Friday, January 31, 2014

Consumer Confidence Dipped in January

Consumer confidence dropped in January, following a rebound in November and December, according to the University of Michigan Consumer Sentiment survey. Both the current and future expectations lost ground in December.

The assessment of current conditions dropped 1.8 points to 96.8. Current conditions are still above pre-shutdown levels. Future expectations declined 0.9 points to 71.2.

Stocks declined over the month of January, which could have negatively impacted consumer confidence.

Inflationary expectations inched up for both the one-year and five-year, growing to 3.1 and 2.9 respectively.

Consumption Continues to Grow in Face of Weak Income Gains

Consumers continued to increase their spending in December, despite seeing no gains in their income. Income growth was weak in the fourth quarter, rising just 0.1% over the quarter. Despite this weak growth consumer spending was strong throughout the fourth quarter. This is also seen in consumption’s strong contribution to fourth quarter growth. The increased spending coupled with no wage growth led the savings rate to drop to the lowest level in nearly a year.

Personal consumption grew by 0.4% in December, down from 0.6% the previous month. Despite this slight decline, consumption rose by 0.4% on average in the fourth quarter, up from 0.25% in the third. Increased spending was focused on non-durable goods and services, which saw gains of 1.5% and 0.4% respectively. Gains in consumption were held back by durable goods spending which fell 1.8% over the month, driven lower by low auto sales.

Income growth has slowed considerably near the end of the year, failing to grow in 2 out of 3 months in the fourth quarter. Tax payments have risen while wage income growth has been lower than expected. Real disposable income remains less than 1% above year-ago levels.

Increased spending with little wage growth has meant that the savings rate has fallen, reaching 3.9% in December. This is its lowest level since January 2013.

Prices increased modestly as measured by the PCE deflator. Prices rose 0.2% in December and are now 1.1% above year ago levels.

Read the BEA release.

Thursday, January 30, 2014

OCC: Banks Ease Underwriting Standards

The Office of the Comptroller of the Currency’s 19th Annual Survey of Credit Underwriting shows a continued easing of underwriting standards for both commercial and retail loans.

The survey found that banks’ increasing risk appetite  and greater market liquidity were factors that contributed to easing standards.

Loan portfolios that experienced the most underwriting easing included indirect consumer, credit cards, large corporate, asset-based lending, international, and leveraged loans. Loan portfolios that experienced the most underwriting tightening included high loan-to-value home equity and conventional home equity.

The 2013 survey included 86 of the largest national banks and federal savings associations and covers the 18-month period ending June 30, 2013.

Read the OCC report.

U.S. Economy Grew 3.2% in 4th Quarter

Real GDP growth slowed in the fourth quarter to 3.2% from 4.1% in the previous quarter. Although growth slowed slightly, the details of this report are strong, with consumption accelerating and driving growth. Net exports also improved notably, providing a strong boost to growth. These strong gains were offset by heavy fiscal drag, as the government shutdown in the fourth quarter slowed growth.

Consumption picked up heavily from the third quarter, growing 2.3%, a faster pace from the 1.4% growth in the third. Net exports also grew considerably at 1.3%, a big uptick from the 0.1% growth in the third quarter. Inventories, which tend to fluctuate from one quarter to the next saw a large rise in the third quarter and as a result growth was smaller in the fourth at 0.42%. Strong consumption and exports are a positive for future growth, as both are sustainable trends.

The government dragged on the economy by 0.9% in the fourth quarter. The BEA found that the reduction in work hours by federal employees reduced growth by 0.3%, however the full effects from the shutdown have yet to be quantified. Since the shutdown was a one-time event, the budget process is more stabilized for the next two years, and state and local finances are improving, the government will likely add to GDP growth in 2014.

Read the BEA release.

Wednesday, January 29, 2014

Federal Reserve Maintains Taper Pace

The Federal Reserve continued to taper its asset purchase program paring purchases by another $10 billion to $65 billion in asset purchases every month

The FOMC’s press release states that, “Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month.”

