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Tuesday, December 29, 2015

Consumer Confidence Improves After Two Monthly Declines

The Conference Board’s Consumer Confidence Index improved in December to 96.5, after declining the previous two months.



The Present Situation Index also increased to 115.3, up from 110.9 the previous month.

The Expectations Index rose to 83.9, up from 80.4 in November.

According to Lynn Franco, Director of Economic Indicators at The Conference Board, “As 2015 draws to a close, consumers’ assessment of the current state of the economy remains positive, particularly their assessment of the job market. Looking ahead to 2016, consumers are expecting little change in both business conditions and the labor market. Expectations regarding their financial outlook are mixed, but the optimists continue to outweigh the pessimists.”

Read The Conference Board report.
Visit the new Banks and the Economy.

Home Prices Continue to Accelerate

The 20-City Case-Shiller Composite gained 5.5 percent year-over-year in October, up from September’s gain of 5.4 percent. The 10-City Composite gained 5.1 percent from the previous year, up from a 4.9 percent annual increase last month. The National Index posted a 5.2 percent annual increase, compared to a 4.9 percent increase in September.



On a monthly basis, the National Index and 20-City Composite each reported month-over-month gains of 0.1 percent, while the 10-City Composite was unchanged, before seasonal adjustment.

Home prices declined on a monthly basis in eight cities, with the largest declines in Chicago (-0.7 percent), Cleveland (-0.4 percent), Washington (-0.3 percent) and San Diego (-0.3 percent). Tampa and Miami reported the largest monthly increases, raising 0.7 percent each. Three cities reported over 10 percent year-over-year gains, as home prices in San Francisco, Portland and Denver rose 10.9 percent.

Read the S&P release.
Visit the new Banks and the Economy.

Wednesday, December 23, 2015

Consumer Sentiment Rose in December

Consumer sentiment rose to 92.6 in December, up 1.3 points from the previous month according to the University of Michigan Consumer Sentiment Index. Confidence is now at the highest level since July.


“The December gain was largely due to lower inflation, which bolstered real incomes and brightened buying plans for household durables,” said Richard Curtin, Chief Economist for UM Surveys of Consumers. “Indeed there have been only three surveys in more than the past half century in which a higher proportion mentioned the availability of price discounts for durables.”


The Current Economic Conditions Index rose 3.8 points to 108.1, and was 3.3 points higher than it was a year ago. The Index of Consumer Expectations fell 0.2 points to 82.7.

“Given the weakness in the global economy and the strong dollar, discounting will continue unabated. As a result, the Fed policies will need to be much stronger to overcome the disinflationary psychology of consumers,” said Curtin.

New Home Sales Rose in November

Sales of new single-family homes rose in November to a seasonally adjusted annual rate of 490,000 according to the U.S. Census Bureau and Department of Housing and Urban Development. The November rate is 4.3 percent above the revised October rate of 470,000, and 9.1 percent above the year ago rate of 449,000.


New home sales increased in two of the four regions. Home sales rose 20.5 percent in the West and 4.5 percent in the South, but declined 28.6 percent in the Northeast and 8.6 percent in the Midwest.

The median sales prices of new houses was $305,000, up from $286,900 in October. The average price was $374,900, down from $358,100 last month.

At the end of November there was an estimated supply of 5.7 months at the current sales rate, down from 5.8 in October.

Read the Census/HUD release.
Visit the new Banks and the Economy.

Personal Income and Consumption Rose in November

Personal income increased $44.4 billion, or 0.3 percent in November, according to the Bureau of Economic Analysis, down from a 0.4 percent October increase. Personal consumption expenditures (PCE) increased $40.1 billion, or 0.3 percent.


Real disposable personal income – personal income less taxes – increased 0.2 percent, down from 0.3 percent in October.

The personal savings rate – personal savings as a percentage of disposable income – was 5.5 percent, down from 5.6 percent in the previous month.

Wages and salaries increased $37.1 billion in November after increasing $47.2 billion in October. The majority of November’s gain was due to wage increases in the private sector.

The price index for PCE increased less than 0.1 percent, slightly less than October. The index excluding food and energy increased 0.1 percent, up slightly from the previous month’s gain.

Read the BEA release.

Durable Goods Orders Unchanged in November

New orders for manufactured durable goods were virtually unchanged in November, increasing $0.1 billion to $238.8 billion according to the U.S. Census Bureau. The November increase followed a 2.9 percent increase in October. The majority of the increase was attributable to an increase in new orders for transportation equipment. Excluding transportation, new orders decreased 0.1 percent.


New orders excluding defense fell 1.5 percent on the month, as orders of nondefense capital goods fell 6.3 percent to $77.2 billion. Over the year, new orders of nondefense capital goods are down 10.7 percent.

