Tuesday, 30 August 2016

FDIC: Fewer Problem banks, Residential REO Declined in Q2

The FDIC released the Quarterly Banking Profile for Q2 today:
Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $43.6 billion in the second quarter of 2016, up $584 million (1.4 percent) from a year earlier. The increase in earnings was mainly attributable to a $5.2 billion (4.8 percent) increase in net interest income and a $981 million decline in expenses for litigation reserves at a few large banks. Banks increased their loan-loss provisions by $3.6 billion (44.2 percent) compared to a year ago, partly in response to rising levels of troubled loans to commercial and industrial borrowers, particularly in the energy sector.
...
“Income and revenue both increased from a year ago, loan growth remained strong, the number of unprofitable banks was at an 18-year low, and there were fewer banks on the problem list. Community banks reported strong net income, revenue, and loan growth,” Chairman Gruenberg said.

“However, challenges continue,” he said. “Revenue growth remains sluggish as a prolonged period of low interest rates has put downward pressure on net interest margins. This has led some institutions to reach for yield, increasing their exposure to interest-rate risk.

“More recently, persistent stress in the energy sector has resulted in asset quality deterioration at banks that lend to oil and gas producers. We likely have not yet seen the full impact of low energy prices on the banking industry, particularly for consumer and commercial and industrial loans in energy-producing regions of the country.

“We will continue to closely monitor the environment in which banks operate, and we will remain vigilant as we conduct our supervision of the industry.”
...
“Problem List” Continues to Shrink: The number of banks on the FDIC’s Problem List fell from 165 to 147 during the second quarter. This is the smallest number of problem banks in more than seven years and is down significantly from the peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $30.9 billion to $29.0 billion during the second quarter. Two banks failed during the quarter.

Deposit Insurance Fund’s Reserve Ratio Surpasses 1.15 Percent Benchmark: The DIF increased $2.8 billion during the second quarter, from $75.1 billion at the end of March to $77.9 billion at the end of June, largely driven by $2.3 billion in assessment income. The DIF reserve ratio rose from 1.13 percent to 1.17 percent during the quarter. Under previously approved FDIC regulations, once the reserve ratio exceeds 1.15 percent, lower regular assessment rates will go into effect. As a result of lower rates, the FDIC estimates that regular assessments paid by banks to the FDIC will decline by about one-third.
emphasis added
FDIC Problem Banks Click on graph for larger image.

The FDIC reported the number of problem banks declined (Note: graph shows problem banks for Q1 and Q2 2016, and year end prior to 2016):
The number of FDIC-insured commercial banks and savings institutions reporting quarterly financial results declined to 6,058 from 6,122 in the second quarter. During the quarter, mergers absorbed 57 insured institutions, two banks failed, and no new charters were added. The number of banks on the FDIC’s “Problem List” declined from 165 to 147, and total assets of problem banks fell from $30.9 billion to $29 billion. This is the smallest number of problem banks in eight years
FDIC Insured Institution REOThe dollar value of 1-4 family residential Real Estate Owned (REOs, foreclosure houses) declined from $4.38 billion in Q1 2016 to $4.12 billion in Q2. This is the lowest level of REOs since Q1 2007.

This graph shows the nominal dollar value of Residential REO for FDIC insured institutions. Note: The FDIC reports the dollar value and not the total number of REOs.

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Export stats show Chinese lithium carbonate prices drop 28% in July

The drop off illustrated by customs data comes in the wake of a consistent decline in price seen on the Chinese spot market over the past number of months.

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Real Prices and Price-to-Rent Ratio in June

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 5.1% year-over-year in June

The year-over-year increase in prices is mostly moving sideways now around 5%. In June, the index was up 5.1% YoY.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $275,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 2.6% below the bubble peak.   However, in real terms, the National index is still about 17.0% below the bubble peak.

Nominal House Prices


Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through June) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to November 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to June 2005 levels, and the CoreLogic index (NSA) is back to July 2005.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

CPI less Shelter has declined over the last two years pushing up real house prices.

In real terms, the National index is back to January 2004 levels, the Composite 20 index is back to October 2003, and the CoreLogic index back to November 2003.

In real terms, house prices are back to late 2003 levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to July 2003 levels, the Composite 20 index is back to April 2003 levels, and the CoreLogic index is back to June 2003.

In real terms, and as a price-to-rent ratio, prices are back to late 2003  - and the price-to-rent ratio maybe moving a little more sideways now.