The Fed cited the improving labor conditions as the reason to begin tapering. The release did note that the unemployment rate remains elevated. Inflation remains below the committee’s long-run goal and will be monitored during tapering to meet the Committee’s dual mandate.

The Committee had previously noted that the target federal funds rate would remain highly accommodative at near-zero levels until the unemployment rate hit 6.5%. The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent. Morevoer the release noted that inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

Read the full FOMC statement below. Read the Federal Reserve's statement on its purchase pace.    

Tuesday, January 28, 2014

Home Prices Dropped 0.1% in November

Existing home prices dropped 0.1% in November, according to the Case-Shiller’s 20-city index. On a seasonally adjusted basis, home prices rose 0.9%. Gains accelerated from a year ago with the 10-city index rising 13.8% and the 20-city index rising 13.7%.

The details of the report were mixed. Four of the ten cities in the 10-city index saw a price decline over the month of November, one remained neutral and five improved. Chicago took the largest hit, dropping 0.5% while Miami grew the most at 1.4%. All regions posted gains from a year ago. Las Vegas grew the most and New York grew the slowest.

The 20-city index still remains 19.7% below its peak in July of 2006.

The housing market will likely continue to grow in 2014, albeit at a slower pace than in 2013.

Read the Standard and Poor release.

Monday, January 27, 2014

New Home Sales Declined 7.0% in December

New home sales declined 7.0% in December to an annual pace of 414,000 units. However, the fourth quarter was still stronger than the third in 2013. December’s report also included downward revisions to October and November’s headline numbers. December’s pace is 4.5% above year-ago levels.

Only one of the four regions posted gains in December, with the Midwest growing 17.6% over the month. The Northeast, South and West all declined from the month prior by 36.4%, 7.3% and 8.8% respectively.

The supply of homes grew to 5.0 months in December. Despite the increase in supply, the median home price grew 0.6% over the course of the month to $270,200.

Read the Census report.

Thursday, January 23, 2014

Existing Home Sales Rose Slightly in December

Existing home sales rose 1.0% in December, according to the National Association of Realtors. Sales rose to an annual pace of 4.9 million units, from a revised November number. December’s pace is 0.6% below year ago levels, the second month in which prices dropped from a year ago.

Two of the four regions posted gains in December. The Midwest was hit the hardest, dropping 4.3%. The Northeast also declined 1.5%. The West and South improved 4.8% and 3.0% respectively. The declines in the Midwest and Northeast may be in part due to the unusually cold weather in December, which prevented some closings.

Market supply is extremely tight, with the supply of homes on the market dropping to 4.6 months at December’s pace.

The median housing price grew to $198,000. Existing home prices are 9.9% above year ago levels, but appear to be slowing their year-over-year growth as prices recover.

Read the NAR release.

Friday, January 17, 2014

Mortgage Rates After the Financial Crisis

Since the end of the financial crisis, the 30-year fixed-rate mortgage has maintained a gradual downward trend, dropping 88 basis points since June 2009, according to data gathered by Freddie Mac. Contrary to this trend, during the last 18 months, the rate has been gradually increasing. The largest weekly drop during the last 18 months was 18 basis points, compared with a maximum weekly drop of 44 basis points during the recession.

In June 2007, before the financial crisis, the 30-year mortgage rate was 6.74%, the highest rate in 2007. The rate fell to a low of 3.34% in January 2013. From January 2013 to December 2013, the rate increased 110 basis points, compared with a 60 basis point drop over the same timeframe in 2012. As of January 16, 2014, the 30-year fixed-rate mortgage is 4.41%.

The 15-year fixed-rate mortgage shows similar trends to that of the 30-year mortgage rate. After experiencing spikes during the financial crisis, the 15-year mortgage rate has also experienced a downward trend. In the second quarter of 2013 the 15-year mortgage rate jumped 80 basis points in three months. Since then, the rate has continued a more gradual rise; the largest weekly drop has been just 17 basis points, compared with a weekly drop of 42 basis points in October 2008.

