Friday, June 28, 2013

Consumer Sentiment Declined Slightly in June

According to the University of Michigan’s consumer sentiment index, consumer confidence declined slightly in June to 84.1, following the previous month’s reading of 84.5, a high since 2007. Current conditions solely contributed to the decline, as future expectations increased.

The present conditions portion of the index dropped to 93.8, down 4.2 index points from the previous month. Unlike present conditions, future conditions rose 2.0 index points to 77.8.

Inflationary expectations declined slightly for the one-year expectations, and remained unchanged for the five-year expectations, reporting 3.0% and 2.9% respectively.

Thursday, June 27, 2013

Personal Income Grew 0.5% in May

Personal income increased 0.5% in May, ahead of the 0.3% rise in consumption. Income has normalized following distortions at the end of last year and the beginning of this year due to increased taxes. Since income growth outpaced consumption, the savings rate improved, climbing to 3.2% in May, from 3.0% in April.

Personal income growth was led by interest, dividend and transfer income. Wage income improved in May, increasing 0.3% and disposable income grew 0.5%.

Real spending accelerated to 0.2%, however nominal spending grew slightly more. Durable goods led the spending growth in May, with nominal durable goods jumping 0.9% following a decline the previous month.

Consumer prices, according to the PCE indicator, rose 0.1%, the first increase since February. Inflation remains low as prices were 1% above their year-ago level.

Read the BEA report.

Wednesday, June 26, 2013

First Quarter GDP Growth Revised Down to 1.8%

BEA’s final estimate of first quarter GDP revised growth down to 1.8% from its original estimate of 2.5% and second estimate of 2.4%. Despite the downward revision, GDP growth improved over fourth quarter growth in 2012, which increased 0.4%, but is well behind the 3.1% growth from the third quarter last year.

As previously noted following the BEA’s initial and second estimates, consumption drove first quarter GDP growth, rising 1.8%. Consumption was expected to decrease following the expiration of the payroll tax holiday, but the pace in the first quarter improved over the 1.3% gains in the fourth quarter. Inventories recovered slightly in the first quarter, but did not offset the decline in the previous quarter, likely due in part to Hurricane Sandy.

Fixed investment increased 0.4%, a slowing of 1.7% growth from the fourth quarter. Non-residential investment heavily contributed to the slowed growth.

Government spending continues to drag on the economy, as preparations for sequestration began. However the government drag, at 1.0%, was less than the fourth quarter drag. Net exports, after posting positive gains in the previous quarter, declined -0.1% in the first quarter.

Read the BEA release.

Tuesday, June 25, 2013

New Home Sales Improved in May

New home sales grew 2.1% in May to an annualized pace of 476,000 units. Home sales are now 29% above year ago levels. May’s report also included notable revisions to April’s pace, which was revised up to 466,000 units. Sales have been trending upward since

New home sales were not regionally balanced. The Midwest saw the largest gain, at 40.7% from the previous month levels, while sales dropped in south 9.0%.

The supply of existing homes rose slightly to 4.1 months, from a revised 4.0 months in April. Supply will remain at cyclical lows until residential construction picks up sufficiently.

The median house price dropped 3.2% to $263,900, but remains 10.3% above year ago levels.

Read the Census’ report.

Home Prices Continued to Rise in April

Existing home prices rose 2.5% in April, according to the Case-Shiller’s 20-city index. Gains from one year ago accelerated, with the 20-city index rising 12.1% above its April 2012 pace. April’s year-ago gain in the strongest since February 2006. The 10-city index improved as well, growing 2.6% from the previous months pace, and 11.6% above year-ago levels.

Since January, all metro regions reported price gains on a year-ago basis. Such geographically widespread gains have not been seen in almost five years. The gains in home prices ranged from a low of 3.2% in New York to a high of 23.9% in San Francisco.

Although home prices have seen strong growth in recent months, the growth is coming from depressed levels. The 20-city index remains 26.2% below its 2006 peak.

Read Standard and Poor's release.

