ECONOMIC AND FINANCIAL HIGHLIGHTS · SUMMARY FEDERAL RESERVE BALANCE SHEET Between January 23 and...

ECONOMIC AND FINANCIAL HIGHLIGHTS

FEBRUARY 6, 2013

FEDERAL RESERVE BALANCE SHEET

Assets and Liabilities 2-3

REAL ESTATE

Construction Spending 4

CoreLogic Home Price Index 5

Mortgage Rates and Applications 6-7

CONSUMER BEHAVIOR

Income, Spending, and Light Vehicle Sales 8-9

Consumer Confidence: Expectations 10

LABOR MARKETS

Nonfarm Payroll Employment and Benchmark Revisions 11-12

Unemployment and Labor Force Participation Rates 13

MANUFACTURING

ISM Purchasing Managers Index 14

TREASURY YIELDS 15

BREAKEVEN INFLATION RATES 16

ADDITIONAL DETAIL

SUMMARY


Between January 23 and

January 30, the Federal

Reserve’s balance sheet

decreased by $2.6 billion. The

overall size of the balance

sheet was essentially

unchanged at $3.1 trillion.

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12

Federal Reserve Assets (Uses of Funds) $ billions

Currency Swaps

Agency Debt & MBS

Lending to Nonbank Credit Markets

Short-Term lending to Financials

Other

Treasuries

through January 30, 2013

• Treasuries increased by $13.4 billion while MBS and agency debt decreased by $17.4 billion. Note that agency debt and MBS typically

increase mid-month as a result of settlements and decline the week after as a result of prepayments. More detail is available on the New York

Fed’s website.

• Since mid-August 2012, decreased use of swap lines by foreign central banks has caused the balance sheet to contract by $22 billion.

• According to the New York Fed’s tentative outright Treasury operation schedule, the desk plans to purchase approximately $44 billion in

Treasury securities over the month of February. This amount is approximately $1 billion less than the stated pace of $45 billion per month,

given that purchases conducted in January exceeded the target by approximately $1 billion.

2 Economic and Financial Highlights 2/6/2013

Source: Federal Reserve Board

http://www.newyorkfed.org/markets/ambs/ambs_faq.html

http://www.newyorkfed.org/markets/tot_operation_schedule.html

http://www.federalreserve.gov/releases/h41/

ADDITIONAL DETAIL

SUMMARY


Between January 23 and

January 30, bank reserve

balances with the Federal

Reserve increased by $48.7

billion, while Treasury

deposits with the Federal

Reserve decreased by $9.9

billion.

As of January 30, 2013, bank

reserves held at the Federal

Reserve were $1.64 trillion.

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12

Federal Reserve Liabilities (Sources of Funds) $ billions

Treasury SFP

Other

Banks Reserve Balances

Currency in Circulation

through January 30, 2013

• Reverse repurchase agreements with foreign officials and international accounts increased by $8.5 billion.

• Other nonreserve deposits, which include balances of international and multilateral organizations with accounts at the New York Fed,

such as the International Monetary Fund, United Nations, International Bank for Reconstruction and Development (World Bank); the

special checking account of the ESF (where deposits from monetizing SDRs would be placed); and balances of a few U.S. government

agencies (such as Fannie Mae and Freddie Mac) decreased by $48.2 billion.


Source: Federal Reserve Board

SFP=Supplemental Financing Program

http://www.federalreserve.gov/releases/h41/

SUMMARY

REAL ESTATE

The U.S. Census Bureau

reported that total construction

spending and nonresidential

construction spending growth

continued to decelerate on a

year-over-year basis while

residential construction

spending growth remained

robust in December.