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Case-Shiller: National House Price Index increased 5.1% year-over-year in June

S&P/Case-Shiller released the monthly Home Price Indices for June ("June" is a 3 month average of April, May and June prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Price Gains in June Concentrated in South and West According to the S&P CoreLogic Case-Shiller Indices
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in June, unchanged from last month. The 10-City Composite posted a 4.3% annual increase, down from 4.4% the previous month.The 20-City Composite reported a year-over-year gain of 5.1%, down from 5.3% in May.
...
Before seasonal adjustment, the National Index posted a month-over-month gain of 1.0% while both the 10-City Composite and the 20-City Composite posted a 0.8% increase in June. After seasonal adjustment, the National Index recorded a 0.2% month-over-month increase, and both the 10-City Composite and 20-City Composite posted 0.1% month-over-month decreases. After seasonal adjustment, nine cities saw prices rise, two cities were unchanged, and nine cities experienced negative monthly prices changes.
emphasis added
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 11.1% from the peak, and down 0.1% in June (SA).

The Composite 20 index is off 9.1% from the peak, and down 0.1% (SA) in June.

The National index is off 2.6% from the peak, and up 0.2% (SA) in June.  The National index is up 31.6% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 4.3% compared to June 2015.

The Composite 20 SA is up 5.1% year-over-year.

The National index SA is up 5.1% year-over-year.

Note: According to the data, prices increased in 10 of 20 cities month-over-month seasonally adjusted.

I'll have more later.

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Cristal Global joins TiO2 majors in price hikes

As demand and activity picks up in the titanium dioxide (TiO2) pigment sector, producers are following suit in upping their prices.

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Monday, 29 August 2016

Tuesday: Case-Shiller House Prices

Tuesday:
• At 9:00 AM ET, b>S&P/Case-Shiller House Price Index for June. Although this is the June report, it is really a 3 month average of April, May and June prices. The consensus is for a 5.2% year-over-year increase in the Comp 20 index for June. The Zillow forecast is for the National Index to increase 5.1% year-over-year in June.

From Matthew Graham at Mortgage News Daily: Mortgage Rates Battle Back From Recent Highs
Mortgage Rates were briefly at their highest levels in several weeks on Friday afternoon. This followed comments from the Fed's Jackson Hole symposium. Markets interpreted those comments as the Fed being more likely to hike rates in 2016--possibly even twice! While mortgage rates are based on MBS (mortgage-backed-securities), as opposed to the Fed Funds Rate (the thing the Fed is talking about hiking), if investors think the Fed is more likely to hike, MBS tend to lose some ground.
emphasis added


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Black Knight: House Price Index up 0.8% in June, Up 5.3% year-over-year

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA, FNC and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: Black Knight Home Price Index Report: June 2016 Transaction
• U.S. Home Prices Up 0.8 Percent for the Month; Up 5.3 Percent Year-Over-Year

• At $265K, the U.S. HPI is up 32.6 percent from the market's bottom and is within just 1.1 percent of a new national peak

• Home prices in six of the nation's 20 largest states and 14 of the 40 largest metros hit new peaks in June
The year-over-year increase in this index has been about the same for the last year.

Note that house prices are close to the bubble peak in nominal terms, but not adjusted for inflation.

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Dallas Fed: Regional Manufacturing Activity Increases in August

From the Dallas Fed: Texas Manufacturing Activity Increases
Texas factory activity increased in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 4.5 after a near-zero reading in July, suggesting output picked up this month.

Other measures of current manufacturing activity also reflected expansion. Demand bounced back, with the new orders index rising from -8.0 to 5.3 in August and the growth rate of orders index pushing up to 2.1, its first positive reading in nearly two years. The capacity utilization index remained only barely positive at 0.9, while the shipments index rose nearly 10 points to 9.9, with nearly a third of manufacturers reporting higher volumes of shipments this month.

Perceptions of broader business conditions remained fairly pessimistic. The general business activity index was negative for a 20th month in a row and moved down from -1.3 to -6.2. The company outlook index was largely unchanged at -2.8.

Labor market measures indicated slight employment declines and shorter workweek length. The employment index came in at -5.0, down from -2.6 last month. ...
emphasis added
The impact of lower oil prices is still impacting manufacturing.

This was the last of the regional Fed surveys for August.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through August), and five Fed surveys are averaged (blue, through August) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through July (right axis).

It seems likely the ISM manufacturing index will be lower in August than in July.

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Personal Income increased 0.4% in July, Spending increased 0.3%

The BEA released the Personal Income and Outlays report for July:
Personal income increased $71.6 billion (0.4 percent) in July according to estimates released today by the Bureau of Economic Analysis ... personal consumption expenditures (PCE) increased $42.0 billion (0.3 percent).
...
Real PCE increased 0.3 percent. The PCE price index was unchanged from June. Excluding food and energy, the PCE price index increased 0.1 percent in July.
The July PCE price index increased 0.8 percent year-over-year and the July PCE price index, excluding food and energy, increased 1.6 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through July 2016 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

Both the increase in personal income and the increase in PCE was at consensus expectations.

A solid start for Q3.




