The Chicago Fed National Activity Index: June 2013

The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated that the national economy remained near contraction in June with the index improving to weak level of -0.13 from a level of -0.29 in May while the three month moving average improved to a level of -0.26.

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.

Reading Rates: MBA Application Survey – July 17 2013

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) went flat at 4.53% since last week while the purchase application volume increased 1% and the refinance application volume decreased 4% over the same period.

Rates have literally exploded rising a whopping 106 basis points over the past nine weeks seemingly directly correlated with the Feds recent suggestion that they may start to wind down GSE purchases later this year.

Clearly, steadily increasing rates is working to tamp down mortgage application activity but thus far, the spillover to home sales and price indicators appears minimal.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

New Residential Construction Report: June 2013

Today’s New Residential Construction Report showed mixed results in June with an 9.9% decline to total housing starts and a 7.5% decline to total housing permits while both single family housing permits and starts improved on the month.

Single family housing permits, the most leading of indicators, increased 0.6% from May to 624K single family units (SAAR), and  increased 24.6% above the level seen in June 2012 but still remained well below levels seen at the peak in September 2005.

Single family housing starts declined 0.8% from May to 591K units (SAAR), and rose 11.5% above the level seen in June 2012 but still remained well below the peak set in early 2006.

Production Pullback: Industrial Production June 2013

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing an increase in June with total industrial production climbing 0.31% since May and rising 1.98% above the level seen in June 2012.

Capacity utilization also improved climbing 0.17% from May and rising 0.18% above the level seen in June 2012 to stand at 77.84%

It's important to recognize that though the "recovery" is well over two years old, both industrial production and capacity utilization are notably below the peaks set in late 2007.

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings July 2013

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that assessments of housing activity improved notably in July with the composite HMI index climbing to 57, the highest level seen since early 2006, while the "buyer traffic" index also improved, rising to a level of 45.

It's important to note that July continued to firmly reverse the weakening trend seen earlier in the year, suggesting that activity in the new home market has picked up notably and is remaining strong even beyond the traditionally strong first quarter period.

Looking at the data, it is fairly clear that the last year of results indicate a major change in builder sentiment likely coming as a result of improvements in confidence given the notable rise in buyer traffic, reduced inventory and a more balanced monthly supply.

SNAP Food Stamp Participation: April 2013

As a logical consequence of the prolonged economic downturn, participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has dwarfed the last peak (which looks like a minor blip by comparison) set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture indicated that in April, a notable 175,902 individual recipients were removed from the food stamps program with the current total still increasing 2.75% on a year-over-year basis.

Individuals receiving food stamp benefits declined to 47.54 million which, as a ratio of the overall civilian non-institutional population now stands at a whopping 19.39% of the population.

Households receiving food stamps benefits declined by 76,082 to 23.03 million households with the current total rising 3.72% above the level seen a year earlier

As participation continues to swell, so too has the total nominal benefit cost climbing 2.80% on a year-over-year basis to $6.29 billion for the month.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims July 11 2013

Today’s jobless claims report showed an increase to both initial and continued unemployment claims as initial claims trended well below the closely watched 400K level.

Seasonally adjusted “initial” unemployment claims increased by 16,000 to 360,000 claims from 344,000 claims for the prior week while seasonally adjusted “continued” claims increased by 24,000 claims to 2.977 million resulting in an “insured” unemployment rate of 2.3%.

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 1.64 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 2.78 million people that are currently counted as receiving traditional continued unemployment benefits, there are 4.43 million people on state and federal unemployment rolls.