Friday, May 29, 2015

Consumer Sentiment Fell to 6-Month Low in May

Consumer sentiment declined to 90.7 in May, down 5.2 points from the previous month, according to the University of Michigan Consumer Sentiment Index.

Current economic conditions fell 6.2 points to 100.8 and the index of consumer expectations fell 4.6 points to 84.2.

Respondents expect both inflation over the next year and over the next 5 years to be 2.8%, both up 0.2 percentage points from the previous month.

Regardless of May's pallid report, in the first five months of 2015 the Consumer Sentiment Index averaged 94.6, the highest average level since 2004.

U.S. Economy Shrank as GDP Declined 0.7% in the First Quarter

U.S. Real GDP for the first quarter decreased at a rate of 0.7%, according to the second estimate released by the Bureau of Economic Analysis. The decline is in stark contrast to the 2.2% growth in the fourth quarter of 2014.

The decline primarily reflected a deceleration in personal consumption expenditures (PCE) and downturns in exports, nonresidential fixed investment and state and local government spending that were partly offset by a deceleration in imports and upturns in federal government spending and in private inventory investment.

Real exports largely contributed to the decline, decreasing 7.6% in the first quarter compared to 4.5% growth in the fourth quarter.

Real personal consumption expenditures increased 1.8% in the first quarter, a much slower rate compared to the 4.4% growth the previous quarter. Real nonresidential fixed investment decreased 2.8% in the first quarter, in contrast to an increase of 4.7% in the fourth quarter. Real federal government spending increased 0.1% this quarter after falling 7.3% in the fourth quarter.

Read the BEA release.

Thursday, May 28, 2015

Fed Survey Finds Increasing Economic Optimism

Four in 10 U.S. households surveyed last fall said they were somewhat or much better off financially than they had been five years prior, according to the Federal Reserve’s 2014 Survey of Household Economics and Decisionmaking. Just over a quarter said they were worse off than in 2009. The numbers show an improvement from last year’s figures, when one-third said they were worse off but only three in 10 said they were better off.

Meanwhile, 65% of respondents said they were either “doing okay” or “living comfortably” financially, up five points from the year before, while 10% said they found it difficult to get by.

The survey also found that 37% had applied for credit in the prior 12 months — up from 31% the year before — and 32% of those households were turned down or given less credit than applied for. Another 12% said they put off applying for credit because they thought they would be turned down. Respondents were more optimistic in 2014 than 2013 that they would be able to obtain a mortgage loan.

More than 8 in 10 respondents who rented their home said they would prefer to own a home. When asked why they don’t, 50% said they cannot afford a down payment, 31% said they would not qualify for a mortgage and 27% said it is cheaper to rent than own.

The survey also explored savings practices. Two-thirds of respondents said they could cover three months of expenses from savings and other sources if they lost their main source of income. Two-fifths said their spending in the previous year exceeded their income. The survey found that 31% of non-retired respondents reported having no retirement savings or pension, including 25% of those over 60.

Read the survey report.

Wednesday, May 27, 2015

ABA Statement on FDIC’s First Quarter Bank Earnings Report

“The banking industry has settled into steady growth bolstered by a continued improvement in the quality of bank portfolios and strong levels of capital. Lending is growing – particularly to small businesses – and real estate loans are starting to return with more enthusiasm. Today’s report is another indication that banks are in a great position to continue making the loans that drive our economy forward.”

Hometown Banks Drive Business Loan Growth
“We’re continuing to see robust lending growth driven by strong demand for business loans. Borrowing is likely to remain elevated as businesses look to jumpstart expansion plans before an expected increase in rates by the Fed later this year. People borrow when they feel they have the capacity to repay debt, and the comfort level of both businesses and consumers is increasing as the economy continues on the road to recovery. Maintaining confidence, particularly for businesses, is critical to supporting economic growth and job creation. More confidence translates into more borrowing and a better future. Banks remain eager to make the loans that fuel economic expansion.”

Increased Lending and Diversification Drive Earnings Growth
“Strong lending growth has driven higher earnings for banks of all sizes, with trading revenue playing an important supporting role. Diversification of revenue streams continues to support income growth, particularly for many larger banks. Community banks have continued to excel at their bread and butter product, small business lending. Margins remain strained under the weight of competition to fund loans and the challenges associated with deploying the large number of new deposits that continue to flow into the U.S. banking system. Expense control remains a high priority as regulatory costs continue to rise.”

