marți, 30 august 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

First Time Foreclosure Starts Near 3-Year Lows, However Bad News Overwhelms; Foreclosure Pipeline in NY is 693 months and 621 Months in NJ

Posted: 30 Aug 2011 06:35 PM PDT

The LPS Mortgage Monitor August 2011 Mortgage Performance Report Shows First-Time Foreclosure Starts Near Three-Year Lows. That's the good news.

The Bad News

  • Average Loan in Foreclosure Is Delinquent for Record 599 Days
  • Of the nearly 1.9 million loans that are 90 or more days delinquent but not yet in foreclosure, 42 percent have not made a payment in more than a year with an average delinquency of 397 days, also a new record.
  • As of the end of June, 4.1 million loans were either 90 or more days delinquent or in foreclosure, as delinquencies remain two times and foreclosures eight times pre-crisis levels.
  • On average, at the current rate of foreclosure sales, judicial foreclosure states would require 111 months to work through inventories of loans that are 90 or more days delinquent or in foreclosure as compared to non-judicial states, which would be able to clear the inventories in approximately 32 months.
  • Most of the foreclosure "outflow" is back into delinquency
  • Loans deteriorating over 90 days still outnumber foreclosure starts 2:1
  • Foreclosure starts outnumber sales by a factor of almost 3:1

Here are a few charts from the LPS Mortgage Monitor Report

click on any chart for sharper image

First time foreclosure starts near three year lows



42% of Loans 90 Day Delinquent+, Not Made a Payment in 12 Months or More



Most of the foreclosure "outflow" is back into delinquency



Loans deteriorating over 90 days still outnumber foreclosure starts 2:1




Foreclosure starts outnumber sales by a factor of almost 3:1



The pipeline ratio in judicial states is more than 3 times that of non-judicial



States with highest percentage of non-current loans: FL, MS, NV, NJ, IL
States with the lowest percentage of non-current loans: MT, WY, AK, SD, ND

Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

The Foreclosure Pipeline in New York is 693 months (over 57 years) and 621 Months (over 51 years) in New Jersey!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Retail Giant in Australia Warns of Massive Price Deflation and Falling Sales, "Hardest Christmas in Retailer Lives" Coming Up

Posted: 30 Aug 2011 05:15 PM PDT

The CEO of Harvey Norman, Australia's largest electrical and furniture chain, warns of massive price cuts and a Christmas Retail Shocker.
"Retailers will have the hardest Christmas in their lives," said the boss of the country's biggest electrical and furniture chain .

"I see unemployment going up, small businesses going under, manufacturing under huge duress and tourism hit very badly. I don't think the outlook will improve."

He said Harvey Norman would crank up its online strategy in October, but he didn't expect it to return profits.

"Our sales in technology, computers and television have been hit badly because of price deflation," he said." Televisions were the biggest offender.

"Prices have dropped by so much we have to sell three times as many TVs to get the same revenue.

"The same goes for computers -- they are half their price of a year ago -- and we have to sell twice as much to stand still.

"Even whitegoods and washing machines are 10 per cent cheaper today.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Eurozone Retail Sales Drop 4th Straight Month; Confidence Drop Most Since 2008; EU GDP .2%; Leading Indicators Negative; S&P Fantasyland Forecast

Posted: 30 Aug 2011 12:15 PM PDT

The Eurozone economy is in shambles. Retail sales are down for the 4th consecutive month, consumer and economic confidence have plunged.

Yet, economic denial runs deep. Government GDP estimates in Spain and Italy are preposterous, as are S&P growth forecasts. Let's take a look at the reports.

Eurozone Retail Sales Drop 4th Straight Month

Finfacts reports Retail sales in Eurozone fell for the fourth month in a row in August


Retail sales in the Eurozone fell for the fourth month in a row in August, according to Markit's latest PMI (Purchasing Managers' Index). A stronger rise in German retail sales was not enough to offset weakness in France and Italy, the two next-largest euro economies. The overall rate of decline accelerated slightly to the fastest since October 2010.

The third-largest euro economy, Italy, registered another steep fall in retail sales in August. The monthly rate of contraction was broadly similar to that posted in July, remaining stronger than the long-run series average. Italian retail sales have fallen continuously for the past six months.

Retailers' inventories of goods for resale rose for the sixth month running, the longest sequence in three years. Moreover, the rate of growth strengthened to a robust pace.

Consequently, the value of goods purchased by Eurozone retailers fell slightly in August. Moreover, the volume of purchases fell more sharply, as average purchase prices continued to rise rapidly during the month. This sustained inflationary pressure, added to weak sales demand, led to a further marked deterioration in retail gross margins during August.

A combination of falling sales and cost pressures led retail employment to slow almost to a halt in August. Latest data marked a third successive month of net job creation in the sector, but at only a negligible rate.
European Economic Confidence Falls Most Since December 2008

Bloomberg reports European Economic Confidence Falls Most Since December 2008
European confidence in the economic outlook plunged the most since December 2008 this month as a persistent debt crisis roiled markets and clouded growth prospects across the 17-nation euro region.