Shipments of manufactured durable goods, up two of the last three months, grew 0.9 percent to $241.8 billion, following a 0.3 percent increase in October.

Inventories of manufactured durable goods, down six of the last seven months, decreased 0.3 percent to $395.7 billion, following a 0.3 percent October decrease.

Read the Census release.

Tuesday, December 22, 2015

November Home Sales Down 10.5 Percent

Existing home sales fell 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November according to the National Association of Realtors (NAR), the lowest rate since April 2014. Existing home sales are now 3.8 percent below a year ago, the first year over year decline since September 2014. The NAR report suggests that November’s decline may be an anomaly as the industry adjusts to the new Know Before You Owe Rule.

“It’s possible the longer timeframes pushed a latter portion of would-be November transactions into December,” says NAR Chief Economist Lawrence Yun. “As long as closing timeframes don’t rise even further, it’s likely more sales will register to this month’s total, and November’s large dip will be more of an outlier.”

Sales of existing homes dropped across all regions, falling 15.4 percent in the Midwest, 13.9 percent in the West, 9.2 percent in the Northeast, and 6.2 percent in the South.

Median home prices increased 6.3 percent to $220,300, up from $207,200 in November 2014, marking the 45th consecutive month of year-over-year increases. Total housing inventories fell 3.3 percent at the end of November to 2.04 million existing homes.

“Sparse inventory and affordability issues continue to impede a large pool of buyers’ ability to buy, which is holding back sales. However, signed contracts have remained steady in recent months, and properties sold faster in November. Therefore it’s highly possible the stark sales decline wasn’t because of sudden, withering demand.”

Distressed sales rose 3 percentage points to 9 percent in November. Seven percent of November sales were foreclosures, and 2 percent were short sales.

Read the NAR release.
Visit the new Banks and the Economy.

House Prices Rose 0.5 Percent in October

House prices in the U.S. rose 0.5 percent in October on a seasonally adjusted basis according to the Federal Housing Finance Agency’s (FHFA) monthly House Price Index (HPI), down from a revised 0.7 percent increase in September. The FHFA HPI is calculated using home sales information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. According to the Index, home prices are up 6.1 percent from a year ago.


Prices rose in seven of the nine census divisions, with changes ranging from a 0.5 percent decline in New England, to a 1.2 percent increase in the East South Central region. On a yearly basis, all divisions continued to see gains. Price increases in the Mountain division were most pronounced, increasing 8.9 percent, while New England saw the slowest year over year growth at 2.9 percent.

Read the FHFA release.

GDP Revised to 2.0 Percent for Third Quarter

Real GDP for the third quarter grew at an annual rate of 2.0 percent according to the Bureau of Economic Analysis’s third estimate. GDP was revised down slightly from the second estimate of 2.1 percent growth. During the second quarter, GDP grew at a rate of 3.9 percent. The third quarter’s slower growth partly reflected a downturn in private inventory investment, as well as decelerations in exports.


Consumption was the largest contributor to GDP, accounting for 2.04 percent of GDP growth, down from 2.42 percent during the second quarter, as spending for both goods and services slowed.


Inventories were the largest drag on GDP growth, subtracting 0.71 percent from GDP growth, as non-farm inventories declined by $31.8 billion. Net exports were also a drag, subtracting 0.26 percent from growth as exports fell.

Government expenditures contributed 0.32 percent to growth, down from 0.46 percent in the previous quarter, as state and local spending slowed.

Read the BEA release.

Friday, December 18, 2015

OCC Releases Fall Risk Perspective for U.S. Banks

The Office of the Comptroller of the Currency (OCC) released their Semiannual Risk Perspective for the fall of 2015. The twice yearly report identified several areas of potential risk, including cybercrime and credit risk, as banks face pressure to ease underwriting standards amid increasing competition.

The OCC viewed the outlook for CRE as mixed, noting that the pace of growth in CRE property values will likely slow over the next two years, as higher interest rates would raise borrowing cause for investors and dampen the pace of price growth for commercial properties. In addition, the OCC expects that new construction will cause the national apartment vacancy rate to increase nearly one percent over the next two years, placing downward pressure on rents.

The OCC report found the easing of loan standards to be particularly concerning among banks with increasing concentrations of auto loans, as longer loan terms on automobiles increase loss exposures for banks in the event of default. Nearly 25 percent of banks have shown year-over-year growth in outstanding auto loans of greater than 10 percent, a number which has increased steadily since 2012.

Operational risk remains elevated within the largest banks according to the OCC, and is increasing in smaller banks as many organizations are being targeted via the BEC, a sophisticated scam which forges payment requests for legitimate vendors but directs the funds to a false account. The FBI has attributed $800 million in losses over the last two years due to BEC schemes. When combined with losses reported by international law enforcement agencies, total losses exceed $1.2 billion.

