GDP: Q4 2015 (First Estimate)

Today, the Bureau of Economic Analysis (BEA) released their first "estimate" of the Q4 2015 GDP report showing that the economy grew weakly in the fourth quarter with real GDP improving at an annualized rate of 0.7% from Q3 2015.

On a year-over-year basis, real GDP increased 1.8% while the quarter-to-quarter non-annualized percent change was an increase of 0.17%.

Notable categories of weakness include, Nonresidential investment in fixed structures and equipment which declined at 1.8%, Exports of goods which declined at 5.4%, while notable categories of strength include Personal Consumption Expenditures which increased at 2.2% and residential fixed investment which increased 8.1%.

Kansas City Fed Manufacturing Survey: January 2016

The Federal Reserve Bank of Kansas City, like other district FRBs (New York, Philadelphia, Richmond and Dallas), tracks its region’s manufacturing activity by surveying a number of important indicators such as general activity, production, shipments, orders, employment and prices for raw materials and finished products.

The latest results are indicating that the assessments of manufacturing activity remained at a contraction level of -9 in January with more component measure declining than increasing while prices paid for raw materials declined to -14.

It's important to note that the current level of the Composite index is roughly equivalent to the level seen during the middle of the Great Recession seemingly indicating, yet again, that our current expansion has drawn to a close.

Pending Home Sales: December 2015

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for December showing that pending home sales increased only slightly with the seasonally adjusted national index rising 0.1% from November to stand 4.2% above the level seen in December 2014.

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Advance Report on Durable Goods Shipments, Inventories and Orders: December 2015

Today, the U.S. Census Department released its advanced monthly Durable Goods Manufacturers’ Shipments, Inventories and Orders Report for December showing new orders for durable goods declining a notable 5.1% from November and falling -0.58% below the level seen in December 2014.

Much of the weakness came from the sub-components of new orders of non-defense aircraft parts (down 29.4%), communications equipment (down 20.5%), capital goods (down 18%), transportation equipment (down 12.4%), machinery (down 5.6%),

Weekly Unemployment Claims: Initial and Continued January 28 2016

Today’s jobless claims report showed a decrease to initial unemployment claims and an increase to continued unemployment claims as seasonally adjusted initial claims remained just below the 300K level.

Seasonally adjusted “initial” unemployment claims declined by 16,000 to 278,000 claims while seasonally adjusted “insured” claims increased by 49,000 to 2.268 million resulting in an “insured” unemployment rate of 1.7%.

New Home Sales: December 2015

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for December showing sales jumped a notable 10.8% from November rising 9.9% above the level seen in December 2014 but still remaining near an historically low level with 544K SAAR units.

The monthly supply declined to 7.1 months while the median selling price declined 2.73% and the average selling price declined 4.89% from the year ago level.

The following chart show the extent of sales decline to date (click for full-larger version).

Reading Rates: MBA Application Survey – January 27 2016

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 13 basis points to 3.91% since last week while the purchase application volume increased 5% and the refinance application volume increased 11% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

FHFA Monthly Home Prices: November 2015

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that in November, nationally, home prices increased 0.54% from October rising 5.92% above the level seen in November 2014.

The FHFA monthly HPI are formulated from home purchase information collected from mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac.

S&P/Case-Shiller: November 2015

Today's release of the S&P/Case-Shiller (CSI) home price indices for November reported that the non-seasonally adjusted National index increased from October with prices rising 0.13% while the non-seasonally adjusted Composite-10 city index increased 0.02% and the Composite-20 city index increased 0.06% over the same period.

On an annual basis, the National index increased 5.35% above the level seen in November 2014 while the Composite-10 city index increased 5.35% and the Composite-20 city index increased 5.83% over the same period.

On a peak basis, all three indices still show significant peak declines slumping 4.83% for the National index, -12.70% for the Composite-10 city index and -11.46% for the Composite-20 city index on a peak comparison basis.

The Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey: January 2016

Today, the Federal Reserve Bank of Dallas released their latest read on manufacturing in their region indicating that assessments of manufacturing activity plunged in January with the current general business activity index declining to a recessionary level of -34.6 while the future general business activity index collapsed to -24.0.

These results are an indication (consistent with other regional and national manufacturing activity data-points) that the U.S. manufacturing sector has clearly slumped into recessionary levels as of late and provides yet another likely harbinger of what is to come in 2016 for the general economy.