-40

-30

-20

-10

0

10

20

30

00 01 02 03 04 05 06 07 08 09 10 11 12

Source: U.S. Census Bureau

U.S. Construction Spending year-over-year percent change

Total Nonresidential Residentialthrough December 2012


December 2012 Construction Spending Put in Place

Total Total Private Total Public

Total

Nonresidential

Private

Nonresidential

Public

Nonresidential Total Residential

Private

Residential

Billions, SAAR 885.0 614.9 270.1 570.4 306.7 263.7 314.6 308.2

M/M 0.9% 2.0% -1.4% 0.3% 1.8% -1.4% 2.1% 2.2%

Y/Y 7.8% 15.0% -5.6% 1.2% 7.6% -5.3% 22.3% 23.6%

SUMMARY

REAL ESTATE

The October CoreLogic home

price indexes continued to

improve in December on a

year-over-year basis.

The CoreLogic home price

index including distressed

properties increased 8.3

percent compared with a year

earlier while the home price

index, excluding distressed

properties, increased 7.5

percent.

HPI including distressed properties

8.3

HPI excluding distressed properties

7.5

-20

-15

-10

-5

0

5

10

15

20

00 01 02 03 04 05 06 07 08 09 10 11 12

Source: CoreLogic®

U.S. CoreLogic® Home Price Index indexed, January 2000 = 100

through December 2012


SUMMARY

REAL ESTATE

According to Freddie Mac’s

Primary Mortgage Market

Survey, the average rate for a

30-year fixed rate mortgage

increased 11 basis points

(bps) over the week ending

January 31, to 3.53 percent.

This is the first week the

average 30-year fixed-rate

mortgage rate has been

above 3.5 percent since

September 13, 2012.

The average rate for a 15-

year fixed-rate mortgage

increased 10 bps to 2.81

percent over the week ending

January 31.

30-Year Fixed: 3.53

15-Year Fixed: 2.81

0

1

2

3

4

5

6

7

8

9

10

92 94 96 98 00 02 04 06 08 10 12

Mortgage Rates percent

through January 31, 2013 Sources: Freddie Mac Primary Mortgage Market Survey


SUMMARY

REAL ESTATE

According to the Mortgage

Bankers Association’s Weekly

Applications Survey,

mortgage loan applications for

refinancing increased 4

percent over the week ending

February 1.

Applications for purchase

increased 2 percent over the

same period and are at their

highest level since the week

ending May 7, 2010.


Refinances

Purchases

0

100

200

300

400

500

600

700

800

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

01 02 03 04 05 06 07 08 09 10 11 12 13

Mortgage Loan Applications Volume Index March 16, 1990 = 100

Source: Mortgage Bankers Association through February 01, 2013

ADDITIONAL DETAIL

SUMMARY

CONSUMER BEHAVIOR

Personal income rose sharply

in December. According to the

U.S. Bureau of Economic

Analysis, the large jump in

December was the result of

accelerated bonus payments

and accelerated dividend

payments made in anticipation

of tax law changes.

Real personal disposal

income grew 2.8 percent in

December.

Real consumer spending

increased 0.2 percent in

December. Durable goods

grew 1.3 percent over the

month, nondurables grew 0.3

percent, and spending on

services was essentially

unchanged.

-16

-12

-8

-4

0

4

8

12

16

-8

-6

-4

-2

0

2

4

6

8

01 02 03 04 05 06 07 08 09 10 11 12 13

Real Personal Consumption Expenditures seasonally adjusted, year-over-year percent change

Real PCE (right axis): 2.24%

Real Nondurable Goods: 1.46%

Real Services: 1.33%

Real Durable Goods (right axis): 9.67%

Real Personal Disposable Income(right axis): 5.61%

Source: BEA

through December 2012

• Real disposable personal income is personal income minus taxes and adjusted for inflation.


http://www.bea.gov/newsreleases/national/pi/2013/pi1212.htm

http://www.bea.gov/newsreleases/national/pi/2013/pi1212.htm

ADDITIONAL DETAIL

SUMMARY

CONSUMER BEHAVIOR

Light vehicles sales

decreased slightly in January,

falling at a -0.6 percent

seasonally adjusted annual

rate of 15.3 million units.

Sales of domestic vehicles are

almost back to prerecession

levels. Sales of domestic light

vehicles are currently 2

percent below levels in

November 2007 while sales of

imported light vehicles are 13

percent below.