An index of executive and consumer sentiment in the single- currency region fell to 98.3 from a revised 103 in July, the European Commission in Brussels said today. That's the lowest since May 2010. Economists had forecast a decline to 100.2, according to the median of 29 estimates in a Bloomberg News survey. In the U.S., consumer sentiment dropped to the lowest level in more than two years, a separate report showed.

The euro area's economic prospects are deteriorating as national governments cut spending in a bid to narrow deficits and tackle the debt crisis. Economic and Monetary Affairs Commissioner Olli Rehn signaled yesterday that the EU may reduce its 2011 growth forecast from 1.6 percent on concerns that financial turbulence could spill into the broader economy.
"Hard Fall" in Spain

In Spain, via Google translate Tourism only Saving Grace in Economic Debacle here are some bullet points I gathered.

  • Director of a major research service says the Spanish economy is in a "hard fall"
  • Cement consumption is down 20%
  • Electricity consumption down 1%
  • Private sector spending fell 3.6%
  • Tourism is up but hotel prices are at 1995 levels
  • Unemployment still rising

"Nothing indicates that between August and November, things will change for the better, as indicated by the index of economic sentiment. The slowdown in economic activity in the European Union (to which targets 65% of Spanish exports) anticipates a slowdown in overseas sales.

The Government fears the worst, mainly due to the stagnation of private consumption, dependent on the creation of employment and compensation of employees. And none of these variables shows signs of recovery."

Eurozone GDP .2%, Leading Indicators Negative

Balkans Business News reports The Eurozone GDP fell short of expectations
Eurozone GDP growth below expectations in 2Q. Data for the US had already disappointed earlier. The Eurozone GDP reading - at 0.2% - fell short of expectations as well (0.4% q/q). In particular, very slow growth in Germany and stagnation in France have been a drag on growth.

Asia did not contribute to y/y growth any further in this month. In fact, Europe was the only destination contributing at all (both within and outside of the Eurozone). This seems likely to be the most important explanation for the German growth slowdown, as exports have been one of the main growth drivers so far.

Leading indicators are not on bright side, either. The global growth slowdown is already reflected in lower y/y growth rates of Eurozone industrial production. In addition, the OECD leading indicator has - similar to the ZEW Index in Germany - turned negative. Hence, it seems likely that industrial production growth will lose steam too. Inventories of finished goods have increased as well, which is a negative signal, even beyond lower production expectations. Sentiment on financial markets could be drag on private consumption, too. Private consumption is not an important growth driver in the Eurozone. However, a deterioration of sentiment could be dampening final demand.

The extremely weak economic growth in Italy does not seem sufficient to lower Italian unemployment significantly in the coming year. Even in countries that are in better economic shape, such as Germany, slower growth will slow down the recovery on the labor markets, too. We therefore expect the decline in the unemployment rate to be even more gradual than expected so far.
GDP Forecast +1.8% 2011, +1.6% 2012!?

In spite of that horrendous news optimism reigns supreme as the following paragraph shows:
We have revised our 2011 GDP forecast for the Eurozone from +2.0% to +1.8%. Additional austerity measures by governments as a result of the recent turbulence on the financial markets, as well as the weak sentiment, should also dampen economic growth in 2012. Hence, we also slightly revise our GDP growth forecast for 2012 from +1.6% to +1.4%.
I have no idea how you get any growth out of this horrendous mix, let alone fantasy projections of 1.8%, but the S&P has the same conclusion.

S&P Fantasyland Forecast

Please consider S&P trims euro zone growth outlook
Ratings agency Standard and Poor's lowered its economic growth forecasts for the euro zone on Tuesday, but said the shared currency bloc was not headed toward a new recession.

Public and private institutions have been scrambling to revise down their growth outlooks for Europe as a stream of weak data have pointed to sharply slowing activity in recent months.

S&P said in a new report it forecast growth of 1.7 percent in 2011 and 1.5 percent in 2012, down from estimates in July of 1.9 percent and 1.8 percent respectively.

For Germany, Europe's biggest economy, S&P cut its 2012 forecast to 2.0 percent from 2.5 percent previously, down sharply from the 3.3 percent it expects to see this year.

It trimmed its forecasts for France to 1.7 percent in 2011 and 2012, in line with recently downwardly revised French government estimates. Previously, S&P had forecast the euro zone's second-biggest economy would grow 2.0 percent and 1.9 percent in 2011 and 2012 respectively.

S&P cut its 2012 outlook for Spain to 1.0 percent from 1.5 percent previously, still better than the 0.8 percent growth it forecasts for 2011.

Outside the euro zone, S&P trimmed its forecast for Britain, estimating its economy would grow 1.3 percent in 2011 and 1.8 percent in 2012, down from 1.5 percent and 2.0 percent respectively.

Despite the bleaker outlook, S&P did not see Europe sinking back into recession.