Banks Prepared for Rising Interest Rates
“The expected increase in rates from the Fed later this year comes as no surprise to our industry, and banks are actively engaged in preparing for that eventuality. This is one of many risks that banks must manage as they work to balance customer demands for longer-term, low-interest loans against the negative impact of rising rates on funding costs.”

Asset Quality Improves Across the Board
“Loan quality has improved across the board due to prudent underwriting by banks and careful management of debt by businesses and individuals. Banks are now back to more normal levels of provisioning funds to cover the possibility of loan losses in the future. Problem loans are back to levels we saw nine years ago, and losses have reduced to pre-crisis levels. The level of non-performing loans are back to levels we saw seven years ago, declining more than 68 percent since its peak in the first quarter of 2010. ”

Higher Capital Supports Lending Base
“The level and quality of bank capital continues to increase, providing a strong base that supports lending to consumers and businesses. With industry capital at a record high, the focus has shifted toward deploying it in the form of loans and community reinvestment. Total industry capital is now $1.8 trillion, and with reserves banks have set aside for possible loan losses, there is a total buffer of $1.9 trillion protecting the industry from any economic circumstance that could arise.”

Tuesday, May 26, 2015

New Home Sales Rose 6.8% in April

Sales of new single-family houses in April rose to a seasonally adjusted annual rate of 517,000 according to the U.S. Census Bureau and Department of Housing and Urban Development. The April rate is 6.8% above the revised March rate of 484,000 and 26.1% above the year-ago rate of 410,000.

New home sales in two of the four regions increased this month. The Midwest increased 36.8% and the South rose 5.8%. Sales in the Northeast and the West declined 5.6% and 2.3%, respectively.

The median sales price of new homes sold in April was $297,300, up 4.1% from March. The average price was $341,500, down 0.5% from March.

At the end of April, there were an estimated supply of 4.8 months at the current sales rate.

Read the Census report.

Home Prices Steadily Increased in March

The 20-City Case-Shiller Composite gained 5.0% year-over-year in March, consistent with February’s gain. The 10-City Composite gained 4.7% in March from the previous year, down from the 4.8% year-over-year gain in February. The National Index recorded a 4.1% gain on an annual basis in March, compared to a 4.2% annual gain in February.

On a monthly basis, all three indices posted increases as the 10-City Composite increased 0.8%, the 20-City Composites rose 0.9% and the National Index rose 0.8%.

The increase this month brought the 10-city and 20-city indices back to their autumn 2004 level, but still remain roughly 15-16% below their June/July 2006 peak.

Only New York reported a monthly decline in March, falling 0.1%. San Francisco reported the highest monthly increase, rising 3.0%, followed by a 2.3% increase in Seattle.

Year-over-year, San Francisco increased 10.3%, the highest of the 20 cities, followed by 10.0% growth in Denver and 9.3% growth in Las Vegas. Cleveland and Washington reported the slowest year-over-year growth, increasing 1.0%, followed by a 2.7% increase in New York.

Read the S&P release.

New Orders for Durable Goods Decreased in April

New orders for durable manufactured goods decreased 0.5% to $235.5 billion in April, according to the U.S. Census Bureau. This decrease, down two of the last three months, followed a 5.1% increase in March. Excluding transportation, new orders increased 0.5%.

Shipments of manufactured durable goods, down three of the last four months, decreased 0.1% to $240.5 billion, following a 1.5% increase in March.

Inventories of manufactured durable goods, up twenty-four of the last twenty-five months, increased 0.2% to $401.5 billion, and continues to be at an all-time high since the series was first published in 1992.

Read the U.S. Census Bureau release.

Friday, May 22, 2015

Yellen: Rate Hike Likely This Year, Despite Headwinds

“[I]f the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy,” Federal Reserve Chair Janet Yellen said in a speech at the Providence Chamber of Commerce in Rhode Island. But, as always, Yellen included the adage that increases in the federal funds rate will be data dependent and are not on a preset course.

Yellen’s monetary policy projection is based on her overall belief that, while there are headwinds, the economy is growing at a moderate pace. Job growth has gradually strengthened; the unemployment rate has declined to 5.4%, the number of job openings has risen and more workers are quitting their jobs, signaling greater confidence in their ability to find a new job. However, there is still slack in the labor market in the form of those working part time for economic reasons, those who are out of the labor force but would work if conditions were better and those who perceive a lack of good job opportunities, as well as overall disappointing wage growth. But these labor market headwinds are showing sign of abating, and wage gains at larger retailers such as Wal-Mart and Target signal that there might be larger wage gains in the future.

