Last week, we pointed out that the ECRI Leading Index dipped to negative for the first time in over a year, which on a historical basis tends to predict a recession with surprising regularity. Today, David Rosenberg takes this data and expands on his views of the probability of a double dip.An interesting observation: when the ECRI drops to -10 (from the current -3.5, and plunging at the fastest rate in history), the economy has gone into a recession 100% of the time, based on 42 years of data. At the current rate of collapse, this means in two months we should know with certainty if the double dip has now arrived.
The Moody’s/REAL All Property Type Aggregate Index measured a 0.5% price decline in March, marking a second month of falling values after a slight rebound reported earlier this year. The index now stands at 111.16, down 24.9% from a year ago and 40.5% from two years ago. Prices peaked in October 2007, and at their lowest point thus far in the downturn (October 2009) they had fallen 43.7%. As of the end of March, commercial property prices are down 42.1% from the peak.
At this juncture of the crisis, there are only two choices: 1) do nothing and let the world sink into a deflationary hellhole or 2) do anything it takes to shore up the global financial system and look to restructure debt as the world economic recovery gains traction. I believe the Fed and the ECB will opt for the second choice.
Existing Home Sales Double Dip Deteriorates With Biggest Increase In Months Supply Inventory In 20 YearsSubmitted by Tyler Durden on 03/23/2010 10:48 -0400
The double dip in housing is getting worse by the month. After hitting a nearly 6.6 million in existing home sales in late 2009, the number has now plunged to 5.02 million, a decline of 0.9% sequentially, and a major drop from the artificially induced peak. Sales for single-family homes were down and were up for condos and co-ops, indicating a preference for smaller, cheaper units among a population concerned with record unemployment and expiring homebuyer taxes. The number came on top of expectations of 4.98 million, with the range being from 4.75 million to 5.2 million units. Sales in the Northeast and Midwast improved slightly, even as sales in the South and recently bubble West declined. Yet the biggest stunner was the months of supply on market which jumped by a 20 year high, from 7.8 months to 8.6 months.
My favorite party boy economist, Nouriel Roubini, just came out with his analysis for the second half and he notes that we may be heading toward a double-dip recession. Too much negative news, he frets. I have been saying this for some time.
Home Prices Double Dip Validated As Unadjusted Case-Shiller Numbers Indicate Third Sequential MoM DeclineSubmitted by Tyler Durden on 02/23/2010 10:41 -0400
After a third sequential decline in unadjusted Case-Shiller housing prices, is it ok to come out of a contrarian shell and proclaim the government-subsidized home price appreciation rally dead? Afdter the unadjusted Composite-20 reading peaked at 146.7 in September, the index has slowly declined for 3 months in a row and is now at 145.9. The only good thing one can say is that the rate of decline has not accelerated. However, with just over a month left on MBS QE, we are not very hopeful for a second V-recovery to appear in home prices any time soon.
Initial claims just made a negative U-turn and posted their first weekly increase since the beneficial inflection point. After new home sales and NAHB, is the initial claims double dip next? This week's number of 480,000 was 25,000 worse than expected, and 8,000 thousand worse than last week's 472,000. The 4-week average rose to 11,750 to 468,750. According to the Labor Department this was a straightforward report with "nothing unusual" and no states estimated. Unadjusted claims rose 28,234 to 530,405. Continuing claims increased by 2,000 on a SA basis, to 4.6 million and by 62,784 NSA to 5.7 million. EUCs surged once again to 281,442 for a new total of 5,632,219. Extended benefits claims fell 39,129 to 222,833 as ever increasing numbers of people roll off extended benefit eligibility.
December new homes sales come in at 342,000, down 7.6% from in November, and a resounding miss of expectations of 366,000. The double dip is here.
The NAHB reported its December housing market index, which came in at 15, missing expectations of a rebound from November's reading of 16, and is now at the low levels last seen in June. The double dip, at least in perceptions of what is happening to the housing market is here, and follows the recent housing starts inflection point.
Without doubt the two biggest issues before the US economy are the threat of a double dip recession and what happens when the massive liquidity pump is i) stopped and ii) put in reverse. And of the key macro economic indicators, deflation is by far the biggest bogeyman (and wildcard). Even in the context of so-called better than expected economic data, i.e., the growth in GDP, a more exhaustive dig through the deflator for gross domestic purchases reveals that deflation has still firmly gripped the economy. Yet price perceptions, which have an impact on the consumer saving and spending rate, while critical are merely one of the numerous indicators that one has to keep an eye on. The group of the four horsemen of a depression also includes overall systemic leverage, the availability of credit, and unemployment.