You’ve Gotta ask Yourself One Question

Do you feel your economy will get lucky? … Well do you, punk!?

I for one believe that the path of least resistance is down at this point and to that end I offer the following data-point coming from today’s release of the Chicago National Activity Index (CFNAI).

The following chart shows the very sensitive diffusion index that the Chicago Fed distills from the other CFNAI measures.

Notice that while this measure improved slightly from last month, its current level of -0.12 is notably weak as well comes just two months after the October level of -0.23, the lowest level seen during our latest economic expansion and caps an entire year of values that appear to be generally trending down.

The Chicago Fed considers the crossing of -0.35 of this measure as a “[signal] of the increased likelihood of the beginning (from above) and the end of a recession (from below)”, so while we are not yet at that threshold, given the current trends (recessionary manufacturing sector, mounting inventories, deflating commodities, falling stocks and wealth effect, etc.) you’ve got to ask yourself one question… will the economy get lucky?

Existing Home Sales Report: December 2015

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for December showing unusually strong sales with total home sales jumping 14.7% since November climbing 7.7% above the level seen in December 2014.

Single family home sales also increased notably with sales surging 16.1% from November and climbing 7.1% above the level seen in December 2014 while the median selling price increased 8.0% above the level seen a year earlier.

Inventory of single family homes decreased notably, falling 12.7% from November to 1.58 million units, 3.7% below the level seen in December 2014 which, along with the sales pace, resulted in a notably tight monthly supply of 3.9 months.

While NAR cites December's surge in sales coming from effects of the implementation of the "Know Before You Owe" regulations, in all likeliness, much this surge in home buying has come as a result of buyers coming off the sidelines in the face of increased rates as the Fed initiated the long awaited "lift off" in December.

It will be interesting to see to what extent this buying will persist in coming months particularly in light of additional speculation of Fed rate hikes.

It's important to note that there has been little to no movement in the 30-Year Conventional Mortgage rate since the Fed's December announcement which clearly affirms the fact that while the Fed is seeking to guide the short end of the rate curve up, they are also still working to tether the long end down by reinvesting principle payments coming from past MBS purchases back into mortgage additional new mortgage backed securities.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply.

The Chicago Fed National Activity Index: December 2015

The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated that the national economic activity remained weak in December with the index improving slightly to a weak level of -0.22 from a level of -0.36 a month earlier while the three month moving average weakened to a level of -0.24.

The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”.

The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth.

A value at or below -0.70 for the three month moving average of the national activity index (CFNAI-MA3) indicates that the national economy has either just entered or continues in recession.

The Philly Fed Business Outlook Survey: January 2016

The January release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) indicated continued weakness in the regions manufacturing activity with the current activity index improving but still remaining at a weak level of -3.5 while assessments the future activity weakened significantly, falling to a level of 19.1.

The above chart shows the current and future activity indexes both with their corresponding 3-month moving averages. The red line marks the threshold between contraction and expansion for these diffusion indexes.

Weekly Unemployment Claims: Initial and Continued January 21 2016

Today’s jobless claims report showed a increase to initial unemployment claims and a decline to continued unemployment claims as seasonally adjusted initial claims remained just below the 300K level.

Seasonally adjusted “initial” unemployment claims increased by 10,000 to 293,000 claims while seasonally adjusted “insured” claims declined by 56,000 to 2.208 million resulting in an “insured” unemployment rate of 1.6%.

New Residential Construction Report: December 2015

Today’s New Residential Construction Report showed weak results with total permit activity declining 3.9% since November while total starts declined 2.3% over the same period.

Single family housing permits, the most leading of indicators, increased 1.8% from November to 740K single family units (SAAR), and rose 8.0% above the level seen a year earlier but still remained well below levels seen at the peak in September 2005.

Reading Rates: MBA Application Survey – January 20 2016

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) increased 3 basis points to 4.04% since last week while the purchase application volume increased 4% and the refinance application volume increased 11% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

NAHB/Wells Fargo Home Builder Sentiment: January 2016

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that overall assessments of housing activity generally worsened in January with the composite HMI index remaining flat at 60 while the "buyer traffic" index declined to a level of 44.

Yellen’s Myth (Part 2)

While Fed Chair Janet Yellen is apparently not able to “see anything in the underlying strength of the economy that would lead me to be concerned” about recession, let’s take a look at just a few data points that may support the apparent myth that expansions "die of old age".

