At 49.5 the purchasing manager’s composite index (PMI) declined 4.26% since October and dropped 5.17% below the level seen a year earlier giving an indication of contracting manufacturing activity for the fourth time in six months.
Respondents now appear to have decidedly negative assessments with most indicating sluggish activity and even some mention of looming recession:
"Conditions still appear to be positive for continued growth in sales." (Machinery)
"Business is steady, but not much more than that. We are in a lull." (Food, Beverage & Tobacco Products)
"The principle business conditions that will affect the company over the next three or four quarters will be the U.S. federal government tax and budgetary policies; the impact of those policies is not yet clear." (Petroleum & Coal Products)
"Differences between first half of year and remaining half are very dramatic, growing to a peak in the middle of the year with a gradual decline since." (Plastics & Rubber Products)
"Seeing a slowdown in request for quote activity." (Computer & Electronic Products)
"The fiscal cliff is the big worry right now. We will not look toward any type of expansion until this is addressed; if the program that is put in place is more taxes and big spending cuts — which will push us toward recession — forget it." (Fabricated Metal Products)
"Seeing a slowdown in demand across markets." (Electrical Equipment, Appliances & Components)
"Economy is very sluggish. Production is down and orders have slowed considerably from Q1." (Transportation Equipment)
"East Coast storms delayed some shipments." (Primary Metals)
"Global economic uncertainty still seems to be sticking around which is not necessarily making things worse, but it is also not making things better from a demand standpoint." (Chemical Products)
Today, the U.S. Census Bureau released their latest read of construction spending showing better results in October with total construction spending with both residential and non-residential components improving since September.
On a month-to-month basis, total residential spending increased a notable 3.00% from September climbing 22.60% above the level seen in October 2011 while still remaining a whopping 56.50% below the peak level seen in 2006.
Single family construction spending climbed a notable 3.61% since September rising 31.52% since October 2011 but remained a whopping 69.97% below it's peak in 2006.
Non-residential construction spending increase a slight 0.27% since September and rose 6.09% above the level seen in October 2011 and remained a whopping 30.13% below the peak level reached in October 2008.
The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.
Today, the Bureau of Economic Analysis (BEA) released their second "estimate" of the Q3 2012 GDP report showing that the economy continued to expand with real GDP increasing at an annualized rate of 2.7% from Q2 2012.
On a year-over-year basis, real GDP increased 2.67% while the quarter-to-quarter non-annualized percent change was 0.66%.
The latest quarterly results indicate that the most notable source of weakness in the economy came from declines to fixed non-residential investment in structures, equipment and software with the nonresidential investment component declining at an annualized rate of -2.2% from Q2.
Residential investment, on the other hand, worked to buoy the overall fixed investment component growing at an annualized rate of 14.2% from Q2.
Keep in mind that these results are likely very poorly estimated and are sure to be revised notably in following quarters and even years to come.
Today’s jobless claims report showed declines for both initial and continued jobless claims as initial claims dropped below the closely watched 400K level.
Seasonally adjusted “initial” unemployment claims declined by 23,000 to 393,000 claims from a revised 416,000 claims for the prior week while seasonally adjusted “continued” claims declined by 70,000 claims to 3.287 million resulting in an “insured” unemployment rate of 2.6%.
Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.
Currently there are some 2.15 million people receiving federal “extended” unemployment benefits.
Taken together with the latest 2.94 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.10 million people on state and federal unemployment rolls.
On Wednesday, the U.S. Census Department released its monthly New Residential Home Sales Report for October showing a slight monthly decline with sales falling 0.3% since September but rising 17.2% above the level seen in October 2011 though remaining at an historically low level of 368K SAAR units.
It's important to recognize that the inventory of new homes appears to now be bouncing around a very low 147K units, near the lowest level seen in in at least 47 years while the median number of months for sale has improved to 5.9.
The monthly supply increased to 4.8 months while the median selling price increased 5.74% and the average selling price increased 7.89% from the year ago level.
The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.
The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.
The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) decreased 1 basis point to 3.44% since last week while the purchase application volume increased 3% and the refinance application volume declined 2% over the same period.
Clearly, the Federal Reserve's QE3 announcement and implementation has had a notable effect on mortgage rates in recent weeks continuing to lift refinance application activity and possibly helping to establish a base of sorts to purchase applications.
The question is though, if the Fed is stimulating this activity by forcing artificially low rates, what would these trends look like if prevailing rates were based on a more fundamental market function?
The latest release of the S&P/Case-Shiller (CSI) home price indices for September reported that the non-seasonally adjusted Composite-10 price index increased a slight 0.28% since August while the Composite-20 index increased 0.29% over the same period.
The latest CSI data clearly indicates that the price trends, while continuing to experience a slight lift through the typically more active late-summer season, are beginning to see a flattening of sorts and as I recently pointed out, the more timely and less distorted Radar Logic RPX data is starting to see the leveling off of prices yield to the typical seasonal downtrend into the fall.
The 10-city composite index increased 2.13% as compared to September 2011 while the 20-city composite increased 3.00% over the same period.
Both of the broad composite indices show significant peak declines slumping -29.77% for the 10-city national index and -29.20% for the 20-city national index on a peak comparison basis.
To better visualize today’s results use Blytic.com to view the full release.
The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated pronounced weakness for the national economy with the index falling notably from the prior month to stand at a near-recessionary level of -0.56 while the three month moving average also slumped to -0.56.
The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”.
The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth.
A value at or below -0.70 for the three month moving average of the national activity index (CFNAI-MA3) indicates that the national economy has either just entered or continues in recession.
I’d like to take a moment to reflect on the notion of “limited government”.
With the latest election, the last four years in particular and the last decade or so in general, the concept of “limited government” seems to have become a relic of sorts, mocked by one side of the ideological spectrum, paid lip service to by the other but widely discarded overall.
It’s strange that such a basic concept could fall so far out of fashion… as if it has no merit at all… yet most “reasonable” people must acknowledge that there are “limits” to what the government can and should do.
By “reasonable” people, of course, I mean those who accept as valid the overall order of our society which seeks to balance the government “public interest” with the individual “private interest” and not those who occupy the extremes of the many philosophies who want nothing more than to radically reorganize everything (…one way or another) from the ground up. ( Continue… )
Looking deeper into last Friday’s weak industrial production report, it appears that the “Business Equipment” component is giving a clear sign of weakness as well as substantiating the business investment pullback noted over the weekend by the WSJ.
In fact, looking at the data (click on the chart below for a full-screen dynamic version of the entire history of this data series) it’s easy to see that this series makes fairly sharp tops as the economy transitions into recession making it a useful contraction indicator.
Keep in mind though, while the latest results look like another solid harbinger of looming recession, the data is still fairly preliminary and subject to revision.
Another couple or few months of data will be required to determine if this pullback is simply a slowing of our halfhearted recovery or a more notable slide into a new recessionary decline.