In recent months, some economic data have suggested that the pace of improvement in the economy may have slowed. But Yellen believes that the flat GDP projection in the first quarter was largely due to transitory factors, including the unusually harsh winter and the labor dispute at ports on the West Coast, as well as some statistical noise. Yellen expects the economic data to strengthen, and for employment and output to be moderate over the remainder of the year and beyond.

Price inflation still remains a headwind, as CPI has been held down by the continued economic weakness during the slow recovery and, more recently, by lower prices of imported goods as well as the fall in oil prices. But with oil prices no longer declining, Yellen and other FOMC members believe that CPI will move up to 2% as the economy strengthens.

Read the speech.

CPI Increases Despite Lower Energy Prices

The Consumer Price Index increased 0.1% in April on a seasonally adjusted basis, as further declines in energy was offset by an increase in all items less food and energy, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the CPI declined 0.1% SAAR — the third year-over-year decline in 2015.

The index for energy fell 1.3% month-over-month, driven by an 8.4% decline in fuel oil and a 1.7% decline in gasoline. On a yearly basis, the energy index fell 18.9% SAAR.

Non-energy items drove the monthly increase, as all items less food and energy increased 0.3% from March. The largest monthly gains were a 0.9% increase in medical care services, a 0.6% increase in used cars and trucks and a 0.3% gain in shelter. In contrast, the index for apparel and airline fares declined in April.

The food index, however, was flat on a monthly basis as a 0.2% increase in food away from home was offset by a 0.2% decline in food at home. On a yearly basis, the index for food increased 2.0% attributable to increases in both food at home and food away from home.

Read the Bureau of Labor Statistics report.

Thursday, May 21, 2015

Existing Home Sales Slowed in April

Existing home sales declined 3.3% to a seasonally adjusted rate of 5.04 million, down from an upwardly revised 5.21 million in March. Existing home sales remain 6.1% higher than last year, despite last month’s decline.

The median existing-home prices increased 8.9% year over year to $219,400, the largest gain since January 2014.

Total housing inventory increased 10% to 2.21 million homes available for sale, 0.9% lower than a year ago. There is currently a 5.3 month supply of existing homes available for sale, up from 4.6 months in March.

National Association of Realtors President Chris Polychron, warned that markets could slow after August 1st, when lenders transition to new closing procedures required by the Consumer Financial Protection Bureau’s RESPA-TILA integrated disclosure rule. “We hope that the move away from the HUD—1 is smooth, but even if 10% of transactions experience closing issues, that’s as many as 40,000 transactions a month.”

Existing home sales increased 1.7% in the Midwest, but declined in the three other regions—falling by 3.1% in the Northeast, 1.7% in the West, and 6.8% in the South. Despite slowing sales over the month, each region saw year-over-year gains in home prices, especially in the Midwest and West regions which rose by 11.4% and 10.0% respectively.

All cash sales were 24% of transactions, while the share of first time homebuyers was 30%, both the same as in March.

Read the NAR report

Wednesday, May 20, 2015

FOMC Minutes: June Rate Hike Not Likely

Many participants said that a June rate hike is unlikely, according to the minutes from the April 28-29 Federal Open Market Committee (FOMC) meeting. However, a few participants anticipated that conditions for beginning policy firming will have been met by June. The Committee agreed that the timing of the first increase in the target range for the federal funds rate would be determined on a meeting-by-meeting basis, and that the increase in the target rate will be appropriate when they had seen further improvement in the labor market and were reasonably confident that inflation would move back to its 2% objective over the medium term.

Fed officials reported that during the intermeeting period, the pace of improvement in the labor market moderated somewhat and CPI continued to run below the FOMC’s longer-run objective of 2%, partly restrained by declines in energy prices and further decreases in non-energy import prices. The decline in private spending, combined with a decline in government spending, led to a substantial slowing in economic growth in the first quarter. Most participants agree that the weak quarter was driven by transitory factors, most notably the severe winter weather in some regions and the labor dispute at West Coast ports temporarily disrupting some supply chains. Overall, participants do not believe that the weakness in the first quarter will endure. High consumer sentiment, increased auto sales and a strong increase in household real incomes maintain the Committee’s expectations that the economy will continue to expand at a moderate pace, despite the slowdown in the first quarter.