"We continue to believe that a genuine double dip will be avoided given the still existing avenues for growth, although we recognize that downside risks are significant," S&P said in a report. "In particular, we will closely monitor trends in consumer demand over the coming quarters," it added.
S&P economic forecasts do not seem any better than their debt ratings. Country by country I will take the "under" line vs. S&P estimates. Odds are strong Europe is already in a recession, and these guys cannot see one coming.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Consumer Confidence Plunges to 44.5, Lowest Since April 2009; Case Shiller Home Index at 2003 Levels, Down 5.9% vs. Year-Ago

Posted: 30 Aug 2011 09:24 AM PDT

In a healthy economy, consumer confidence would be 90. Instead it is slightly less than half that.

Please consider U.S. Consumer Confidence Falls to Two-Year Low
The Conference Board's index slumped to 44.5, the weakest since April 2009, from a revised 59.2 reading in July, figures from the New York-based research group showed today. It was the biggest point drop since October 2008. A separate report showed home prices declined for a ninth month.

"This paints a picture of underlying demand weakening," said Bricklin Dwyer, an economist at BNP Paribas in New York, whose forecast of 45 was most accurate in a Bloomberg News survey. "Consumers are seeing their wealth deteriorate. We've seen a huge decline continuing in the housing market. They've also been hit on the chin by the equity markets."

The S&P/Case-Shiller index of property values in 20 cities fell 4.5 percent in June from a year earlier, after a 4.6 percent drop in the 12 months ended in May that was the biggest since 2009.

Today's confidence report is in line with other figures. The Thomson Reuters/University of Michigan final index of consumer sentiment dropped this month to the lowest level since November 2008. The Bloomberg Consumer Comfort Index has been hovering at levels previously consistent with recessions.

The Conference Board's data showed a measure of present conditions declined to 33.3, the second-lowest this year, from 35.7 in July. The measure of expectations for the next six months slid to 51.9, the weakest since April 2009, from 74.9.

The percent of respondents expecting more jobs to become available in the next six months fell to 11.4, the lowest since March 2009, from 16.9 the previous month. The proportion expecting their incomes to rise over the next six months declined to 14.3 from 15.9. The percent expecting a drop rose to 18.7, the highest since November 2009.

Fewer respondents in the Conference Board's survey indicated they were planning to buy a house, while more intended to purchase cars or major appliances in the next six months.
Housing Prices Drop 5.9% vs. Year-Ago

S&P reports Nationally, Home Prices Went Up in the Second Quarter of 2011 According to the S&P/Case-Shiller Home Price Indices.

Bear in mind that number is not seasonally adjusted. In other words, it really didn't happen. Let's look at some details to show why.

click on any chart below for sharper image
As of June 2011, 19 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up versus May – Portland was flat. However, they were all down compared to June 2010. Twelve of the 20 MSAs and both Composites have now increased for three consecutive months, a sign of the seasonal strength in the housing market. None of the markets posted new lows with June's report. Minneapolis posted a double-digit 10.8% annual decline; Portland is not far behind at -9.6%. Thirteen of the cities and both composites saw improvements in their annual rates; however; they all are in negative territory and have been so for three consecutive months.



The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.9% decline in the second quarter of 2011 over the second quarter of 2010. In June, the 10- and 20-City Composites posted annual rates of decline of 3.8% and 4.5%, respectively. Thirteen of the 20 MSAs and both monthly Composites saw their annual growth rates improve, although remaining in negative territory in June.

The National Index was up 3.6% from the 2011 first quarter, but down 5.9% compared to a year-ago," says David M. Blitzer, Chairman of the Index Committee at S&P Indices. "Looking across the cities, eight bottomed in 2009 and have remained above their lows. These include all the California cities plus Dallas, Denver and Washington DC, all relatively strong markets. At the other extreme, those which set new lows in 2011 include the four Sunbelt cities – Las Vegas, Miami, Phoenix and Tampa – as well as the weakest of all, Detroit. These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together.

Nationally Home Prices at 2003 Levels

The only valid comparison for not seasonally adjusted prices is vs. a year ago, otherwise one must use seasonally adjusted number. Here are a pair of charts from the report.

All 20 Cities Down vs. Year ago



Seasonally-Adjusted vs. Not-Seasonally-Adjusted



Not seasonally-adjusted, home prices fell in only two cities. Seasonally-adjusted, home prices fell in 13 of 20 cities. The difference is a slight decline this quarter vs. a headline gain of +1%.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Wells Fargo Says 12 States in Economic Contraction

Posted: 30 Aug 2011 12:56 AM PDT

According to a Wells Fargo report, 12 States in Contraction, Alabama in Recession.
The report from the San Francisco-based bank said Alabama was one of 12 states experiencing an economic contraction in July and "likely slipped into a recession."

The report, written by senior economist Mark Vitner and economist Michael A Brown, said more states "are likely to fall into negative territory within the next six months" because of a persistent decline in manufacturing jobs.

Of the 12 states cited in Wells Fargo's report, five were in the South. Joining Alabama were Georgia, South Carolina, North Carolina and Virginia. The other seven states were Michigan, Nevada, Montana, Illinois, Indiana, Vermont, and Alaska.
12 Down 38 to Go

The amusing thing was Alabama state officials in denial.

Some farm states may avoid a recession this time around, but otherwise a clear picture has emerged: US In Recession Right Here, Right Now

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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