From January 2013 to December 2013, the 15-year mortgage rate increased 80 basis points, compared with a 60 basis point decrease over the same timeframe in 2012. During the week of January 16, 2014, the weekly average of the 15-year fixed-rate mortgage decreased 11 basis point to 3.45%.

For more information, read the Freddie Mac report.

Industrial Production Rose Slightly in December

Industrial production rose 0.3% in December, with manufacturing continuing to see healthy growth. Overall production is now 3.7% above year-ago levels.

Manufacturing growth slowed slightly from the strong growth seen the prior two months, but remained healthy at 0.4% over the month. Auto production was a strong component of manufacturing growth, rising 1.6% over the month. Auto assemblies rose to 11.8 million, their highest since 2006. Strong gains in electronics and appliances, as well as high-tech manufacturing also contributed to the strong growth.

Mining production posted the strongest gains in December rising 0.8%. Utilities production dipped in December by 1.4%, following an unusually strong November.

Read the Federal Reserve release.

Housing Starts Dipped in December

New residential construction dropped in December to an annual pace of 999,000 units. December’s report included positive revisions to October and November, adding a combined 26,000 units. Despite December’s decline, starts improved notably with the fourth quarter pace averaging 14% higher than the third quarter.

Housing starts continued their recovery in 2013, with 925,000 new units produced, up from 780,000 in 2012. Despite the improvement, new home construction remains well below the historical average of 1.5 million units per year.

The decline was driven by both single and multi-family starts, dropping 0.7% and 14.9% respectively. A colder than usual December may have placed downward pressure on housing starts.

Permit issuance declined overall as a result of single family issuance dropping 4.8%. Multi-family issuance held steady. Completions also declined in December by 10.8%, however have grown 18.5% over the past year.

Read the Census report.

Thursday, January 16, 2014

Christopher Low Discusses ABA Economic Advisory Committee Forecast on Fox Business

Cristopher Low, Chief Economist at First Horizon National Corp’s FTN Financial and Chairman of the ABA's Economic Advisory Committee (EAC) discussed the committee forecast today on Fox Business. The EAC is comprised of 13 chief economists from among the largest banks in North America.

"Our committee forecast is 3 percent and it is the first time we've forecasted 3 percent since 2005," said Low. "For the first time since the great recession we're [the U.S. economy is] firing on all cylinders."

Watch the full interview here.

Consumer Prices Improved 0.3% in December

The consumer price index increased 0.3% in December as energy prices surged. Food prices grew modestly. The increase from year-ago levels grew to 1.5%, however this remains below the 2.0% year over year growth goal set by the Federal Reserve. The headline index is at it's strongest level in 5 months.

Core prices maintained their trend of growth between 0.1% to 0.2% with a recording of 0.1% in December. Goods prices remained constant and services improved slightly by 0.1%.

Energy prices recovered 2.1%, although this doesn’t fully offset the previous two months of decline. Compared with year ago levels, energy prices are only 0.4% higher.

The outlook for 2014 looks more positive with higher price increases, as Europe comes out of a recession and the fiscal climate at home is more stable.

Read the BLS report.

Bank Economists See Stronger Economic Growth in 2014

According to the committee, which includes 13 chief economists from among the largest banks in North America, inflation-adjusted GDP growth for 2014 will be 3.0 percent, compared to a 2.3 percent annual average since the Great Recession ended in mid-2009 and the post-recession high of 2.8 percent in 2010.

"This will be the strongest economic growth since the expansion began in 2009, and the committee’s strongest forecast since 2005,” Christopher Low, chairman of the group and chief economist of First Horizon National Corp's FTN Financial, said. "We expect faster growth in business investment and stronger job creation as the economy improves."

The bank economists believe the housing market will continue to grow in 2014 as wages increase and the unemployment rate continues to fall. The group sees the housing sector gaining strength as home sales recover from depressed levels. The committee forecast is that home prices nationwide will rise solidly and residential investment will increase 12.3 percent in 2014. The strengthened housing sector will support consumer spending.

"When families get into new homes, they spend more on appliances, furniture, electronics and building materials," Low said.