However, a number of participants suggested that the negative effect of the strong dollar on net exports as well as the dampening effect of low oil prices on firms’ investment spending might be larger and longer-lasting than previously anticipated. Furthermore, the expected boost to household spending from lower energy prices had not materialized as expected.

Read the FOMC minutes.

Tuesday, May 19, 2015

Housing Starts Jump to Highest Level Since 2007

Housing starts in April rose to a seasonally adjusted annual rate of 1.135 million, 20.2% above the revised March estimate of 944,000 and 9.2% above the April 2014 rate of 1.039 million. Single-family housing starts grew at a rate of 733,000, 16.7% above the revised March figure of 628,000. The rate of growth for multifamily units was 389,000, 31.9% above the revised March estimate of 295,000.

The rate of housing starts accelerated in three of the four regions. Housing starts in the Northeast increased 85.9% to 184,000 total units, the largest of the four regions, followed by a 39.0% increase to 278,000 units in the West and a 27.8% increase to 170,000 units in the Midwest. The South, the only region to experience a deceleration in housing starts, decreased 1.8% to 503,000 units.

Building permits were at a seasonally adjusted annual rate of 1.143 units, which is 10.1% above the revised March rate of 1.038 and 6.4% above the year-ago estimate of 1.074. Building permits for single-family units were at a rate of 666,000, 3.7% above the March figure of 642,000. Building permits for multifamily units were 444,000, 20.0% above March’s revised rate of 370,000.

Housing completions in April were at a seasonally adjusted annual rate of 986,000, 20.4% above the revised March estimate of 819,000 and 19.4% above the year-ago rate of 826,000. Single-family housing completions were at a rate of 688,000, 14.5% above the revised March rate of 601,000. The April rate for multifamily units was 288,000, 39.8% higher than March.

Read the Census release.

Monday, May 18, 2015

Homebuilder Confidence Fell Two Points in May

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) fell two points to a level of 54 in May, but increased nine points from May 2014.

Two of the three components of the index experienced losses this month. The buyer traffic dropped one point to 39 and current sales conditions decreased two points to 59. The component charting sales expectations in the next six months rose one point to 64.

Two of the four regions posted gains in May. The South and the Midwest each increased one point to 57 and 55, respectively. The Northeast fell one point to 41 and the West fell three points to 55.

“Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home,” said NAHB Chief Economist David Crowe. “On the bright side, the HMI component measuring future sales expectations has been tracking upward all year, mortgage rates remain low, and house prices are affordable. These factors should spur the release of pent-up demand moving forward.”

Read the NAHB release.

Friday, May 15, 2015

Mining and Utilities Drive Industrial Production Decline

Industrial production decreased 0.3% in April, the fifth consecutive monthly loss. From April 2014, the index increased 1.9%.

Output of utilities fell by 1.3%, an improvement from the 5.4% decline in March. Mining output decreased by 0.8% — the fourth consecutive monthly decrease — driven by a sharp fall in oil and gas well drilling. Manufacturing output was flat from March, as a small increase in the production of durables was offset by a small decrease in the output of nondurables .

The capacity utilization for the total industry was 78.2%, 1.9 percentage points below the 1972 - 2014 average.

Final products declined 0.5%, driven by declines in both consumer goods and business equipment. Nonindustrial supplies increased 0.2% as construction increased 0.1% and business supplies increased 0.3%. The index for materials declined 0.2% as a result of a 0.5% reduction in energy materials.

Read the Federal Reserve release.

Thursday, May 14, 2015

Student Loan Debt is Outpacing Other Debt Growth

The Federal Reserve Bank of New York announced in their Q1 2015 Household Debt and Credit Report, that total household debt reached $11.85 trillion, up only $24 billion from last quarter. Growth in balances slowed across most categories for the quarter, most notably in mortgage balances, which grew $1 billion, down $38 billion from the previous quarter.

“Tight standards on mortgage lending are reflected in both sluggish growth in housing debt as well as substandard reductions in mortgage delinquency and defaults,” said New York Fed SVP and economist Andrew Haughwout.