Read the OCC report.
Visit the new Banks and the Economy.

Wednesday, December 16, 2015

Fed Raises Rates for First Time Since 2006

The Federal Reserve Open Market Committee (FOMC) unanimously voted to raise the target range for the federal funds rate by 25 basis points to 0.25 to 0.50 percent. Today’s widely expected move marked the first change in the federal funds rate since it was cut to virtually zero during the crisis in 2008.


The projected policy path for the federal funds rate was largely unchanged from September, with participants estimating a target rate of 1.4 percent for 2016 (unchanged), and a 2.6 percent rate for 2017 (a 20 basis point increase).

In their decision to move the target rate, the Committee noted that labor market conditions have seen “considerable improvement,” and that they are now reasonably confident that inflation will rise over the medium term to its 2 percent objective.

In statements and speeches leading up to the December meeting, Fed officials have stressed repeatedly that monetary policy will remain highly accommodative, even as interest rates rise. The Committee also stressed that they will be data dependent in determining the path of monetary policy, and will not set off on a predetermined path of tightening, and that economic data will likely warrant “gradual” increases, far more specific than previously used language.

“Today’s action shows the Fed is confident that the economy is strong enough to handle a very gradual rise in rates,” said Rob Nichols, Chief Executive Officer of the American Bankers Association. “After years at historically low levels, it’s important to head back in the direction of more normal interest rates. Abnormally low rates can have adverse consequences – especially for savers that may seek out investments that could be too risky in pursuit of a higher return.”

The Committee also announced that it is maintaining its policy of reinvesting principal payments from its holdings of agency debt and mortgage-backed securities, and of rolling over maturing Treasury securities at auction, anticipates it will do so until normalization of the federal funds rate is underway.

Read the FOMC statement.
Read the ABA statement.

Visit the new Banks and the Economy.

Industrial Production Fell in November

Industrial production declined 0.6 percent in November, after a 0.4 percent decline in October. Total industrial production is now 1.2 percent below the year ago level.


Manufacturing output was unchanged in November, as a 0.5 percent increase in the output of nondurable goods was offset by a 0.2 percent decline in durable goods production.


Mining output fell 1.1 percent, after a 2.4 percent drop in October. Much of the decrease was due to declines in coal mining and oil and gas well drilling and servicing. Mining output is now 8.2 percent below year ago levels.

Capacity utilization was 77.0 percent, down 50 basis points from October, and 3.1 points below its long-run average.

Read the Federal Reserve release.
Visit the new Banks and the Economy.

Housing Starts Rose in November

Housing starts increased to a seasonally adjusted annual rate of 1.173 million in November, 10.5 percent above the revised October estimate of 1.062 million and 16.5 percent above the November 2014 rate. Housing starts have remained above the 1.0 million rate for eight consecutive months.


Housing activity was mixed across regions, rising 21.3 percent in the South and 6.3 percent in the West, while falling 8.5 percent in the Northeast. Housing activity in the Midwest was unchanged during November.


New building permits increased to 1.289 million, up 11.0 percent from October, and 19.5 percent from a year ago.

Housing completions in November were at a seasonally adjusted annual rate of 947,000, 3.2 percent below October’s estimate, but up 9.2 percent from November 2014.

Read the Census release.
Visit the new Banks and the Economy.

Tuesday, December 15, 2015

Builder Confidence Fell Slightly in December

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) fell one point to 61 in December, marking the second consecutive monthly decline in the index after a 10-year high in October.

All three index components posted losses for the month. Current sales conditions fell one point to 66, while the indices for buyer traffic and sales expectations in the next six months fell two points each to 67 and 46 respectively.

“For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” said NAHB Chief Economist David Crowe. “With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.”

“Overall, builders are optimistic about the housing market, although they are reporting concerns with the high price of lots and labor,” says NAHB Chairman and home builder, Tom Woods.

The three-month moving averages for regional HMI scores were mixed, increasing three points in the west to 76, and one point in the Northeast to 50. Scores fell two points to 58 in the Midwest and one point in the South to 64.

Read the NAHB release.
Visit the new Banks and the Economy.

CPI Remained Unchanged in November

The Consumer Price Index was unchanged in November, but increased 0.4 percent over the last 12 months, before seasonal adjustment. This is the largest 12-month increase since the 12-month period ending December 2014.


The energy index fell 1.3 percent after increasing by 0.3 percent in October. Prices for gasoline fell by 2.4 percent on the month after a 0.4 percent increase in October. The electricity index increased by 0.3 percent, while utility gas service fell 1.9 percent. Energy prices have fallen by 14.7 percent over the last 12 months.

Prices for non-food and energy items increased 0.2 percent, the same as in the previous month. The indexes for shelter, medical care, airline fares, new vehicles and tobacco rose, while recreation, apparel, household furnishings and used cars and trucks all declined.