Total

Domestic

Imported

0

5

10

15

20

25

00 01 02 03 04 05 06 07 08 09 10 11 12

Light Vehicle Sales millions of units, SAAR

Source: Bureau of Economic Analysis

through January 2013

• Note: Light vehicle sales include all cars and light trucks up to 14,000 pounds. Domestic sales include autos produced in the United States,

Canada, and Mexico.


ADDITIONAL DETAIL

SUMMARY

CONSUMER BEHAVIOR

Final measures of consumer

expectations as measured by

the University of Michigan

improved from the preliminary

mid-month reading (not

shown), suggesting any

concern from consumers

might have been short-lived.

The mid-month reading from

the Conference Board also

indicated a drop, mostly the

result of changes in income

expectations.

The components measuring

the current situation in both

surveys have improved since

the summer of 2011 but

remain below prerecession

levels.

-80.0

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

02 03 04 05 06 07 08 09 10 11 12 13

Consumer Confidence Indices Measuring Expectations relative to level in June 2007

University Of Michigan - Expectations (NSA)

Conference Board Consumer Confidence - Expectations(SA)

Sources: The Conference Board, Reuters/University of Michigan, Bloomberg


• The expectations component of University of Michigan survey increased 2.8 points in January, following a 13.9 point drop in December and a

1.3 point drop in November.

• The expectations component of the Conference Board survey declined 8.6 points in the mid-January reading, following a 12.8 point drop in

December and a 3.1 point drop in November.

• The future components of both the Conference Board and Reuters/University of Michigan survey utilize fairly similar underlying questions.


ADDITIONAL DETAIL

SUMMARY

LABOR MARKETS

The U.S. Bureau of Labor

Statistics (BLS) reported last

Friday that payrolls rose by

157,000 in January 2013. The

BLS also revised payrolls

upward for the last few

months of 2012, particularly

for November and December.

Last year, employment growth

averaged 181,000 per month,

higher than the roughly

153,000 per month originally

estimated, the result of the

BLS’s usual monthly revisions

for November and December

and the annual benchmark

revision, which raised 10

months’ payroll numbers over

the year. More detail on the

benchmark revision is on the

next page.

157

-1000

-800

-600

-400

-200

0

200

400

600

2009 2010 2011 2012 2013

Other Services & Gov Leisure & Hosp Professional & Business

Retail Trade Goods Producing Total nonfarm

Contributions to Change in Nonfarm Payroll Employment

thousands, SA

Source: U.S. Bureau of Labor Statistics through January 2013

• In January, the most significant payroll gains were seen in retail trade (up 33,000), construction (up 28,000), and health care (up 23,000). In

the chart above, construction takes up the vast majority of the gain in “Goods Producing” industries; manufacturing, the other large component

of the category, gained just 4,000 payrolls in January, mostly in the production of motor vehicles and parts.


ADDITIONAL DETAIL

SUMMARY

LABOR MARKETS

Annually, the BLS releases its

benchmark revision. With this

release, seasonally adjusted

data from January 2008 have

been revised to include a

more comprehensive count of

payrolls. The chart to the right

compares the “pre-benchmark

payroll growth estimate” with

post-benchmark payroll

growth.

275

259

143

68 87

45

181

192

132

137 161

155

311

271

205

112

125

87

153

165

138

160

247

196

-100

-50

0

50

100

150

200

250

300

350

Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13

Pre-Benchmark Payroll Growth Estimate Post-Benchmark Payroll Growth

Difference (thous.)

Monthly Difference in Payrolls, Pre- and Post- Benchmark Revision

Thousands, SA, January 2012-December 2012 and January 2013

Source: Bureau of Labor Statistics

157

• See more information on the BLS’s benchmarking procedures, including methodology and an explanation of why benchmarks differ from

original estimates.


http://www.bls.gov/web/empsit/cesbmart.htm

SUMMARY

LABOR MARKETS

The unemployment rate

ticked up slightly to reach

7.9 percent in January. This

followed an unemployment

rate of 7.8 percent in

December 2012. Excluding

the effects of rounding, the

actual increase in the

unemployment rate was less

than 0.1 percentage point.