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Sunday, 28 August 2016

Monday: Personal Income and Outlays

Weekend:
Schedule for Week of Aug 28, 2016

Monday:
• At 8:30 AM ET, Personal Income and Outlays for July. The consensus is for a 0.4% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 10:30 AM, Dallas Fed Survey of Manufacturing Activity for August.

From CNBC: Pre-Market Data and Bloomberg futures: S&P and DOW futures are mostly unchanged (fair value).

Oil prices were down over the last week with WTI futures at $47.14 per barrel and Brent at $49.46 per barrel.  A year ago, WTI was at $45, and Brent was at $48 - so prices are mostly unchanged year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.21 per gallon (down about $0.30 per gallon from a year ago).

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Saturday, 27 August 2016

Schedule for Week of Aug 28, 2016

The key report this week is the August employment report on Friday.

Other key indicators include Personal Income and Outlays for July, the Case-Shiller House Price Index for June, the August ISM manufacturing and non-manufacturing indexes, August auto sales, and the July trade deficit.

----- Monday, Aug 29th -----

8:30 AM: Personal Income and Outlays for July. The consensus is for a 0.4% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%.

10:30 AM ET: Dallas Fed Survey of Manufacturing Activity for August.

----- Tuesday, Aug 30th -----

Case-Shiller House Prices Indices9:00 AM: S&P/Case-Shiller House Price Index for June. Although this is the June report, it is really a 3 month average of April, May and June prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the May 2016 report (the Composite 20 was started in January 2000).

The consensus is for a 5.2% year-over-year increase in the Comp 20 index for June. The Zillow forecast is for the National Index to increase 5.1% year-over-year in June.

----- Wednesday, Aug 31st -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for 175,000 payroll jobs added in August, down from 179,000 added in July.

9:45 AM: Chicago Purchasing Managers Index for August. The consensus is for a reading of 55.2, down from 55.8 in July.

10:00 AM: Pending Home Sales Index for July. The consensus is for a 0.6% increase in the index.

----- Thursday, Sept 1st -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 265 thousand initial claims, up from 261 thousand the previous week.

ISM PMI10:00 AM: ISM Manufacturing Index for August. The consensus is for the ISM to be at 52.2, down from 52.6 in July.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion at 52.6% in July. The employment index was at 49.4%, and the new orders index was at 56.9%.

10:00 AM: Construction Spending for July. The consensus is for a 0.6% increase in construction spending.

Vehicle SalesAll day: Light vehicle sales for August. The consensus is for light vehicle sales to decrease to 17.1 million SAAR in August, from 17.8 million in July (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the July sales rate.

----- Friday, Sept 2nd -----

8:30 AM: Employment Report for August. The consensus is for an increase of 175,000 non-farm payroll jobs added in August, down from the 255,000 non-farm payroll jobs added in July.

The consensus is for the unemployment rate to decrease to 4.8%.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In July, the year-over-year change was 2.45 million jobs.

A key will be the change in wages.

U.S. Trade Deficit8:30 AM: Trade Balance report for July from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through June. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $41.3 billion in July from $44.5 billion in June.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for July. The consensus is a 2.0% increase in orders.

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Friday, 26 August 2016

Comments on Home Sales in July

CR Note: When the New and Existing home sales reports were released this week, I was out of town and didn't post any graphs. Here are a few graphs and comments on the reports.

The new home sales report for July was very strong at 654,000 on a seasonally adjusted annual rate basis (SAAR) - the highest since October 2007 - however combined sales for April, May and June were revised down by 12 thousand SAAR.

Sales were up 31.3% year-over-year (YoY) compared to July 2015. And sales are up 12.4% year-to-date compared to the same period in 2015.

New Home SalesClick on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

As always, I wouldn't read too much into data for any one month - this series is volatile and the revisions are frequently significant.

However it does appear new home sales are approaching normal levels (I've been expecting sales to increase to at least 800 thousand - but I expected the recovery to be slow).

New Home Sales 2015 2016The second graph shows new home sales for 2015 and 2016 by month (Seasonally Adjusted Annual Rate).  Sales to date are up 12.4% year-over-year, mostly because of the solid growth starting in Q2.

There will probably be solid year-over-year growth in Q3 this year too.

Overall  I expected lower growth this year, in the 4% to 8% range.  Slower growth seemed likely this year because Houston (and other oil producing areas) will have a problem this year.

So far new home sales have been stronger than my forecast.

Existing Home SalesThe third graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in July (5.39 million SAAR) were 3.2% lower than last month, and were 1.6% below the July 2015 rate.

For existing homes, inventory is still key.  I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 5.8% year-over-year in June). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next several years.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through July 2016. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to move more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales.

However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

Distressing GapAnother way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down, and this ratio will probably continue to trend down over the next several years.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

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Low-priced offers clog Indian graphite industry

Competition has intensified in the Indian graphite space as additional capacities from Madagascar and Brazil hit domestic producers hard in a sluggish trading environment.