Food prices declined 0.1 percent, the first monthly decline since March. The index for food at home declined 0.3 percent, while the index for food away from home rose 0.2 percent. Over the last year, prices for food increased 1.3 percent.

Read the BLS release.
Visit the new Banks and the Economy.

Friday, December 11, 2015

Retail Sales Rose 0.2 Percent in November

There were $448.1 billion of retail and food service sales in November (after adjustment for seasonal variation and holiday and trading-day differences, but not for price changes), a monthly increase of 0.2 percent according to the U.S. Census Bureau. Retail sales increased 1.4 percent from November 2014.


Core retail sales – excluding automobile and parts grew 0.4 percent after a 0.1 percent gain in October. Year-over-year sales excluding automobiles and parts increased 0.7 percent. Retail trade sales grew 0.2 percent on the month and 0.7 percent on the year, as nonstore retail sales along with sales at food service and drinking places increased 7.3 percent and 6.5 percent respectively over the last 12 months.

Clothing and sporting goods stores posted the strongest monthly gains, with sales improving 0.8 percent on the month. Sales at gasoline stations continued to decline, falling 0.8 percent on the month. Gas station sales have fallen 19.9 percent over the last 12 months.

Read the Census release.

Producer Prices Increased in November

Producer prices increased 0.3 percent in November, seasonally adjusted, after decreasing 0.4 percent in October according to the U.S. Bureau of Labor Statistics. November’s increase was attributable to an increase in prices for final demand services.


Prices for final demand goods fell 0.1 percent, the fifth consecutive month of decreases. Over 90 percent of the decline in goods prices can be traced to energy prices, which fell 0.6 percent. Prices for final demand goods less foods and energy also fell by 0.1 percent, while prices for final demand foods rose 0.3 percent.

The index for final demand services increased 0.5 percent, primarily due to a 1.2 percent increase in final demand trade services. Prices for final demand transportation and warehousing services also increased, rising 0.3 percent.

Read the BLS release.
Visit the new Banks and the Economy.

Thursday, December 10, 2015

Household Net Worth Dipped in Third Quarter

Household net worth fell $1.2 trillion during the third quarter of 2015 to $85.2 trillion, a 1.4 percent decrease from the previous quarter but a 2.9 percent increase from a year ago.


Household holdings of nonfinancial assets increased during the third quarter, growing 1.8 percent. The majority of this increase came from real estate holdings, which increased by $482.0 billion. Growth in wealth derived from consumer durable goods slowed, adding $41.7 billion, compared to $69.2 billion in the second quarter.

Household financial assets declined 2.4 percent from the previous quarter but increased 1.2 percent from the previous year. The quarterly decline was driven mostly by a sharp drop in corporate equities, which fell by $1.4 trillion. Funded pension entitlements also declined, falling by $819 billion (4.8 percent), while debt securities increased by $116 billion.

Household nonfinancial debt increased at an annual rate of 1.5 percent in the third quarter, as consumer credit grew 7.2 percent. Mortgage debt grew at a 1.6 percent annual rate. The household savings rate rose to 5.2 percent in the third quarter, up from 5.0 percent in the second.

Nonfinancial business debt rose at an annual rate of 4.7 percent in the third quarter, somewhat smaller than the second quarter’s increase.

Federal government nonfinancial debt increased at a rate of 0.2 percent in the third quarter, down from a rate of 2.4 percent in the second quarter. State and local government nonfinancial debt increased at an annual rate of 1.7 percent, up from a 1.0 percent rate in the second quarter.

Read the Federal Reserve release.
Visit the new Banks and the Economy.

OCC: Underwriting Standards Ease, Credit Risk Grows

Credit risk for both retail and commercial loan products has increased over the past three years and is expected to continue rising in 2016, according to the OCC’s annual Survey of Credit Underwriting Practices. The increase was seen primarily in commercial loan products — 30 percent of commercial loans reflected increased risk, up from 27 percent in 2014 — with retail loan products also seeing a 2 percent increase in risk from 2014.

The increase in credit risk has been accompanied by a steady easing of underwriting standards over the past several years for both commercial and retail products, the report said, adding that the current environment reflects trends in underwriting standards similar to those seen just prior to the financial crisis in 2008.

However, rising credit risk in the commercial portfolio appears to have slowed the trend toward easing standards. A net 24 percent of examiners reported easing, down from the net 29 percent in 2014. Easing of underwriting standards for retail loans accelerated — a net 26 percent of examiners reported more relaxed standards compared to 12 percent in 2013 and 2014.

While net easing was reported across most loan categories, it was significantly less pronounced in leveraged lending — a focus of regulatory scrutiny. For the third straight year, no examiners reported easing on high loan-to-value home equity loans. Underwriting standards on commercial real estate loans for residential construction remained unchanged.