Consumers are also finding themselves on stronger financial footing in the New Year and have regained confidence. The group believes consumer spending will support economic growth over the year ahead. Automobile sales are also expected to remain strong.

"Some consumers remain cautious due to lingering high unemployment and slow wage growth," Low said. "Many have not benefited from the resurgent stock market and personal income growth, and are carefully watching what they spend. But tax rates will rise much less in 2014, and household balance sheets are healthier than they have been in years. The consumer is the key; if people loosen up their wallets and pocketbooks, economic growth will be even stronger."

As the recovery improves, the group believes underlying drivers of economic growth will broaden beyond housing and consumption. Business spending and exports should also be stronger in 2014. The committee believes the fiscal environment will be friendlier in 2014 and will exert less drag on consumers and businesses over the course of next year.

After slowing in December, job growth will accelerate from near 180,000 per month last year to over 200,000 monthly in 2014, according to the bank economists.

In 2014 and 2015, loans to individuals are expected about 7 percent and loans to businesses will grow 8 percent.

"Banks will continue to meet the needs of their customers as we work to make the loans that help drive our economy forward," Low said.

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

Wednesday, January 15, 2014

Fed’s Beige Books Shows Continued Expansion

Reports from the twelve Federal Reserve Districts suggest economic activity continued to expand across most regions and sectors from late November through the end of the year. Furthermore, the economic outlook is positive in most Districts, with some reports citing expectations of “more of the same” and some expecting a pickup in growth.

Nine Districts indicated the local economy was expanding at a moderate pace. Among these, the Atlanta and Chicago Districts saw conditions improve compared with the previous reporting period, Boston and Philadelphia cited modest growth, and Kansas City reported the economy held steady in December.

Three-quarters of the Districts indicated that retail activity had increased since the last report, and all Districts reported year-over-year increases in manufacturing activity.

Real estate markets generally continued to improve, according to District reports. Most cited increased residential sales activity and construction as well as rising home prices.

District reports that mention banking noted that loan volumes have not changed substantially since the last reporting period. In addition, while no Districts reported major changes in credit standards, some did cite instances where financial institutions relaxed their underwriting standards. Credit quality held steady or improved.

Read the full Federal Reserve report.

ABA’s Chessen Talks Banking Environment

Community banks are resilient in a difficult environment, ABA Chief Economist James Chessen said on Bloomberg Radio. “Banks are a reflection of the local economy. When you get out to smaller communities, it’s tough,” he explained. “But the great thing is they’re very resilient and very responsive to their customers. Banking is a relationship business.”

Bloomberg radio co-host Mike McKee asked Chessen about how the recently released Basel III leverage ratio would affect American banks. Chessen pointed out that it’s likely the U.S. regulators will adopt a higher standard than Basel’s. And although “U.S. banks are already much better capitalized than most institutions around the world,” he pointed out, “the higher you set those rates, it does at some point cut off the ability to lend.”

Listen to the interview.

Producer Prices Rose 0.4% in December, Sharp Rebound in Energy Prices

Producer prices rose for the first time in two months in December, rising 0.4% from the month prior. The index was largely driven by a sharp rebound in energy prices. Producer prices improved 1.2% from year ago levels.

At the earlier stages of processing, prices received by producers of intermediate goods rose 0.6% in December. Nearly three-quarters of the broad-based advance can be traced to the index for intermediate energy goods.

The crude goods index climbed 2.4% in December, led by the index for crude energy materials.

Prices for finished goods increased 1.2%, compared to a 1.4% advance in 2012. Prices for finished energy goods led the advance in the index, increasing 1.6% in December—the largest advance since June 2013. The index for finished goods less foods and energy also contributed moving up 0.3%, the largest advance since July 2012.

Read the BLS report.

Tuesday, January 14, 2014

FY 2014 Spending Bill Unveiled

House and Senate negotiators Monday night unveiled a $1.1 trillion omnibus appropriations bill that would provide discretionary funding for the entire federal government for the 2014 fiscal year. The bill contains all 12 regular appropriations bills for fiscal year 2014, with no area of the government functioning under a Continuing Resolution.