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Price briefing 19-25 August 2016

Trading remains quiet in iodine and graphite as prices edge down further, while some fused alumina production is resuming in China following weeks of shutdown. Market activities are expected to increase in the coming weeks as the European holiday season comes to an end.

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TiO2 producers push for 10th price hike

Chinese producers have announced another price hike- the tenth one this year- citing the rising cost of raw materials as well as stronger supply/demand fundamentals.

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Thursday, 25 August 2016

Indian graphite industry clogged with low-priced offers

Competition has intensified in the Indian graphite space as additional capacities from Madagascar and Brazil hit domestic producers hard in a sluggish trading environment.

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Fused alumina production resumes in China

Some white and brown fused alumina producers in Henan have received the green light to restart production but uncertainty remains on whether there would be more disruption in output in September due to renewed anti-pollution efforts.

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Iodine spot prices drop further

Spot market prices continues to decline this week as producers aggressively compete to secure business. Market participants predicted that contract prices could follow the downward trajectory in Q4.

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Wednesday, 24 August 2016

Canpotex to extend supply contract to India

Potash marketing JV Canpotex will likely extend its supply agreement with India as fertiliser buyers in the country receive their delayed government subsidy.

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Thursday: Travel Day

As a reminder: NAR Existing Home Sales Report vs. Tom Lawler's LEHC Projection from Last Week

Existing Home Sales (SAAR): NAR, 5.39 million; LEHC, 5.41 million; “Consensus”, 5.52 million

Inventory of EHS for Sale: NAR, 2.13 million; LEHC, 2.14 million.

YOY % Change, Median Existing SF Home Sales Price: NAR, 5.4%; LEHC, 5.3%.

Note: Thursday is a travel day - no posting until later in the day.

Thursday:
At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 265 thousand initial claims, up from 262 thousand the previous week.

Also at 8:30 AM, Durable Goods Orders for June from the Census Bureau. The consensus is for a 3.7% increase in durable goods orders.

At 11:00 AM, Kansas City Fed Survey of Manufacturing Activity for August.

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Kenmare H1 revenue falls on low mineral sands prices

While a large number of contracts were signed towards the end of 2015 for H1 2016 resulting in lower prices throughout the first half of the year, Kenmare said tightening ilmenite supply was starting to give way to higher prices as it looks to secure contracts for the second half of the year.

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Tuesday, 23 August 2016

Wednesday: Existing Home Sales

Note: I'm in New York and posting will not be frequent (too much to do and see).

Thanks to Joe Weisenthal for having me on Bloomberg's WDYM. And Barry Ritholtz on his MIB radio and podcast.

Wednesday:
At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

At 9:00 AM, FHFA House Price Index for June 2016. This was originally a GSE only repeat sales, however there is also an expanded index.  The consensus is for a 0.3% month-to-month increase for this index.

At 10:00 AM, Existing Home Sales for July from the National Association of Realtors (NAR). The consensus is for 5.52 million SAAR, down from 5.57 million in June.

Housing economist Tom Lawler expects the NAR to report sales of 5.41 million SAAR in July, down 2.9% from June’s preliminary pace.

Hint: Lawler isn't always closer, but I'd take the under on the consensus Wednesday.

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Monday, 22 August 2016

Pricing notice: Proposal to delist spodumene, petalite grades

Industrial Minerals proposes to delist several spodumene concentrate and petalite grades at the end of September.

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Sunday, 21 August 2016

Finding Evidence That Shows Candidates’ Seriousness About Procurement

Special thanks to Charles Dominick, SPSM3 of the Next Level Purchasing Association for this guest post.

In the my previous post, I talked about ways to structure a job description to help find a rock star of a procurement employee by focusing on the qualifications you need and the qualifications you want.  However, let me caution you now that qualifications alone may not be enough.  You may deserve a candidate who not just knows procurement, but loves procurement.

How do you know if a candidate loves procurement?  Three pieces of evidence that suggest it:  contributions to the profession, intra-profession mobility, and certification.  We’ll explore each of these in this post.

Contributions To The Profession

Lots of people have occupied procurement positions.  According to the US Bureau of Labor Statistics, there are nearly a half-a-million people in the US who are buyers and purchasing agents.

Some of those half-million people are making a difference in their roles.  Others are pretty much taking up space.

Those who are making a difference also recognize the need to make a name for themselves, both internally within their organizations and externally within the procurement community.  After all, if a cost savings tree falls in the procurement forest and no one is around to hear it, did it make a sound on the bottom line?

Those difference-makers speak at procurement conferences.  They author articles in trade publications.  They post questions and answers on the many LinkedIn Groups aimed at procurement professionals.

In other words, they don’t succeed in isolation.  They contribute to the profession.  And those contributions provide excellent evidence that a candidate is serious about procurement and likely to stick to it for the long-term.