Thursday, June 20, 2013

New Report Shows Increased Lending to Small Businesses

The U.S. Department of the Treasury today released the results of the First Annual Small Business Lending Fund (SBLF) Lending Survey, showing over 90 percent of SBLF participants reported stronger small business lending with SBLF funding. The report also finds that small businesses in a wide array of industries and in every region of the country have benefitted from the Treasury-administered program and that over 80 percent of small business loans made by SBLF participants were made in amounts of $250,000 or less.

The lending survey has also allowed Treasury to begin to estimate the number of small businesses supported by SBLF participants’ increased lending. By dividing the average loan size reported by community banks by the program-wide $8.9 billion lending increase reported in the April 2013 SBLF Use of Funds Report, Treasury is able to estimate that SBLF participants have now increased small business lending by an additional 38,000 loans as of December 31, 2012.

The survey also allows a closer look at SBLF participant lending by industry and geography. Participants report that the service and agriculture sectors have received the largest estimated percentage of additional loans. By region, SBLF participants in the South and Midwest reported the largest estimated increases in the number of small business loans (20,200 and 8,700 loans, respectively), followed by the Northeast (5,500 loans) and the West (3,600 loans).

Read the entire Department of Treasury’s release. Copy of the report.

Existing Home Sales Jumped 4.2% in May

According to the National Association of Realtors, existing home sales improved 4.2% in May, rising to an annual pace of 5.18 million units. May’s pace was the fastest since fall of 2009 and 12.9% above year ago levels.

All regions reported higher existing-home sales, with the largest gains in the Midwest.

Housing inventory at the end of May rose 3.3% to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace, down from a 5.2 months in April. Housing inventory is 10.1% below a year ago, when there was a 6.5-month supply.

The national median existing-home price was $208,000 in May, up 15.4% from a year ago. This represents the 6th straight month of double digit increases.

Read the NAR release.

Wednesday, June 19, 2013

Federal Reserve Provides QE3 Tapering Guidelines

The Federal Reserve will maintain its present level of bond buying at a pace of $85 billion per month following the Federal Open Market Committee’s (FOMC) June meeting. The Federal Reserve left its open-ended quantitative easing program (QE3) unchanged and left interest rates at near zero levels. The Fed did, however, note that it is prepared to vary purchases according to economic conditions.

The Fed provided additional guidance about how they plan to handle the winding down of QE3. During the Press Conference, Chairman Bernanke said the Fed plans to begin tapering by end of year and totally wind down tapering by mid-2014 when unemployment hits 7.0%.

“If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year," Chairman Bernanke said. "If the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.”

Chairman Bernanke also noted that it's possible the Federal funds rate could remain at its current level even after unemployment reaches the previously set 6.5% threshold. Despite improving labor market forecasts, the Committee sees Federal funds rates remaining lower in the short term. Bernanke even mentioned then that 6.5% target could be revised down. Bernanke noted that when the Fed begins winding down its balance sheet, it will not sell mortgage backed securities, instead opting to let the securites mature and roll off.

“Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated,” the Fed noted in its announcement. Chairman Bernanke has already eluded that the pace of bond buying may vary depending on the economy. The FOMC updated their projections of the unemployment rate from the previous meeting, rivising the forecast to drop faster than previously anticipated. The more optmisitic outlook means tapering by the Fed could start sooner.   

The Fed’s statement suggested that the economy continues to expand at a “moderate pace,” with some improvement in labor and housing markets. They did note, however, that the unemployment rate remains elevated.

FOMC Fed Funds Rate Projections

Read the full FOMC statement below. Read the Federal Reserve's updated projections.  

Tuesday, June 18, 2013

Housing Starts Improved Moderately in May

Housing starts increased 6.8% in May to an annualized pace of 914,000 units, from a revised April figure of 865,000 units and 28.6% above year ago levels.

May’s gain was driven by multi-family starts, which rose to a pace of 315,000 units annually, a 21.6% from the previous month. Single family starts saw a 0.3% increase, rising to a pace of 599,000 units per month. Single family starts are 29% above year ago levels.

Permit issuance fell 3.1% in May, due to the10% drop in multifamily permits.

Despite the strong improvement in the past year, housing starts remain well below their 50-year average of 1.5 million units.