The bipartisan spending package provides a total of $1.012 trillion for the operation of the federal government, abiding by all terms set by the Bipartisan Budget Act of 2013, and meeting the $520.5 billion defense and $491.7 billion non-defense budget caps.

Of interest to the financial industry, the bill includes $1.35 billion for the SEC, which is $29 million above the fiscal year 2013 enacted level, but $324 million below the budget request. The bill designates $44 million of the total for the Division of Economic and Risk Analysis to improve the use of economic analysis in the SEC’s rule-making process.

The CFTC also would receive increased funding to a total of $215 million, $10 million above the fiscal year 2013 level, but $100 million below the Administration’s budget request. CFTC officials have said that without a budget increase along the lines of what was in the President’s request the agency will have difficulty meeting all its responsibilities under the Dodd-Frank Act.

The bill also includes additional reporting requirements intended to "increase transparency of the activities of agencies whose funding jurisdiction fall outside annual congressional review, including the Office of Financial Stability and the Office of Financial Research," according to a House Appropriations Committee summary. The OFR, created by the Dodd-Frank Act, would be required to submit quarterly reports to four committees in Congress: the House and Senate appropriations committees, House Financial Services Committee and the Senate Banking Committee.

In addition, the bill includes an ABA-advocated increase—from $1.5 billion to $2 billion—in funding for guaranteed farm ownership loans. The increase will help clear a backlog of farm mortgages that banks have approved pending the USDA guarantee.

The House and Senate are expected to consider the package this week.

Read the House Appropriations Committee’s press release.

Retail Sales Improved 0.2% in December

Retail sales grew modestly in December, rising 0.2% over the month. December’s report revised October and November’s headline numbers down by 0.1% each. Year-over-year growth was 4.1%, a slight decline from the previous month.

Food and beverage retailers saw strong gains in December, rising 2.0%. Clothing and accessories sales jumped 1.8%, following a month of decline. Electronics and appliances took a massive hit in December, dropping 2.5%. It is the second consecutive month decline.

The small gains reveal that consumers are still conservative, however sales should pick up in 2014.

Read the Census Bureau release.

Small Business Optimism Inched Up in December

Small business optimism rose to 93.9 in December, slightly above the previous month. The December index returned to September's level, before the partial government shutdown and debt ceiling debate. December’s improvement was largely due to increased capital spending and strong job creation, which was at its highest level since February 2006.

Financing continues to be the least cited concern for small businesses, holding at 2% of respondents citing it as the single most important problem. Taxes took the top spot, rising to 23% from 20%, while government requirement and red tape dropped to 20% from 21%.

The details of the report are mixed, with 5 of the 10 index components improved from the previous month, 2 remained neutral and 3 declined. On net, the indices improved 15%. Overall, more owners hired workers in December, despite that job creation plans slipped a point. The rate at which owners increased employment, an average of 0.24 workers, was the strongest reading since February 2006.

Read the NFIB report.

Friday, January 10, 2014

Employment Gains Weakest in 3 Years

The U.S. labor market added 74,000 jobs in December, the smallest gain in 3 years and well below the projected 200,000 jobs gained. December’s report included a positive revision to November’s headline number, adding an additional 38,000 jobs. Despite the weak job growth, the unemployment rate dropped to 6.7%, indicating discouraged workers left the labor market.

Job creation continues to be driven by the services sector, which added 90,000 jobs in December. However, this growth was well below the average of 169,000 jobs seen over the prior three months. The weakness was driven primarily by a 16,000 loss in construction, a 12,000 loss in information and no improvement in education and healthcare. The goods producing sector shrank for the first time in 5 months, dropping 3,000 jobs. The public sector also retracted and declined by 13,000. The private sector continues to be volatile.

Despite the weak growth, the unemployment rate declined, a direct result of the labor force participation rate shrinking to 62.8% in December. 347,000 people left the labor force, most of whom are likely discouraged workers. Part of this drop may have been due to the severely cold weather seen in December. If employees couldn’t make it to work and didn’t receive compensation for the entire payroll period it could affect the payrolls numbers. Moreover, some of the decline in labor force participation may be in anticipation of expiring unemployment benefits .