Intra-Profession Mobility

Personally, I took a purchasing course in college.  I loved it.  I sought out – and found – a procurement position as my first job after graduation.  I haven’t left the procurement profession in the 20+ years since!

But it’s no secret that cases like mine have been the exception moreso than the rule.  Even with many colleges now offering degrees in supply chain management, millennials aren’t necessarily seeking out procurement roles as universities tend to consider disciplines like production control and logistics to be at least as important pieces of supply chain as they consider procurement to be.

So, again, just because someone has been in procurement doesn’t mean that they targeted that role and got exactly what they were shooting for.  But, if a candidate has a track record of staying in procurement even when they get new jobs, they may just love procurement.

Certification

A final indicator of a candidate’s seriousness about procurement is whether or not he or she has a procurement certification.  Unlike a college degree, which is likely to be highly generalized – “business administration” is a bit broad, isn’t it? – a certification in a profession shows that a candidate is truly interested in being a specialist.  A procurement certification demonstrates that a candidate:

  • Has learned some of the most strategic procurement practices
  • Has met third party standards for excellence in the profession
  • Is serious about procurement as his or her lifelong profession

 Make “Seriousness” About The Profession A Qualification

Now that you understand the importance of a demonstrated seriousness about procurement, you need to institutionalize it as a qualification on your job descriptions.  Phrases like “Visibility as a thought leader highly desirable,” “Progressive experience in procurement a plus,” and “SPSM Certification preferred” can help you attract higher-level talent.

Charles Dominick Serious Post

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The views expressed in this post and throughout the series are the autor's own and not intended to reflect the views the YQ Matrix platform, its users or any associated organisations.

For the procurement people among you, have a look at the latest YQ Matrix raw material and semi-finished prices. For: Prices on other websites.

Sunday Night Futures

Weekend:
Schedule for Week of Aug 21, 2016

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for July. This is a composite index of other data.

From CNBC: Pre-Market Data and Bloomberg futures: S&P and DOW futures are up slightly (fair value).

Oil prices were up over the last week with WTI futures at $48.11 per barrel and Brent at $50.88 per barrel.  A year ago, WTI was at $40, and Brent was at $44 - so prices are up 15% or so year-over-year. Yes, UP year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.16 per gallon (down about $0.50 per gallon from a year ago).

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Saturday, 20 August 2016

Schedule for Week of Aug 21, 2016

The key economic reports this week are July New and Existing Home Sales.

Also the second estimate of Q2 GDP will be released.

Fed Chair Janet Yellen is scheduled to speak at the Jackson Hole annual economic symposium.

For manufacturing, the August Richmond and Kansas City manufacturing surveys will be released this week.

----- Monday, Aug 22nd -----

8:30 AM ET: Chicago Fed National Activity Index for July. This is a composite index of other data.

----- Tuesday, Aug 23rd -----

New Home Sales10:00 AM ET: New Home Sales for July from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the June sales rate.

The consensus is for an decrease in sales to 580 thousand Seasonally Adjusted Annual Rate (SAAR) in July from 592 thousand in June.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for August.

----- Wednesday, Aug 24th -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

9:00 AM: FHFA House Price Index for June 2016. This was originally a GSE only repeat sales, however there is also an expanded index.  The consensus is for a 0.3% month-to-month increase for this index.

Existing Home Sales10:00 AM: Existing Home Sales for July from the National Association of Realtors (NAR). The consensus is for 5.52 million SAAR, down from 5.57 million in June.

Housing economist Tom Lawler expects the NAR to report sales of 5.41 million SAAR in July, down 2.9% from June’s preliminary pace.

----- Thursday, Aug 25th -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 265 thousand initial claims, up from 262 thousand the previous week.

8:30 AM: Durable Goods Orders for June from the Census Bureau. The consensus is for a 3.7% increase in durable goods orders.

11:00 AM: Kansas City Fed Survey of Manufacturing Activity for August.

----- Friday, Aug 26th -----

8:30 AM ET: Gross Domestic Product, 2nd quarter 2016 (Second estimate). The consensus is that real GDP increased 1.1% annualized in Q2, down from 1.2% in the advance estimate.

10:00 AM: University of Michigan's Consumer sentiment index (final for August). The consensus is for a reading of 90.5, up from the preliminary reading 90.4.

11:00 AM: Fed Chair Janet Yellen will speak at the annual economic symposium in Jackson Hole, Wyoming. The symposium topic is “Designing Resilient Monetary Policy Frameworks for the Future”.

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Friday, 19 August 2016

From 2007 and 2008: The Compleat UberNerd

Note: I'm flying to Boston today to attend a wedding this weekend. There will be a few posts on Tanta today.

In December 2006, my friend Doris "Tanta" Dungey started writing for Calculated Risk.