Credit card balances declined $16 billion after gaining $20 billion in Q4. Although the aggregate credit card limit increased by nearly one percent, new extensions of credit were slow as the number of credit inquiries dropped by 5 million from the previous quarter.

Delinquencies improved somewhat, as 5.7% of outstanding debt was in some sort of delinquency, compared to 6.0% in Q4. Mortgage delinquencies were 3.0%, 10 basis points lower than in Q4. About 112,000 individuals had foreclosure notation added to their credit reports, the lowest since the data was first collected in 1999.

Student loan debt drove the increase in total household debt adding $32 billion, a slight increase from last month. Although the 90+ day delinquency rate dropped 2 basis points, it remained high at 11.1% (and may actually be much higher since about half of these loans are in deferment). Given that there are $1.19 trillion in student loans outstanding, the economic consequences could be extraordinary

As Donghoon Lee, a research officer at the New York Fed noted in February, “Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.” Approximately 8 million Americans are in default on their student loans according to the CFPB, with an additional 3 million Direct Loan borrowers at least 30 days past due. As the average amount of student loan debt and defaults continue to grow, an increasing share of borrowers may find it increasingly difficult to make large purchases.

Read the New York Fed report.

Producer Prices Slipped in April

Producer prices fell 0.4% in April, seasonally adjusted, according to the U.S. Bureau of Labor Statistics, after increasing 0.2% in March. Over 70% of the decrease in final demand prices is attributable to a decline in the index for final demand goods. On an unadjusted basis, producer prices are down 1.3% from the previous year.

After rising in March for the first time in eight months, final demand goods declined by 0.7% in April. Final demand energy contributed largely to the decline as prices for gasoline decreased 4.7%. Final demand for foods decreased 0.9%, while demand less foods and energy decreased by 0.1%.

Final demand services were sluggish as well, falling 0.1% after rising 0.1% in March. Final demand for trade services led the decrease as it fell 0.8%. More than 40% of the April decrease can be attributed to margins for machinery and equipment wholesaling, which declined by 1.0%. In contrast, prices for securities brokerage, dealing, investment advice and related services rose by 4.0%.

Read the BLS release

Wednesday, May 13, 2015

Retail Sales Unchanged in April

There were $436.8 billion of food and retail sales in April (after adjustment of seasonal variation and holiday and trading-day differences, but not for price changes), according to the U.S. Census Bureau. This level was virtually unchanged from the previous month, but 0.9% higher from April of last year.

Core retail sales – excluding automobiles, building materials, and gasoline—increased by 0.2% in April, after rising by a half percent last month. Total sales, excluding automobiles and parts rose 0.1%, a slower increase from last month's growth of 0.7%, but unchanged from April 2014.

Retail trade sales declined 0.1% from both last month and April of 2014. Sales at gasoline stations declined by 0.7% on the month and were 21% lower than a year ago. Sales from department stores fell 2.2% from March, and were down 5.1% on the year.

Read the Census release

Tuesday, May 12, 2015

Small Business Optimism Rises in April

The NFIB Small Business Optimism Index rose to 96.9 in April, up 1.7 points from the previous month. Nine of the ten indices reported increases or remained unchanged for the month, while expectations for real sales increases declined by 3 points. The percent of businesses believing the next three months to be a good time for expansion was unchanged.

The number of owners reporting plans to increase employment rose by 1 point. Fifty-three percent of owners reported hiring or trying to hire, while 44% reported difficulty filling positions due to a lack of qualified applicants.

The earnings trends index rose by 6 points. Reports of increased labor compensation rose to a net 23% of all owners. Furthermore, a seasonally adjusted net 14% of owners surveyed plan to raise compensation in the coming months, although rising benefit costs may offset increases in employee take-home pay.

A historically low number of business owners responded that all of their credit needs were not met, with 2% reporting that financing was their top business problem. Government requirements and red tape was the single most important problem cited by small business owners, followed by taxes and quality of labor.

Read the NFIB report

Friday, May 8, 2015

U.S. Added 223,000 Jobs in April

Total Nonfarm payroll employment rose by 223,000 in April, up from last month’s revised estimate of 85,000. The unemployment rate dropped slightly to 5.4%, the lowest since 2008. The Federal Reserve has placed its full-employment estimate between 5.0% and 5.2%.

The strongest gains occurred in professional and business services, health care, and construction. Professional and business services gained 62,000 jobs in April. Health care added 45,000 jobs in April and 390,000 jobs over the last year. Construction gained 45,000 jobs in April and 280,000 jobs over the past year.