The Federal Reserve began tapering last month, however December’s weak report could cause tapering to follow a slower than planned schedule. 6.7% unemployment is close to the Federal Reserve’s target 6.5% unemployment, at which it has said it will begin evaluating raising rates. However, the improvement needs to be real job growth, not a declining labor force.

Read the BLS report.

Thursday, January 9, 2014

Consumer Delinquencies Reached All Time Low in Third Quarter

Consumer delinquencies declined significantly in last year’s third quarter as the economy improved and consumers better managed their finances, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 13 basis points to 1.63 percent of all accounts in the third quarter, a record low that’s well under the 15-year average of 2.35 percent.

“More jobs and higher income are a recipe for lower delinquencies,” said James Chessen, ABA’s chief economist. “Consumers also continue to do a good job of monitoring their finances and keeping debt at manageable levels.”

Bank card delinquencies saw a slight third-quarter increase, rising 13 basis points to 2.55 percent of all accounts – but still remain well below their 15-year average of 3.84 percent. “While bank card delinquencies saw a slight uptick, rates are still more than 30 percent below their 15-year average,” Chessen said. “It will be difficult for bank card delinquencies to improve further when they are already at such low levels.”

Chessen believes that small fluctuations in delinquency rates are likely in the months ahead as the economy continues to improve.

Read ABA's full release.

Wednesday, January 8, 2014

Community Banks Increased Small Business Lending

Community banks and community development loan funds (CDLFs) participating in the Small Business Lending Fund (SBLF) have increased their small business lending by $11.2 billion over the 2010 baseline, with $819 million of the increase occurring in the 3rd quarter alone. Lending increases were widespread amongst the participants: 93% of participants increased their small business lending since 2010 and 90% reported increases of 10% or more.

In the aftermath of the recession, small businesses encountered financing difficulties. The SBLF was created by the Small Business Jobs Act of 2010 to help support small business lending by investing capital in community banks using an innovative dividend or interest rate incentive structure designed to encourage responsible increases in lending. The report showed that the SBLF participants did in fact bolster the flow of credit to businesses by more than their counterparts, with participating banks increasing business loans by a median of 52% over baseline levels.

Read the report.

Consumer Credit Grew $12.3 Billion in November

Consumer credit expanded by $12.3 billion in November, below the average gains the last three months and below expectations. September’s gains were mostly driven by non-revolving credit. Consumer credit is 4.8% above year ago levels.

Revolving credit grew by $0.5 billion, signaling consumers’ continual hesitancy to take on debt. However, the positive two month trend is optimistic for December and 2014.

Non-revolving credit continues to grow, adding $11.9 billion in November, consisting mainly of student debt. Non-revolving credit is 4.8% above year ago levels. However, the pace of non-revolving credit is on a downward trend, and may start to slow in the coming months as the economy picks up.

Read the Federal Reserve release.

FOMC Members Discuss Reasons to Start Taper

The FOMC minutes from the December 17-18 meeting highlight the reasons behind the FOMC to begin tapering. FOMC members pointed to increases in nonfarm payrolls over 200,000 for October and November and a declining unemployment rate as positive signs of economic improvement.

According to the minutes, “Participants were most concerned about the marginal cost of additional asset purchases arising from risks to financial stability, pointing out that a highly accommodative stance of monetary policy could provide an incentive for excessive risk-taking in the financial sector.”

It appears as though the committee will taper in $10 billion increments at every meeting. The committee noted concern at the low inflation rate. It is one of the reasons the committee is slowly winding down asset purchases as a slow pace.

Read the FOMC minutes.

ADP Employment Beats Expectations for Second Consecutive Month

According to the ADP’s National Employment Report, the private sector added 238,000 jobs in December, beating expectations for the second consecutive month. Moreover, December’s report included upward revisions to October and November, increasing the headline numbers by a combined 36,000. December’s growth was the strongest all year.