Increased competition was overwhelmingly cited as the main reason for relaxed underwriting standards — more than 90 percent of examiners cited competitive pressure as a reason for easing on commercial loans and more than 70 percent said the same for retail loans. The OCC also said that its examiners “largely noted good or acceptable adherence to underwriting standards,” with policy exemptions “adequately documented and approved for most products.”

Read the report.

Wednesday, December 9, 2015

ABA Survey: Banks Are Making Effective Small Dollar Loans

A large majority of banks provide small dollar loans effectively (with low charge-offs) and have the capacity to expand their small dollar lending, were market and regulatory conditions to allow for it, according to an ABA survey of senior bank officers. More than one-third said they made personal loans of less than $5,000 as part of an established program, and nearly half said they had done so in the past year to accommodate a customer who asked for a loan.

The survey showed that banks were using small dollar loans to meet low-income and rural credit needs. About 94 percent said that they made at least some small dollar loans to low-to-moderate income customers, and 58 percent of small dollar loans were made in rural communities.

One-third of banks making small dollar loans had no charge-offs, and only 4 percent reported a charge-off rate of more than 3 percent. More than half of respondents said they charged an “all-in” APR in excess of 36 percent for the loan, which includes interest and all related fees. Just over half of the respondents said they made more than 50 such loans in 2014, and about half said the average loan amount was between $2,000 and $5,000. Nine in 10 banks secured at least some of their small dollar loans with a vehicle title.

The survey was conducted as part of ABA’s response to the Consumer Financial Protection Bureau’s proposed framework to regulate payday, vehicle title and other short-term loans and continues the association’s efforts to protect and expand small dollar lending by banks. The proposed CFPB framework would impose burdensome requirements on loans with all-in APRs exceeding 36 percent, such as requiring an “ability-to-repay” determination to be made for each loan and limiting repeat borrowing.

View the survey results.
Read the CFPB's proposed framework.

Tuesday, December 8, 2015

Small Business Optimism Dipped in November

Following three months of no-significant change, the NFIB Small Business Optimism fell 1.3 points to 94.8 in November. Only one of the ten index components posted a gain on the month, while six components posted losses.


Labor market conditions remained consistent during the month of November, as 55 percent of business owners reported hiring or trying to hire, while 47 percent reported few or no qualified applicants for their available positions. A seasonally adjusted net 11 percent of owners plan to create new jobs, unchanged from October.

The percent of owners reporting increased sales in the past three months increased 3 points to a net negative 5 percent. Nine percent of small business owners reported weak sales as their top business problem, down three points from October.

Capital spending picked up in November, after being unchanged for two consecutive months. Sixty-two percent of owners reported capital outlays, a 4 point increase from October. Only 25 percent of owners are planning capital outlays in the next 3 to 6 months, down 1 percent from October’s reading, as owners expect a continuation of economic “under-performance.”

Credit conditions remained satisfactory, as only 3 percent of owners reported that all their borrowing needs were not met. Fifty-two percent of respondents explicitly stated that they did not want a loan, down 1 point from October. Just 2 percent of owners cited financing as their top business problem, compared to 5 percent during the great recession.

Read the NFIB release.
Visit the new Banks and the Economy.

Monday, December 7, 2015

Consumer Credit Grew 5.5 Percent (SAAR) in October

Consumer credit increased in October at a seasonally adjusted annual rate of 5.5 percent, rising to $3.51 trillion. Revolving credit rose at an annual rate of 0.2 percent to $924 billion, and non-revolving credit increased at an annual rate of 7.4 percent to $2.59 trillion.



Total outstanding consumer credit increased $16.0 billion, down from last month’s increase of $28.6 billion. Total outstanding non-revolving consumer credit increased by $15.8 trillion, down from a September increase of $21.9 billion. Outstanding revolving credit grew by $0.2 billion, down from an $8.7 billion increase in September.




Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising 36 percent of outstanding credit. Depository institutions and finance companies are the secondary and tertiary holders, holding 25 percent and 24 percent of outstanding non-revolving credit.

Read the release.

Federal Reserve Announces Regional Bank Chairs for 2016

The Federal Reserve Board announced designation of the chairs and deputy chairs of the 12 Federal Reserve Banks on Friday.

The appointments for 2016 are listed below:

Boston:

  • John F. Fish, Chairman and Chief Executive Officer, Suffolk Construction Company, Inc., Boston, Massachusetts, named Chair. 
  • Gary L. Gottlieb, M.D., Chief Executive Officer, Partners In Health, Boston, Massachusetts, named Deputy Chair. 

New York:

  • Emily K. Rafferty, President Emerita, The Metropolitan Museum of Art, New York, New York, renamed Chair. 
  • Sara Horowitz, Executive Director, Freelancers Union, Brooklyn, New York, renamed Deputy Chair. 