From December 2006, until she passed away from ovarian cancer on Nov 30, 2008, Tanta was my co-blogger. Tanta worked as a mortgage banker for 20 years, and we started chatting in early 2005 about the housing bubble and the changes in lending practices. In 2006, Tanta was diagnosed with late stage cancer, and she took an extended medical leave while undergoing treatment. While on medical leave she wrote for this blog, and her writings received widespread attention and acclaim.

If you want to understand the mortgage industry, read Tanta's posts (here is The Compleat UberNerd and a Compendium of Tanta's Posts).

As an example, here is a brief excerpt from Foreclosure Sales and REO For UberNerds
The following is not an exhaustive discussion of all of the issues involved in foreclosures and REO. It’s a start at unpacking some of the concepts and definitions. We have been seeing, and are going to continue to see, a lot of information presented on foreclosure sales, REO sales, and their impacts on existing home transaction volumes and prices in various market areas. As always with “UberNerd” posts, this is long and excruciating. Proceed with typical motivation as you may consider your own best interest in an open market in blog postings.
And an excerpts from Mortgage Servicing for UberNerds
StillLearning asked in the comments about mortgage servicing, and since y’all are nerds, not dummies, here’s my highly-selective occasionally-oversimplified summary for you that skips the boring parts like how your check gets out of the “lockbox” and that stuff. We can discuss extra-credit issues like “excess servicing” and “subservicing” and “SFAS 144 meets MSR” and “negative convexity” and other kinds of inside baseball in the comments. There is a lot that can be said about loan servicing, but let’s start with the basics:

Servicers have two major types of servicing portfolio: loans they service for themselves and loans they service for other investors. In accounting terms, the “compensation” is the same, meaning that even if you are the noteholder, you pay yourself to service the loans in the same way that an outside investor would pay you, and it shows on the books that way. The differences in compensation stem from the basic fact that one is generally more motivated to do a good job servicing (particularly collecting and efficiently liquidating REO) for one’s own investment than for someone else’s.
Also see In Memoriam: Doris "Tanta" Dungey for photos, links to obituaries in the NY Times, Washington Post and much more.

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Chinese rare earths prices differ in August

Guidance prices for rare earths products released this month for southern and northern China show a notable difference, with price levels in the north of the country declining as southern rates remain stable.

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Price Briefing 12–18 August 2016

Ahead of the US presidential election in November, democratic nominee Hilary Clinton has appointed former interior secretary, Ken Salazar, to chair her presidential transition team a move that was seen by some as positive for the struggling fracking industry.

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Price Briefing 5–11 August 2016

Producer reported higher bromine prices in Q2; more pigments producers announced TiO2 price increases; lithium 2017 contract talks to begin and brown fused alumina prices tick higher.

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Thursday, 18 August 2016

A Questionable Quote

Everywhere I turn lately I am seeing quotes from anyone and everyone, so I thought that I would jump on the bandwagon from a procurement standpoint.

Are these wise words I am am sharing based on my many, many, many (well you get the idea) . . . years of personal experience?

While I can’t attest to the wisdom of the words, I can tell you that they are what I honestly think.

Anyway, here is my questionable quote for today . . . tell me if you agree or disagree.

JWH Tech Quote

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This content was assembled for you by the YQ Matrix platform

The views expressed in this post and throughout the series are the autor's own and not intended to reflect the views the YQ Matrix platform, its users or any associated organisations.

For the procurement people among you, have a look at the latest YQ Matrix raw material and semi-finished prices. For: Prices on other websites.

Rising demand supports chromite prices

Prices for chemical grade product continue to edge up slowly, according to buyers and sellers stated, who cited supply tightness and some increasing demand as the key drivers.

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Wednesday, 17 August 2016

FOMC Minutes: "Near-term risks to the domestic outlook had diminished"

From the Fed: Minutes of the Federal Open Market Committee July 26-27, 2016. Excerpts:
With respect to the economic outlook and its implications for monetary policy, members continued to expect that, with gradual adjustments in the stance of monetary policy, economic activity would expand at a moderate pace and labor market indicators would strengthen. Members saw developments during the intermeeting period as reducing near-term uncertainty along two dimensions discussed at the June meeting. The first was about the outlook for the labor market. They agreed that the strong rebound in job gains in June--together with a rise in the labor force participation rate and a decline in the number of individuals who were working part time for economic reasons--suggested that, despite the very soft employment report for May, labor market conditions remained solid and slack had continued to diminish. Many members commented on the somewhat slower average pace of improvement in labor market conditions in recent months. Several of these members observed that the recent pace of job gains remained well above that consistent with stable rates of labor utilization. A couple of members indicated that, in light of their judgment that labor market conditions were at or close to the Committee's objectives, some moderation in employment gains was to be expected. In contrast, several other members expressed concern about the likelihood of a further reduction in the pace of job gains, and it was noted that if that slowing turned out to be persistent, the case for increasing the target range for the federal funds rate in the near term would be less compelling.