December’s growth was broad. Most gains came from construction, signaling a robust housing recovery. Construction had its best month since 2006, adding 48,000 jobs in December. The services industry ended the year on a positive note, recording the highest monthly gain in December for 2013 at 170,000 jobs. Manufacturing dipped slightly, but still remains at strong levels in comparison to the rest of 2013.

Read the ADP release.

Tuesday, January 7, 2014

Trade Deficit Dropped to $34.3 Billion

The U.S. trade deficit contracted 13% in November to $34.3 billion. The improvement in the deficit was due to a combined decrease in imports and increase in exports. November’s report also slightly revised up October’s headline numbers.

Exports increased by 0.9% to $194.9 billion. The petroleum deficit decreased by $1.4 billion to $9 billion. The services industry grew by $0.2 billion to $19.7 billion.

The increased exports in November caused a reduction in the real deficit, adding around 0.5% to fourth quarter annualized real GDP growth.

Imports decreased by 1.4% to $229.1 billion. The drop was primarily due to a $4.3 billion decrease in imports of industrial supplies and materials.

Read the Census report.

Monday, January 6, 2014

ISM Nonmanufacturing Index Dipped in December

The ISM nonmanufacturing index dipped in December to 53.0, the second consecutive month of decline. Despite that the report as a whole is weak, any reading above 50 indicates industry expansion. The manufacturing index dropped slightly in December as well, but it remains 4.0 points above the nonmanufacturing index.

The details of the report saw mostly across the board declines. New orders sharply declined 7.0 points. It’s the first time new orders have dropped below the expansionary threshold since 2009. Exports dropped 6.5 points to 51.5. Backlogged orders remained below 50 for the second consecutive month, losing another 3 points.

Employment, which has been volatile, improved in December to 55.8.

Read the ISM release.

Thursday, January 2, 2014

Construction Spending Increased 1.0% in November

Construction spending grew 1.0% in November, due largely to strong non-residential construction growth. Construction spending increased 5.9% above year ago levels.

Private construction improved 2.2% in November, coming off a month of no growth in October. Non-residential construction grew 2.7% and residential construction improved 1.9%. Spending on new single-family homes dramatically increased in the past year, growing 18.4% from November 2012.

Public construction saw a 1.8% decrease in spending, however it doesn’t fully offset the large 3.1% gain the month prior.

Read the Census report.

FDIC Publishes Community Banking Study Updates

The FDIC Community Banking Study, a report on U.S. community banking trends from the end of 1984 through 2011, has been updated with 2012 information. Addressing topics such as the definition of a community bank, structural change, geography and more, the study found that community banks continue to play a central role in the U.S. economy and in local communities.

Regarding the trend of consolidation, the FDIC reported that though the total number of banks declined by 59 percent between 1984 and 2011, the number of FDIC institutions with assets between $100 million and $1 billion actually increased. They FDIC noted that the decline in the total number of banks was not just driven by failures, but also by the voluntary mergers in intra-company consolidations.

Looking at community banks balance sheets, the FDIC noted that in 2012 community banks’ total assets grew by $47 billion to $2 trillion and net loans and leases held by community banks grew by 1.6%.

Read the FDIC article.

ISM Manufacturing Index Dipped Slightly in December

The ISM manufacturing index dipped slightly in December to 57.0, dropping 0.3 points. The index is still the second highest reading of the year, coming off the strongest in November. Any index reading above 50 indicated industry expansion. The details of the report were strong, particularly for the employment and new order indices.

New orders rose 0.6 points to 64.2 in December. It’s the highest level since April 2010. As a result of this improvement and inventories declining, the gap between new orders and inventories – a proxy for future production – grew 4.1 points to 17.2. The wide gap indicates a potential for manufacturing growth in the future. Production saw a slight decline, losing 0.4 points and settling at 62.2.

Trade indicators declined, with new export orders dropped 4.5 points to 55.0.

The employment index grew from 56.5 to 56.9. The index reached the highest level since December 2011 – two years ago.

Read the ISM release.