The labor force participation

rate stayed the same in

January. It has remained at

63.6 percent since November

2012, when it fell from 63.8

percent in October 2012.

63

64

65

66

67

68

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Unemployment and Labor Force Participation Rates percent, SA

Source: U.S. Bureau of Labor Statistics

Unemployment Rate (left axis)

January 2013 = 7.9%

Participation Rate (right axis)

January 2013 = 63.6%



ADDITIONAL DETAIL

SUMMARY

MANUFACTURING

The Institute for Supply

Management’s (ISM)

Purchasing Managers Index

(PMI) of manufacturers gained

2.9 index points in January to

reach 53.1, its highest point

since April 2012.

The gains were broadly based

across the index’s

components. The new orders

index, which is seen as a

leading indicator of future

manufacturing activity, gained

3.6 index points to reach 53.3.

20

30

40

50

60

70

2009 2010 2011 2012 2013

Purchasing Managers Index

New Orders

Production

Employment

ISM Manufacturing Purchasing Managers Index (PMI) Index: 50 or greater indicates expansion, less than 50 indicates contraction; SA

Source: Institute for Supply Management through January 2013

• Other components of the PMI that gained ground in January included production (up 1.0 index point to reach 53.6 points) and employment (up

2.1 index points to reach 54.0 points). The inventories index also surged 8.0 index points to reach 51.0 points, taking that component from

contraction to expansion territory in the index.

• Supplies were delivered just a bit more slowly in January than in December 2012, according to the index. The supplier-deliveries measure

slipped just 0.1 index point to reach 53.6 points in January.


SUMMARY

TREASURY YIELDS

0.0

0.2

0.4

0.6

0.8

1.0

1.0

1.5

2.0

2.5

3.0

3.5

1-Nov 8-Nov 15-Nov 22-Nov 29-Nov 6-Dec 13-Dec 20-Dec 27-Dec 3-Jan 10-Jan 17-Jan 24-Jan 31-Jan 7-Feb

U.S. Treasury Yields daily, percent

10-yr (LHS) 30-yr (LHS) 5-yr (RHS) 2-yr (RHS)

December FOMC

Source: Bloomberg

through February 6, 2013

Fiscal Cliff Deal January FOMC


Longer-term U.S. Treasury

yields are little changed since

the January FOMC meeting.

The 10-year note and the 30-

year bond now yield about 1.98

percent and 3.19 percent,

respectively.

However, since the December

12 FOMC statement—which

reiterated the Committee’s

intention to purchase $45 billion

of Treasury securities as well as

$40 billion of agency MBS per

month—and following the fiscal

cliff deal, Treasury yields have

moved noticeably higher. The

30-year bond is up 30 bps, and

the 10-year higher by 28 bps,

since December 12; with

increases of 24 bps and 22 bps,

respectively, since the fiscal cliff

deal.

SUMMARY

BREAKEVEN INFLATION RATE

2.89

1.75

2.00

2.25

2.50

2.75

3.00

3.25

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13

Barclays 5-year/5-year forward breakeven inflation rate percent

Source: Barclays Capital through February 6, 2013

January FOMC


The Barclays 5-year/5-year

forward breakeven inflation rate

is currently at 2.89 percent,

roughly stable since September

2012 but getting close to the

peak of readings since January

2011.

(Note: The breakeven inflation

rate is a measure of expected

inflation derived from “nominal”

Treasury securities and their

“real” counterparts—inflation-

protected TIPS securities.)

ECONOMIC AND FINANCIAL HIGHLIGHTS · SUMMARY FEDERAL RESERVE BALANCE SHEET Between January 23 and...

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Transcript of ECONOMIC AND FINANCIAL HIGHLIGHTS · SUMMARY FEDERAL RESERVE BALANCE SHEET Between January 23 and...