A second source of near-term uncertainty that members had discussed at the June meeting pertained to the potential economic and financial market consequences of the U.K. referendum on membership in the EU. At the current meeting, most members pointed to the quick recovery of financial market conditions since the "leave" vote as an encouraging sign of resilience in global financial markets that helped reduce near-term uncertainty about the outlook for the U.S. economy.

While members judged that near-term risks to the domestic outlook had diminished, some noted that the U.K. vote, along with other developments abroad, still imparted significant uncertainty to the medium- to longer-term outlook for foreign economies, with possible consequences for the U.S. outlook. As a result, members agreed to indicate that they would continue to closely monitor global economic and financial developments.

Members continued to expect inflation to remain low in the near term, in part because of earlier declines in energy prices, but most anticipated that inflation would rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipated and the labor market strengthened further. Nonetheless, in light of the current shortfall of inflation from 2 percent, members agreed that they would continue to carefully monitor actual and expected progress toward the Committee's inflation goal.

After assessing the outlook for economic activity, the labor market, and inflation, as well as the risks around that outlook, members decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent at this meeting. Members generally agreed that, before taking another step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labor market and economic activity. A couple of members preferred also to wait for more evidence that inflation would rise to 2 percent on a sustained basis. Some other members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation. One member preferred to raise the target range for the federal funds rate at the current meeting, citing the easing of financial conditions since the U.K. referendum, the return to trend economic growth, solid job growth, and inflation moving toward 2 percent.

Members again agreed that, in determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee would assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. They noted that this assessment would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee expected that economic conditions would evolve in a manner that would warrant only gradual increases in the federal funds rate, and that the federal funds rate was likely to remain, for some time, below levels that are expected to prevail in the longer run. However, members emphasized that the actual path of the federal funds rate would depend on the economic outlook as informed by incoming data. In that regard, members judged it appropriate to continue to leave their policy options open and maintain the flexibility to adjust the stance of policy based on incoming information and its implications for the Committee's assessment of the outlook for economic activity, the labor market, and inflation, as well as the risks to the outlook. Most members noted that effective communications from the Committee would help the public understand how monetary policy might respond to incoming data and developments.
emphasis added


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Tuesday, 16 August 2016

Lawler: Early Read on Existing Home Sales in July

From housing economist Tom Lawler:

Based on publicly-available state and local realtor/MLS reports from across the country released through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.41 million in July, down 2.9% from June’s preliminary pace and down 1.3% from last July’s seasonally-adjusted pace. Unadjusted sales last month should register a significantly steeper YOY decline than seasonally adjusted sales, as there were two fewer business days this July than last July.

Local realtor/MLS data also suggest that existing home listings in aggregate increased modestly last month, and I project that the inventory of existing homes for sale as estimated by the NAR for the end of July will be 2.14 million, up 0.9% from June’s preliminary estimate and down 5.3% from last July. Finally, I project that the NAR’s estimate of the median existing single-family home sales price for July will be up 5.3% from last July’s estimate.

Compared to last July unadjusted home sales last month were down in a wide range of markets across the country, but that is less surprising when one takes into account the significantly lower business day count (two!) this July relative to last July. There were, however, a few notable markets where unadjusted sales last month were sharply lower than a year earlier.

Last month residential home sales in the Portland, Oregon metro area were down 19.6% YOY. While residential listings in July were still slightly down from a year earlier, the increase in listings since February has substantially exceeded the typical seasonal norm.

In the Denver, Colorado metro area residential home sales last month were down 17.6% YOY. And while residential listings remained historically low, listings how increased considerably faster than the seasonal norm since February.

Finally, existing single-family home sales nine-county San Francisco, California Bay area last month were down 16.1% YOY. The California Association of Realtor’s “Unsold Inventory Index” for the SF Bay Area was 2.8 months in July, up from 1.8 months last July.

All three of these markets have seen substantial home prices increases over the past years, as well as historically very low inventory levels. All three markets have also, however, seen YOY declines in sales for at least four straight months.

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Confidential Information, Trade Secrets and The “Use” of Non-Disclosure Agreements

Last week was very interesting – okay, every week is interesting – but last week in particular.

On three separate instances I was made aware of attempts to circumvent the Freedom Of Information Act under the auspices of protecting proprietary information or trade secrets, the possible release of confidential information, and the frustration of sources who want to speak out, but are muted by non-disclosure agreements.

The concern I have with the above examples, which are probably the tip of a very large iceberg, centers around the question; is the public’s right to know being trumped by the self-serving interests of a select few?