Philadelphia:

  • Michael J. Angelakis, Senior Advisor – Executive Management Committee, Comcast Corporation, Philadelphia, Pennsylvania, named Chair. 
  • Brian McNeill, President and Chief Executive Officer, TouchPoint, Inc., Concordville, Pennsylvania, named Deputy Chair. 

Cleveland:

  • Christopher M. Connor, Chairman and Chief Executive Officer, The Sherwin-Williams Company, Cleveland, Ohio, renamed Chair. 
  • John P. Surma, Chairman and Chief Executive Officer (Retired), United States Steel Corporation, Pittsburgh, Pennsylvania, renamed Deputy Chair. 

Richmond:

  • Russell C. Lindner, Executive Chairman and Chief Executive Officer, The Forge Company, Washington, D.C., renamed Chair. 
  • Margaret G. Lewis, President, HCA Capital Division (Retired), Richmond, Virginia, renamed Deputy Chair. 

Atlanta:

  • Thomas A. Fanning, Chairman, President, and Chief Executive Officer, Southern Company, Atlanta, Georgia, renamed Chair. 
  • Michael J. Jackson, Chairman, Chief Executive Officer, and President, AutoNation, Inc., Ft. Lauderdale, Florida, renamed Deputy Chair. 

Chicago:

  • Greg Brown, Chairman and Chief Executive Officer, Motorola Solutions, Inc., Schaumburg, Illinois, renamed Chair. 
  • Anne R. Pramaggiore, President and Chief Executive Officer, ComEd, Chicago, Illinois, renamed Deputy Chair. 

St. Louis:

  • Rakesh Sachdev, President and Chief Executive Officer, Sigma-Aldrich, St. Louis, Missouri, named Chair. 
  • Kathleen M. Mazzarella, Chairman, President, and Chief Executive Officer, Graybar Electric Company, Inc., St. Louis, Missouri, named Deputy Chair. 

Minneapolis:

  • MayKao Y. Hang, President and Chief Executive Officer, Amherst H. Wilder Foundation, St. Paul, Minnesota, named Chair. 
  • Kendall J. Powell, Chairperson and Chief Executive Officer, General Mills, Minneapolis, Minnesota, named Deputy Chair. 

Kansas City:

  • Steve Maestas, Chief Executive Officer, Maestas Development Group, Albuquerque, New Mexico, renamed Chair. 
  • Rose M. Washington, Executive Director, Tulsa Economic Development Corporation, Tulsa, Oklahoma, renamed Deputy Chair. 

Dallas:

  • Renu Khator, Chancellor/President, University of Houston System/University of Houston, Houston, Texas, renamed Chair. 
  • Matthew K. Rose, Executive Chairman, BNSF Railway Company, Fort Worth, Texas, renamed Deputy Chair. 

San Francisco:

  • Roy A. Vallee, Chairman and Chief Executive Officer (Retired), Avnet, Inc., Phoenix, Arizona, renamed Chair. 
  • Alexander R. Mehran, Chairman and Chief Executive Officer, Sunset Development Company, San Ramon, California, renamed Deputy Chair. 


Read the press release.

Friday, December 4, 2015

ISM Non-Manufacturing Index Fell in November

The ISM Non-Manufacturing Business Index fell to 55.9 in November, 3.2 points below October’s reading. Despite the drop, November marked the 76th consecutive month of growth, as indicated by readings over 50. Twelve non-manufacturing industries reported growth in November, while 6 reported contraction.


The Business Activity Index fell 4.8 points to 58.2, yet still registered a 76th consecutive month of growth in business activity. Respondents reported business expansion and that they were experiencing more orders for their services.

Non-manufacturing employment continued to grow, albeit at a slower pace, as the index for employment fell 4.2 points to 55.0. Eight industries reported increases in employment, including transportation and warehousing, real estate, and finance and insurance. Five industries, including mining, utilities, and construction, reported contraction.

The New Orders index registered 57.5 percent, down 4.5 points from the previous month. Respondents noted an increase in orders as part of an end-of-year rush, as well as a pick-up in new orders due to aggressive discounts.

Supplier deliveries continued to slow, as the index registered 53.0 points, up 1 point from October. (Readings above 50 indicate slower deliveries.) Four sectors, including mining, educational services, and transportation and warehousing, reported faster deliveries, while eight, including construction, retail trade, and professional and scientific services reported slower deliveries.

Read the ISM release.
Visit the new Banks and the Economy.

U.S. Foreign Trade Deficit Widened in October

The U.S. international trade deficit widened in October to $43.9 billion, up $1.4 billion from September. October exports were $184.1 billion, down $2.7 billion on the month, while imports fell $1.3 billion to $228.0 billion. The goods deficit increased $2.1 billion to $63.1 billion, while the surplus in services increased by $0.6 billion to $19.2 billion.