Mining employment saw job losses, losing 15,000 jobs in April. Most of the losses were in support activities for mining and oil and gas extraction. Mining employment has fallen by 49,000 since the beginning of the year.

The civilian labor force participation rate remained virtually unchanged at 62.8%. It has held between 62.7% and 62.9% since April 2014.

Average hourly earnings increased by 3 cents to $24.87. Hourly earnings have increased by 2.2% over the last year.

The number of long-term unemployed, those jobless for 27 weeks or more, was little changed at 2.5 million. This group accounts for 29% of the unemployed. The number of involuntary part-time workers was little changed at 6.6 million.

Read the BLS release

Thursday, May 7, 2015

Consumer Credit Grew 7.4% (SAAR) in March

Consumer credit increased at a seasonally adjusted annual rate of 7.4% in March to $3.36 trillion. Revolving credit rose 5.9% (to $889 billion) and non-revolving credit increased by 7.9% ($2.47 trillion). Consumer credit rose at an annual rate of 5.4% for the first 3 months of 2015.

Total outstanding consumer credit increased by $20.5 billion, up from an increase of $14.8 billion in February. Total outstanding non-revolving credit increased by $16.2 billion, while outstanding revolving credit increased by $4.4 billion.

Federal Government holdings of student loans continue to be the largest portion of non-revolving credit, making up 36% of outstanding credit. Finance companies and depository institutions are the secondary holders of non-revolving credit, each holding approximately 25%. Depository institutions continue to be the primary holder of revolving credit, holding 82%.

Read the Federal Reserve release

Tuesday, May 5, 2015

Non-Manufacturing ISM Index Rises in April

The Non-Manufacturing ISM Report on Business Index was 57.8 in April, up 1.3 points from 56.5 in March. Index readings above 50 indicate expansion in non-manufacturing industries. April was the 63rd consecutive month of growth. Fourteen industries reported growth in April, while four industries—Mining; Other Services; Professional, Scientific & Technical Services; and Information—contracted.

The Business Activity Index registered 61.6, 4.1 points higher than March’s number. Respondents cited improved weather and lower fuel costs as reasons for increasing activity.

The employment index grew 0.1 points to 56.7, as 13 industries reported increased employment. Four industries, Mining; Information; Other Services; and Professional, Scientific & Technical Services, reported reduction in employment.

Inventories grew to 51.0 points, up from 49.5 in March. Some respondents commented that “higher inventories are needed to calm fears about more backorders from ports,” while others noted that they reduced on–hand materials as part of a “lean initiative.”

Prices paid increased for the second month in a row albeit at a slower pace, registering 50.1, 2.3 points lower than in March. Nine industries reported an increase in prices, while 7 reported a decrease.

The index for imports was 51.5, 4.0 points lower than March’s reading but still expansionary. Four industries—Wholesale Trade; Construction; Information; and Professional, Scientific & Technical Services, reported import growth, while eight industries reported no change.

Read the ISM release

Deficit Widens as Imports Increase More Than Exports

The U.S. international trade deficit increased in March, rising to $51.4 billion, up from $35.9 billion in February. The $1.6 billion increase in exports was not enough to offset the $17.1 billion increase in imports.

The rise in exports was largely composed of a $700 million dollar increase in civilian aircraft and aircraft engines.

Imports were driven by higher demand for consumer goods, which increased by $9.0 billion and capital goods, which increased by $4.0 billion.

The goods deficit increased $14.9 billion to $70.6 billion, while the services surplus decreased $0.6 billion to $19.2 billion.

Since March 2014, the goods and services deficit has increased 5.2%. Exports decreased $11.7 billion (2.0%) and imports decreased $5.3 billion (0.8%).

Read the BEA release here

Monday, May 4, 2015

C&I Lending Standards Little Changed, Residential Demand Increases

Over the past three months, banks have further eased lending standards for a variety of home loan types, while C&I lending remained little-changed, according the April Federal Reserve Senior Loan Officer Opinion Survey.

On net, 5.3 % of respondents reported easing standards for commercial and industrial lending to large and middle-market firms. For small businesses lending, the number of respondents reporting tightening standards were virtually equal to the number reporting easing standards. Most respondents that reported having eased standards cited more-aggressive competition from other banks and non-banks as a reason for doing so. A smaller segment attributed easing standards to a more favorable or less uncertain economy. Respondents who tightened standards pointed to industry specific problems and concerns about the effects of legislative changes or supervisory actions.