Read the Census report.

Consumer Prices Rose 0.1% in May

Consumer prices rebounded in May, posting a 0.1% gain which partially offset the previous month’s fall. Rising energy prices and gains in the shelter index contributed to the gain. Prices are now 1.4% above year ago levels. Core CPI remained stable, increasing 0.2% from the previous month and matched the previous month’s year over year gain, at 1.7%.

The shelter index rose 0.3%, accounting for more than half of May’s increase. May’s gain was also driven by the energy index, which grew 0.4%.

Food prices declined 0.1%, following modest increases since the beginning of this year. The 0.3% drop in the food at home index was its steepest in almost four years.

Read the BLS report.

Friday, June 14, 2013

James Chessen Discusses Interest Rates on Fox Business News

ABA's Chief Economist James Chessen spoke with Fox Business News today, where he discussed the interest rates and broke down how quantitative easing impacts both short term and long term rates.

"[Short term] interest rates are probably not going to go up until the first quarter of 2015."

Watch the full interview.

Producer Prices Rose 0.5% in May

Producer prices increased in May and rose to 0.5%, following two months of decline. Producer prices are up 1.8% over year ago levels. The gain was driven primarily by higher gasoline and good prices. Core prices improved 0.1% in May.

Prices for finished energy goods rose sharply, improving 1.3% from the previous month, reversing a two month decline. Higher gasoline prices largely contributed to the gain. Food prices increased 0.6% in May.

The price of crude goods increased 2.2% in May. Crude prices improved 7.6% over year ago levels. However core crude goods fell 2.3% and is 6.3% lower over year ago levels.

Read the BLS report.

Thursday, June 13, 2013

Retail Sales Rose 0.6% in May

Retail sales performed better than expected in May, rising 0.6%. May’s growth follows an upward revision to March, which was revised to a 0.3% decline. Retail sales are now 4.3% above year ago levels, a return to the strong year over year growth seen earlier this year in January and February. The jump in sales is largely attributed to a 1.8% increase in auto sales.

Led by an increase in auto sales, building materials also grew 0.9% from the previous month.

Excluding auto and gas, sales improved 0.3% from April.

Despite May’s growth, there were several areas where sales declined from the previous month. Furniture and home furnishings led the decline, at 0.8%. Electronics and appliances as well as food service and drinking places both decreased 0.4%.

Read the Census release.

Tuesday, June 11, 2013

Small Business Data Trends in 1Q13

Only 22% of small business owners plan to hire a new college graduate in the next 6 months, according to Capital One’s Spark Small Business Barometer, a quarterly survey of small businesses across the nation. 73% of female executives say they don’t plan to hire college graduates, while 81% of males say the same thing about their company.

The survey found financial optimism is on the rise. It creased 3.6% from last quarter and 45% of small businesses across the country are reporting that they believe their financial position will be better in six months.

Small Business Owners are feeling financially better off than a year ago. 35% of small businesses say their firm’s financial position is better than a year ago, compared with 18 % who report that their financial position is worse in Q2 2013 and 23% in 2012.

The report also shed positive light on growing optimism about local market economies. 64% of small businesses are optimistic about the economies where they do business. When the survey launched, in Q1 2009, more than seven in ten consumers felt business conditions in their area were only fair or poor.

Small Business Optimism Continued Increase in May

The NFIB’s Small Business Optimism Index rose 2.3 points in May, reaching 94.4. It is the second consecutive month gain. While May’s reading is the second highest since the recession started December 2007, it’s still well below the long run average of 98.1.

Financing continues to be the least citied challenge facing small business, with only 2% of respondents reporting it as their single most important problem, unchanged from the previous month. Taxes and government requirements remained unchanged as the first and second most often cited problems, but the number of respondents citing the issues as the single most important problem increased. Taxes rose from 23% to 24%, and government requirements and red tap grew 2% to 23%.

Read the NFIB report.

Monday, June 10, 2013

Economic Advisory Committee Press Conference

The Economic Advisory Committee (EAC) of the American Bankers Association, which includes 13 chief economists from among the largest banks in North America, presented their consensus findings at a press conference last Friday, June 7, 2013 .