Exports of goods decreased $3.1 billion to $123.8 billion in October, driven by decreases in demand for industrial supplies and materials, including fuel oil and other petroleum products. Capital goods exports also fell by $0.9 billion. Exports of services increased by $0.4 billion to $60.3 billion, largely due to an increase in freight and port services, passenger fares, and financial services.

Imports of goods fell $1.0 billion to $186.8 billion, as imports of industrial supplies and materials fell by $2.0 billion. Imports of services fell $0.2 billion to $41.1 billion, largely due to a decrease in travel and transport services.

Read the Census/BEA release.
Visit the new Banks and the Economy.

Economy Added 211,000 Jobs in November

Total nonfarm payroll employment rose by 211,000 in November, lower than last month’s upwardly revised total of 298,000 jobs. The national unemployment rate remained unchanged at 5.0 percent.


According to Joel Naroff of Naroff Economics, “The increase came despite further cut backs in energy-related firms, weakness in clothing stores, a weird crash in the motion picture industry and a very strange reduction in the vehicle sector, which continues to set new sales records. And, we actually saw a decline in temporary help services companies! In other words, this report was probably even stronger than the headline number implies.”

The majority of gains occurred in construction, which added 46,000 jobs, up from a gain of 34,000 in October. Leisure and hospitality followed with 39,000 jobs, 9,000 less than last month’s gain. Health care and social assistance added 32,200 jobs, down from 62,700 in the previous month. Over the past year, health care employment has increased by 470,000.

Goods producing industries added 34,000 jobs as a whole, largely due to healthy gains in construction. Most other goods producing industries shed jobs, however, with mining and logging employment falling by 11,000, motor vehicles and parts employment down 3,400, and manufacturing employment falling by 1,000.

The civilian labor force participation rate was little changed at 62.5% in November. The number of long-term unemployed, those jobless for 27 weeks or more, was also unchanged at 2.1 million. The number of discouraged workers, those who gave up looking for work, was 594,000, little changed from a year ago.

Average hourly earnings rose by 4 cents to $25.25 in November. Year-over-year, hourly earnings grew 2.3 percent.

Read the BLS release.
Visit the new Banks and the Economy.

Thursday, December 3, 2015

Manufactured Goods Orders Increased 1.5 Percent in October

New orders for manufactured goods rose 1.5 percent in October to $473.9 billion, following two consecutive months of declines, according to the U.S. Census Bureau. New orders excluding transportation grew 0.2 percent to $391.8 billion.


New orders for manufactured durable goods increased 2.9 percent to $238.8 billion, following a 0.8 percent September decrease. New orders for transportation equipment led the increase, increasing 7.9 percent to $82.0 billion, as orders for non-defense aircraft and parts increased by 81.0 percent.

Shipments decreased 0.5 percent to $475.2 billion, following a 0.3 percent decrease in September. Growth in shipments have declined during six of the last seven months. Inventories decreased once again, falling 0.1 percent to $643.6 billion after a 0.5 percent decrease last month.

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Job Cuts Reach 14-Month Low in November

Employers announced plans to cut 30,953 jobs in November, the lowest number of planned layoffs in over a year according to a report issued by Challenger, Gray & Christmas. November’s announced cuts were 39 percent lower than October’s, and 14 percent lower than a year ago.

Year-to-date, employers have announced 574,888 job cuts, 28 percent higher than the cuts announced by this point last year. Cuts are currently on pace to be the highest since 2009, when 1,272,030 layoffs were counted. Industrial goods firms announced the most layoffs in November, with 7,398 layoffs planned, more than double October’s amount, as the U.S. manufacturing industry contracted in November for the first time since 2012.

“The fourth quarter tends to experience heavier cuts, as employers make year-end adjustments to workforce levels in order to achieve earnings goals,” says John A. Challenger, CEO of Challenger, Gray & Christmas. “The November decline could be the quiet before a December storm, or it could signal a lower-than-expected downsizing to close out the year. If recent history is any indication, it could be the latter as December job cuts have been lower than the annual average since the end of the recession.”

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Wednesday, December 2, 2015

Beige Book: Labor Markets Tighten, Mixed Manufacturing Growth

Economic activity expanded across most of the twelve Federal Reserve Districts according to the November edition of the Federal Reserve Beige Book. Seven districts reported modest growth, while conditions leveled off in the New York District.

Labor markets tightened modestly since the previous report. The Atlanta, Kansas City and Dallas districts reported a slight increase in hiring, while the remaining districts characterized their increase as modest to moderate. However, many of the newly created positions were characterized as temporary or entry-level, and were being filled by staffing firms.