A modest net fraction of banks eased standards on loans eligible for purchase by government-sponsored enterprises, and on qualified mortgage jumbo mortgage loans. Modest to moderate net-fractions of banks reported increases in demand for most categories of home loans over the last three months.

The survey contained a special set of questions regarding lending to the oil and gas extraction sector. Although higher delinquencies are expected for this sector, banks indicated that their exposures were small, and have taken steps such as restructuring loans and reducing existing credit lines to reduce them further. Over 80% of banks surveyed stated that lending to this sector accounted for less than 10% of their C&I loans.

Read the Federal Reserve report

New Orders Increase for First Time in 7 Months

New orders for manufactured goods increased 2.1% to $476.5 billion in March following a revised 0.1% decline in February according to the U.S. Census Bureau. The March increase in orders was the first after 7 consecutive months of decreases.

New orders for transportation equipment were strong, rising 13.5% to $80.4 billion, as defense aircraft and parts orders increased by 103.0% and nondefense aircraft and parts increased by 30.6%. New orders for manufactured durable goods were up by 4.4% to $241.2 billion

Shipments increased 0.5% to $482.2 billion after a 0.4% increase in February. Inventories decreased 0.2% to $649.1 billion, after remaining virtually flat in February. Unfilled orders increased by 0.1% to $1.157 trillion, following a 0.5% February decline.

The inventories-to-shipments ratio was 1.35, unchanged from February.

Read the Census Bureau release

Friday, May 1, 2015

ISM Manufacturing Index Growth Remains Slow

The ISM manufacturing index was unchanged at 51.5 points in April. Index readings above 50 indicate expansion in the manufacturing economy. Respondents again cited port delays and challenges finding qualified labor to fill positions. The transportation sector noted that North American business is flat but softening slightly globally. Of the 18 manufacturing industries indexed, 15 reported growth, up from 10 in March.

The index for new orders increased 1.7 points, while inventories declined 2 points. The gap between these two indices increased to 4 points, indicating that inventories are not keeping up with current demand.

The employment index fell to 48.3, down from 50 in March. The April reading is the lowest since September 2009 when the index registered 47.8. Of the 18 manufacturing industries, 11 reported employment growth while the textile mill, computer and electronic products, and chemical products industries reported decreases in employment.

Export orders expanded for the first time in 3 months, registering 51.5 in April, up from 47.5 in March.

The prices index rose to 40.5, up 1.5 points from March, marking the 6th consecutive month of raw material prices decreasing.

Production increased 2.2 points, growing for the 32nd consecutive month.

Read the ISM release

Construction Spending Fell in March.

Construction spending declined 0.6% in March to a seasonally adjusted annual rate (SAAR) of $966.6 billion. February spending was revised up slightly from $967.2 billion to $972.9 billion. Although growth in construction spending declined from February, construction spending for the first quarter of 2015 was 3.2% greater than the first quarter of 2014.

Total private construction fell to $702.4 billion (SAAR), a 0.3% decrease from the revised February estimate. On the year, private construction increased 2.9%.

Private residential construction declined to $349.0 billion (SAAR), down 1.6% from February, as both construction of single and multi-family homes declined for the month. For the year, private residential construction declined by 2.6%

Non-residential construction increased by 1.0%, with communication infrastructure and lodging construction posting the most notable increases.

Public constriction continued to decline, falling 0.9% from February, but increased 16.5% from one year ago.

Read the Census Bureau release

Consumer Sentiment Rebounded in April

Consumer sentiment rose in April, according to the University of Michigan survey, rising 2.9 points above March’s reading. This month’s increase brought the index to its second highest level since 2007.

University of Michigan economist Richard Curtin noted that optimism has become increasingly dependent on low inflation and interest rates, and that although most consumers anticipate a rate increase in the coming year, they expect the increase to be minimal and offset by expanding jobs and incomes.

The Current Economic Conditions Index and Index of Consumer Expectations also rose in April, rising by 2 points and 3.5 points respectively. The Index of consumer expectations is 14.1 points higher than it was in April of 2014.

Inflationary expectations fell during the month. Consumers now expect prices to be 2.6% higher one year from now, down from 3.0% in March.