The committee found that inflation-adjusted GDP growth for 2013 will be 2.1 percent over the course of the year, and is expected to increase to 2.8 percent in the first half of 2014.

Scott Anderson, Bank of the West Chief Economist and current chair of the EAC, lead the press conference, "We believe that the Fed should remain fairly cautious here as they see the continued improvement in the (economic) numbers."

Watch the full press conference.

Friday, June 7, 2013

Consumer Credit Grew $11.1 Billion in April

Consumer credit rose by $11.1 billion over April, a faster pace than the previous month but below rates seen so far this year. Following recent trends, consumer credit growth continues to be driven by student loans, while revolving credit growth remains sluggish.

Revolving credit, consisting primarily of credit card balances, grew by $700 million, partially offsetting a $900 million loss the previous month. Revolving credit has now grown $1 billion since the beginning of the year.

Non-revolving balances grew for the 20th consecutive month, rising $10.4 billion in April. Although strong, April’s growth is slower than the $12.5 billion growth seen over the first quarter. Student and auto loans make up the majority of the non-revolving sector.

Non-revolving credit has accounted for the vast majority of growth lately. Of the $156.7 billion in credit growth over the past 12 months, 94% is due to non-revolving balances.

Read the Federal Reserve Release.

Bank Economists See Stronger Growth Ahead

According to the Economic Advisory Committee (EAC) of the American Bankers Association, which includes 13 chief economists from among the largest banks in North America, inflation-adjusted GDP growth for 2013 will be 2.1 percent over the course of the year, and is expected to increase to 2.8 percent in the first half of 2014.

Although economic growth has been constrained in recent quarters, it will accelerate later this year and into 2014 as external pressures and fiscal drag ease.

The bank economists believe the housing market has finally entered a sustainable recovery. The group sees the housing recovery gaining significant strength this year, with improving construction levels and rising home sales and prices. The committee forecast is that home prices nationwide will rise solidly and residential investment will increase 15 percent in 2013.

“This strong growth demonstrates that housing has finally caught up with the broader economic recovery,” Anderson said. Consumers are on a stronger financial footing and have regained confidence. The group believes consumer spending will support economic growth over the next two years.

“Higher equity prices and rising home values, along with declining gas and energy prices, have helped consumers cope with rising taxes and reduced federal spending,” Scott Anderson, committee chairman and Bank of the West chief economist, said. “The wealth effect created by rising home values will boost consumer sentiment and spur increased spending.”

Read the full release. Read the detailed EAC forecast numbers.

Unemployment Rose to 7.6% with the U.S. Economy Adding 175,000 Jobs in May

Payroll employment increased by 175,000 jobs in May, as the unemployment rate increased 0.1% to 7.6% from the previous month. May’s growth is still below the 1Q13 average of 207,000 jobs per month. May’s report saw April’s job gains revised down from 165,000 to 149,000, while March was revised up slightly.

Similar to previous months, May’s strong numbers were solely due to the private sector, driven by the service industry, which added 176,000 jobs. The private industry as a whole added 178,000 jobs in May, up from a revised 157,000 in April. The goods producing sector shed 1,000 jobs in May, following a revised 15,000 job loss in April.

The government continues to drag on growth and lost 3,000 jobs in May. It is the government’s lowest amount of job lost in a given month since February. The government is expected to continue to drag on payroll employment through the end of this fiscal year as the impacts of sequester take hold.

The unemployment rate ticked up to 7.6% from the previous month’s 7.5% rate. The increase in the unemployment rate is due to new entrants in the labor force. The labor force participation rate increased to 63.4%.

Read the BLS report.

Wednesday, June 5, 2013

Beige Book Reports Modest Growth

The Federal Reserve released its Beige Book today, which shows that the economy is recovering at a modest to moderate pace since the previous report across all Federal Reserve Districts except the Dallas District, which reported strong economic growth.

Similar to the last report, the manufacturing sector expanded in most Districts since the previous report. Consumer spending grew slightly to moderately in most districts, particularly centered around vehicle sales. The energy sector was flat, partially due to lower gas prices that could have dampened consumer spending.