Manufacturing reports were mixed in recent weeks, with firms in several districts reporting constrained demand due to a combination of the strong dollar, and low commodity prices. The Boston and St. Louis districts reported moderate growth, while New York, Philadelphia and Minneapolis reported a decline in manufacturing activity. Food manufacturers in the Richmond district reported an increase in new orders. In Chicago, the auto industry experienced gains and plan to expand capacity. Demand for high tech manufacturing also picked up slightly.

Banking conditions were positive as loan demand increased during the period. The rise in demand was slight to modest in the New York, Cleveland, Richmond and Dallas districts, while demand was moderate in the Philadelphia and San Francisco regions. Several districts reported a rise in mortgage lending, as well as an increase in demand for home equity loans. Some community banks in Atlanta stated that they found difficulty competing with loan structures and terms offered by larger institutions, while some banks in the St. Louis region reported a decline in consumer borrowing due to nonbank competition.

Consumer spending increased in nearly all districts, but to varying degrees. Growth in the Philadelphia, Cleveland, Chicago and St. Louis districts was modest, while spending in the New York District was described as sluggish. Reports were mixed in the Boston, Richmond and Dallas districts, while spending declined in the Kansas City region. Vehicle sales continued to rise however, with dealerships crediting low gas prices for boosting sales.

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ADP: 217,000 Jobs Added in November

According to the ADP National Employment Report, the non-farm private sector added 217,000 jobs in November, up from 196,000 in October. The majority of November’s jobs were created within the services sector, which saw the strongest gains since June.


“Job growth remains strong and steady,” said Mark Zandi, chief economist of Moody’s Analytics. “The current pace of job creation is twice that is needed to absorb growth in the working age population. The economy is fast approaching full employment and will be there no later than next summer.”

Small businesses, businesses with less than 50 employees, added 81,000 jobs in November, compared to 91,000 added in the previous month. Medium-sized businesses with 50-499 employees, added 62,000 jobs, down from 67,000 added in October. Large businesses added 74,000 jobs, up sharply from the 37,000 added in October.

Goods-producing employment rose by only 13,000 jobs, down from 22,000 in October. Construction jobs grew by 16,000, half of October’s rate. Manufacturing jobs increased by 6,000, up from the decline of 2,000 jobs in October.

Service-providing jobs increased by 204,000, in large part due to expansion in the professional and business services sector, which added 59,000 jobs in November, up from 19,000 in October. The trade transportation and utilities sector also expanded, adding 30,000 jobs in November.

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Tuesday, December 1, 2015

ISM Manufacturing Contracts for First Time Since 2012

The ISM Manufacturing Index fell to 48.6 points in November – down 1.5 points from October’s reading. November’s reading marked the first contraction since November 2012, as readings below 50 indicate contraction in the manufacturing industry. Of the 18 industries, 10 reported contraction in November, while only 5 reported expansion. Some survey respondents expressed concern over a downturn in Chinese and European markets, as well as the effect of the strong dollar suppressing foreign demand.


After falling in October, the Employment Index increased 3.7 points to 51.3, indicating a return to growth in employment. Nine of the 18 industries reported employment growth, while 5 industries, including apparel, leather and allied products, petroleum and coal, electrical equipment, machinery, and computer and electronic products, reported contractions.

The index for new orders fell 4.0 points to 48.9, indicating a contraction in new orders for the first time since 2012. Eight industries in total reported a decline in new orders for October.

Export orders continued to decline in November as the index registered 47.5 for the second consecutive month. November marked the sixth consecutive month of declines in new export orders. Five industries reported growth in exports, down from 6 in October. Eight industries reported a decrease including apparel, primary metals, chemical products, and transportation equipment.

The inventories index registered 43.0 points in November, 3.5 points lower than the October reading – marking contraction for the fifth consecutive month.

The price index fell 3.5 points to 35.5, indicating a decrease in raw materials prices for the thirteenth consecutive month.

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Construction Spending Rose 1.0 Percent in October

Construction spending grew 1.0 percent in October to $1,107.4 billion (SAAR). September’s spending estimate was revised up to $1,096.6 billion (0.6 percent growth). Construction spending during the first 10 months of 2015 amounted to $888.1 billion, 10.7 percent higher than in the first 10 months of 2014.


Total private construction rose to $802.4 billion (SAAR), 0.8 percent above the revised September estimate of $795.8 billion.

Private residential construction rose to a seasonally adjusted annual rate of $399.0 billion, up 1.0 percent from September’s estimate, as construction of single and multifamily units increased by 1.6 percent and 1.4 percent respectively.

Private nonresidential construction grew 0.6 percent to a seasonally adjusted rate of $403.4 billion, as construction related to education, communication and manufacturing increased.

Public construction spending increased by 1.4 percent to $304.9 billion (SAAR), after falling 0.1 percent in September. Construction related to public safety and conservation and development posted strong gains, while construction related to power fell slightly.

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