homes will not recover any time soon there is an opportunity here for buyers who are confident of their income in the near future. Buyers may find that theirs is the only offer rather than the situation of a year or two ago when it would have been one of 25 offers.

Source:  Mortgage Bankers Association

 

 

FHFA House Price Index (February 2020)

- month/month 0.7%. Previous was 0.5%
- year/year 5.7%. Previous was 5.4%

This is for homes where sales closed in February purchased with conforming loans. It may take two more months for the effect of COVID to be evidenced in the Home Price Index. 

Source:  FHFA  Details: https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx

Redbook Chain Store Sales (week ended 4/18/2019)

- Same Store Sales year/year -6.9. Previous was -2.0.
- Same Store Sales month/month -10.6. Previous was -8.3%.

We are now seeing the dramatic effect of the shutdown on retail.  Retail has been hard hit in terms of sales and jobs and some of the largest retail chains will declare bankruptcy. COVID hit fast-forward on the "retail apocalypse"

Source: Redbook Research Inc.

 

 

Existing Home Sales  (March 2020)

- Existing Home Sales seasonally adjusted, annualized rate 5,270,000. Previous was 5.760,000
- Existing Home Sales month/month -8.5%. Previous was 6.5%

These are transactions which closed in March. These were ratified in January and February.

After home sales started declining in 2007 NAR started misrepresenting home sales.  NAR's statement was that it made this mistake because it inaccurately changed the adjustment it made to sales which took place outside MLS. Hopefully this will not start happen again. There are entities such as CoreLogic which now have more believability.

Markets need accurate data if participants are to act in their best interests.

Source: National Association of Realtors  Details: https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales  

Leading Economic Indicators (March 2020)

- LEI month/month -6.7%. Previous was -0.2%.

This is calculated from 10 forward looking indicators such as building permits and factory orders and
is supposed to forecast economic activity 3-6 months into the future. The present circumstances are unique.
Fiscal and monetary policies to fix what's wrong are already in place waiting for the starter's pistol.

Source:  Conference Board 

Housing Starts (March 2020)

- Starts seasonally adjusted, annualized rate 1,216,000. Previous was 1,564,000
- Permits seasonally adjusted, annualized rate 1,353,000. Previous was 1,452,000

Starts has suffered and will continue to do so as uncertainty continues. The sad part is that we peaked at 2,147,000
in November 2017 and then bottomed at 505,000 in March 2009.  It took until September 2019 to get back above 1,500,000
which is the level needed to keep pace with population growth and units lost to disaster or scrapped. Per NAHB estimated
Starts are even lower at 1,084,000.

Source:  Census  Details:  https://www.census.gov/construction/nrc/pdf/newresconst.pdf

 

Initial Jobless Claims (week ended 4/11/2020)

- Initial Claims seasonally adjusted  5,245,000. Previous was 6,615,000.
- Initial Claims unadjusted, totaled 4,971,823 a decrease of 1,239,576 from the previous week.
- 4-week Moving Average seasonally adjusted  5,508,000. Previous was 4,268,000

In the last 6 weeks 31,965,000 people have filed Initial Unemployment claims.

Source:  Labor Department  Details: https://www.dol.gov/ui/data.pdf

MBA Mortgage Applications (week ended 4/10/2020)

- Purchase Index week/week -2.0%. Previous weeks were -12.0% -11.0%, -15.0%, -1.0%, 6.0%, -3.0%, +6.0%, -3.0%, -6.0%., -10.0%, +5.0%, -2.0%, and +16.0%
- Refinance Index Week/Week +10.0%. Previous weeks were -19.0%, +26.0%, -34.0%, -10.0%, 79%, +26.%, -1.0%, -8.0%, +5.0%, +15.0%, +8.0%, -2.0%, and +43.0%
- Composite Index Week/Week +7.3%. Previous weeks were  -17.9%, +15.3%, -29.4%, -8.4%, 55.4%, +15.1%, +1.5%, -6.4%, +1.1%, 5.0%, +7.2%, -1.2% and +30.2%

The drop in purchase applications is a result of people staying at home rather than holding open houses.  This is likely a sign that the real estate business will be hit hard by COVID.

Most sales are of existing homes but  we will soon see a large drop in Housing Starts.  This will be driven by uncertainty on the part of builders.  A reduction in the number of potential buyers will reduce both the number of sales and the prices new homes sell for. This will be especially true if people believe that COVID will reoccur and cause job loss at the end of 2010. Those are not factors which encourage building.

Source:  Mortgage Bankers Association

 
Retail Sales  (March 2020)

- Retail Sales month/month  -8.7%. Previous was -0.4%
- Retail Sales less autos month/month -4.5%. Previous was -0.4%
- Less Autos & Gas month/month  -3.1%. Previous was -0.2%

The data shows a massive but expected dislocation. People stopped buying cars, gasoline and clothing and instead purchased food and liquor to eat at home.

The large drop will drive 1stQ2020 GDP negative and with 2ndQ in all likelihood being worse we will be in recession.  This recession will not be  like any other.  This is not systemic but episodic.  Both the fiscal and monetary policies to end it are already in place.

Source:  Census  Details:  https://www.census.gov/retail/marts/www/marts_current.pdf

Industrial Production  (March 2020)

- Production month/month -5.4%. Previous was +0.5%
- Manufacturing month/month -6.3%. Previous was -1.%
- Capacity Utilization Rate  72.7%. Previous was 77.0%

Source:  Federal Reserve  Details:  https://www.federalreserve.gov/releases/g17/current/default.htm

 
Business Inventories  (February 2020)

- Inventories month/month -0.4%. Previous was -0.3%

This is a component of 1stQ GDP.

Source:  Census  Details:  https://www.census.gov/mtis/www/data/pdf/mtis_current.pdf

 
Housing Market Index  (April 2020)

- Housing Market Index   30. Previous was  72

Housing Starts will fall dramatically.

Source: National Association of Home Builders

Import and Export Prices (March 2020)

- Import Prices month/month -2.3%. Previous was -0.7%
- Export Prices month/month -1.6%. Previous was -1.1%
- Import Prices year/year -4.1%. Previous was -1.3%
- Export Prices year/year -3.6%. Previous was -1.3%

Lower demand = lower prices.

Source: Bureau of Labor Statistics  Details: https://www.bls.gov/news.release/ximpim.nr0.htm

 

Redbook Chain Store Sales (week ended 4/11/2019)

- Same Store Sales year/year -2.0%. Previous was +5.3%.
- Same Store Sales month/month -8.3%. Previous was +0.9%.

We are now seeing the dramatic effect of the shutdown on retail.  Retail Sales for March will be published tomorrow and the drop almost certainly will be so severe that 1stQ GPD will be negative.

Source: Redbook Research Inc.

CPI (March 2020)

- CPI month/month      -0.4%. Previous was +0.1%
- CPI year/year         1.5%. Previous was +2.3%
- CPI core (less food & energy) month/month -0.1%. Previous was +0.2%
- CPI core (less food & energy) year/year 2.1% . Previous was +2.4%

In the short term (next few month) the effects of the shutdowns consequent to COVID are deflationary because demand decreased. In the longer term we have heard talk of the enormous expansion of money supply by the Fed being inflationary.  I don't believe that to be a necessary consequence.  We had an enormous expansion of money supply when the Great Recession happened but inflation remained well-contained.

Source:  BLS  Details:  https://www.bls.gov/cpi/