Residential real estate and construction activity increased at a moderate to strong pace in all Districts. Several Districts reported that higher demand and low inventory of homes available for sale are resulting in multiple offers on properties. Almost all Districts reported higher home sale prices. Continuing a theme from the previous report, strength in residential construction boosted suppliers in that industry.

Defense related sectors experienced weakened activity in several districts, likely a result of the sequester.

Residential real estate and construction activity increased at a moderate to strong pace in all Districts. Several Districts reported that higher demand and low inventory of homes available for sale are resulting in multiple offers on properties. Almost all Districts reported higher home sale prices. Commercial real estate and construction activity grew at a modest to moderate pace in most Districts.

Hiring increased at a measured pace in several Districts, with some contacts noting difficulty finding qualified workers. Wage pressures remained contained overall.

Read the report.

ISM Non-Manufacturing Improved in May

The ISM non-manufacturing index increased to 53.7 in May from 51.3 in April. The gains don’t fully offset April’s cooling of the index and the composite index remains down 1.3 points on a year-ago basis. The non-manufacturing index has now remained above 50 – indicating industry expansion – for 41 consecutive months. Services continue to outperform the manufacturing sector, which declined below 50 to 49.0 this past month.

Details of the report are mixed. Business output and new orders improved while exports declined. Business output increased 1.5 points to 56.5 in May. New orders also grew to 56.0, a positive sign for future production. Inventories posted no index change, but at 51.5, is above the expansionary threshold and could aid GDP growth in the second quarter. Exports noticeably declined 3.5 points to 50.0.

Although unemployment dropped to 50.1, the index remains in expansionary territory.

Read the ISM release.

ADP Employment Rose by 135,000 jobs in May

ADP’s National Employment Report indicated that the private sector increased employment by 135,000 jobs in May, an improvement from April’s revised 113,000 jobs, but below the job gains seen this year and late last year. Employment gains were solely driven by the service sector.

Job gains continue to be rooted in the service sector, which added 138,000 jobs in May, up from 119,000 jobs in April but below the 6 month average. Goods producing employment contracted in May, shedding 3,000 jobs. It’s the second consecutive month of negative job gains in the goods producing sector.

Manufacturing declined as well, losing 6,000 jobs after posting a revised 15,000 job decrease in April.

Read the ADP release.

Tuesday, June 4, 2013

Trade Gap Widened in April

The trade deficit increased in April to $40.3 billion, a 9% increase from a revised $37.1 billion deficit in March. The increase partially reverses the previous month’s decline, but remains below the revised deficits from January and February. Rising imports were the primary contributor to the increase in the deficit.

Exports grew by 1.2% from March to $187.4 billion. Imports increased by 2.4% to $227.7 billion. While exports improved, imports grew at a faster rate. The services surplus remained unchanged at $18.3 billion, while the goods deficit increased to $58.6 billion.

Read the Census report.

Monday, June 3, 2013

ISM Manufacturing Index Shrinks in May

The ISM manufacturing Index fell to 49.0 in April, falling below the expansionary threshold of 50 for the first time since November 2012 and the second time since July 2009.

The index saw broad declines across its various components. New orders decreased 2.5 index points to 48.8, the lowest since July 2012 and below 50 for the first time since December 2012.

Production dropped 4.9 points to 48.6. This is only the second time since 2009 that the index is below 50.

Employment improved 0.1 to 50.1. While inventories increased to 49.0, the difference between new orders and inventories—a proxy for future production—fell from 5.8 to -0.2, and is the worst reading since August 2012, signaling a cooling economy.

Read the ISM release.

Construction Spending Increased 0.4% in April

Construction spending grew 0.4% in April and is 4.3% above year ago levels. Construction spending in April partially reversed the previous month’s decline, and continues the volatile trends seen in the past 6 months.

Private construction saw gains in April, driven solely by non-residential construction, which increased 2.2% from the previous month and reversed the previous month’s drop. Residential construction declined 0.1%, after posting positive gains the previous two months.

Public spending fell 1.2%. While some components of public spending increased, all are down from year ago levels.

Read the Census report.