First, as part of the Census Department's "Manufacturing and Trade Inventories and Sales" report we find that the general ratio of inventory to sales has been climbing since late 2014 to currently stand at the highest level since mid-2009 indicating that inventories are likely mounting in the face of diminished demand.


Rail Freight Carloads, as published by the U.S. Bureau of Transportation Statistics, is currently reflecting a similar likely pullback in general demand with carloads registering annual declines for all of 2015, falling to a level last seen in early 2010.


Finally, the Dow Jones Transportation Average, a stock index representing the U.S. transportation sector, is now down over 20% from it's most recent high, the most substantial pullback seen since 2008's Great Recession.

Industrial Production and Capacity Utilization: December 2015

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing further declines in December with total industrial production declining 0.36% since November and falling 1.75% below the level seen in December 2014.

Capacity utilization also declined falling 0.48% from November and plunging 3.19% below the level seen in December 2014 to stand at 76.487%.

It's important to note that industrial production is now showing significant weakness which, if all past periods were to serve at least as a rough guide, now clearly indicates notable trouble for the macro-economy.

The Empire State Manufacturing Survey: January 2016

The Empire State Manufacturing Survey consists of a series of diffusion indices distilled from a monthly survey of New York regional manufacturing executives and seeks to identify trends across 22 different current and future manufacturing related activities.

Today’s report showed a notable decline for current and future assessments of manufacturing activity with the current activity index falling to a recessionary level of -19.37 while future activity dropped to a weak level of 9.51.

Current prices paid rose to 16 while current new orders slumped notably to -23.54 while assessments of future new orders fell to 12.18.

Retail Sales: December 2015

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing declining activity in December with sales falling 0.1% from November but rising 2.2% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales improved, climbing 0.56% from November and rising 2.38% above the level seen in December 2014 while, adjusting for inflation, “real” discretionary retail sales increased 0.09% on the month and rose 1.12% since December 2014.

Index of Stress: January 2016

The Federal Reserve Bank of St. Louis recently began publishing a new weekly index that seeks to track the general level of financial stress.

As periods of financial stress come and go a whole host of fundamental economic indicators immediately adjust to meet the near and long term expectations of market participants

Interest rates, yields spreads, popular market volatility indices all move in real time giving observers unequivocal evidence of changes general sentiment.

The St. Louis Fed has devised a method of crunching eighteen of these sensitive indices down into one convenient index it calls the St. Louis Fed Financial Stress Index (STLFSI).

The latest results of the STLFSI indicate that the level of financial stress is low but is trending up with January's results increasing to -.492.

The Philly Fed Business Outlook Survey: December 2015

The December release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) indicated a notable pullback in the regions manufacturing activity with the current activity index falling to a weak level of -10.2 while assessments the future activity also worsened to a level of 24.1.

The above chart shows the current and future activity indexes both with their corresponding 3-month moving averages. The red line marks the threshold between contraction and expansion for these diffusion indexes.

Weekly Unemployment Claims: Initial and Continued January 14 2015

Today’s jobless claims report showed a increase to both initial and continued unemployment claims as seasonally adjusted initial claims remained just below the 300K level.

Seasonally adjusted “initial” unemployment claims increased by 7,000 to 284,000 claims while seasonally adjusted “insured” claims increased by 29,000 to 2.263 million resulting in an “insured” unemployment rate of 1.7%.

Reading Rates: MBA Application Survey – January 13 2016

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) decreased 7 basis points to 4.01% since last week while the purchase application volume increased 18% and the refinance application volume increased 24% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

SNAP Food Stamp Participation: October 2015

As a logical consequence of the prolonged weak economic conditions, participation in the federal food stamp program remains at historic levels.

The latest data released by the Department of Agriculture indicated that in October, 47,097 individual recipients were removed from the food stamps program with the current total declining 2.43% on a year-over-year basis.

Individuals receiving food stamp benefits declined to 45.36 million which, as a ratio of the overall civilian non-institutional population now stands at a whopping 18.03% of the population.

Households receiving food stamps benefits declined to 22.38 million households with the current total falling 1.73% below the level seen a year earlier

Total nominal benefit cost declined 4.01% on a year-over-year basis to $5.73 billion for the month.