“A consent decree the British firm reached in 2011 settled civil claims over violations of U.S. arms export control laws and regulations. The $69 million civil settlement followed a criminal guilty plea from the company the preceding year, resulting in a fine of $400 million.” – BAE Systems moves to enter State Department FOIA fight By 08/11/16

Take Josh Gerstein’s article regarding BAE Systems’ efforts to limit the Associated Press’ access to documents surrounding both the civil and criminal cases against British Aerospace.

As Gerstein reports, BAE Systems plc, a British company, and BAE Systems Inc., its U.S.-based affiliate, who are “successor firms” to British Aerospace, filed a motion in Federal Court this past Thursday. In it they claimed that the publication of the details of a settlement between the company and the State Department would result in their suffering “harm from the public release of their proprietary information.”

As further justification for their motion, the companies presented the argument that preventing AP from gaining access to this information, “would ensure the continued integrity of the regulatory process which relies upon the free, open, and voluntary transmission of sensitive information between the regulator and regulated entities.” Conversely, the failure of their motion to prevent the AP from obtaining and publicizing said information, could “discourage businesses from entering into settlement talks in similar cases.”

In short, if the companies are forced to turn over the requested information, it would hinder their ability to be open and transparent with the government in the future. Alternatively, if the companies’ motion is granted, they don’t have to be open with the public. Either way, getting to the truth is a complex and burdensome undertaking.

This raises an interesting question . . . why would or should the public care about the BAE case? After all, how does this case – and cases like it, have a direct impact on our lives.

For what it’s worth, my answer to that question goes beyond simply exercising our right to know.

Edmund Burke coined the phrase “The only thing necessary for the triumph of evil is for good men to do nothing.” The problem is this . . . you can’t act if you don’t know.

In other words, it is the act of not knowing, of not asking the questions that need to be asked, that pose the greatest risks. When transparency and the access to information is compromised or restricted, you are left in the dark. This leaves you potentially vulnerable, in that what happened to someone else, could also happen to you.

Consider the following example from the world of procurement, and the NIGP #CodeGate story.

Let’s say the story of what happened in Missouri never came out? What if the actions of the NIGP and Periscope went unchecked and unchallenged? At the time, it may have only mattered to Missouri and perhaps the winning vendor – Perfect Commerce. But here is the thing, if there hadn’t been a disclosure at that critical juncture, and things were allowed to progress as they could have, how many other states (and municipalities) might have been subjected to a similar experience? At best, and under this scenario, the process of selecting and awarding a contract to a competing service provider would have possibly become a litigious battle of wills. At worst Periscope – with the assistance of the NIGP – would have cornered the public sector market through their control of the NIGP taxonomy.

The NIGP’s continuing refusal to release the findings of an internal audit that came about as a result of the #CodeGate story, only fuels speculation that something is seriously amiss at the non-profit organization. Otherwise, why not provide the media with a copy of the audit?

This is what makes our right to know a NEED TO KNOW, and why we need to challenge any efforts to conceal the truth regardless of where and when it happens.

questions

Anyway, that’s my take, what is yours?

By the way, why should BAE’s predecessor company’s export control violations matter to you? Have a read of the following 2015 U.S. Department of Commerce paper titled “Don’t Let This Happen To You.”

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This content was assembled for you by the YQ Matrix platform

The views expressed in this post and throughout the series are the autor's own and not intended to reflect the views the YQ Matrix platform, its users or any associated organisations.

For the procurement people among you, have a look at the latest YQ Matrix raw material and semi-finished prices. For: Prices on other websites.

Key Measures Show Inflation close to 2% in July

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.7% annualized rate) in July. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers was unchanged (-0.5% annualized rate) in July. The CPI less food and energy rose 0.1% (1.1% annualized rate) on a seasonally adjusted basis.
Note: The Cleveland Fed has the median CPI details for July here. Motor fuel was down 43% annualized in July.

Inflation Measures Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.6%, the trimmed-mean CPI rose 2.0%, and the CPI less food and energy also rose 2.2%. Core PCE is for June and increased 1.6% year-over-year.

On a monthly basis, median CPI was at 2.7% annualized, trimmed-mean CPI was at 1.8% annualized, and core CPI was at 1.1% annualized.

Using these measures, inflation has generally been moving up, and most of these measures are at or above the Fed's target (Core PCE is still below).

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Early Look at 2017 Cost-Of-Living Adjustments and Maximum Contribution Base

The BLS reported this morning:
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.4 percent over the last 12 months to an index level of 234.789 (1982-84=100).
CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and is not seasonally adjusted (NSA).

• In 2014, the Q3 average of CPI-W was 234.242. In the previous year, 2013, the average in Q3 of CPI-W was 230.327. That gave an increase of 1.7% for COLA for 2015.

• In 2015, the Q3 average of CPI-W was 233.278. That was a decline of 0.4% from 2014, however, by law, the adjustment is never negative so the benefits remained the same this year (in 2016).

Since the previous highest Q3 average was in 2014 (not 2015), at 234.242, we have to compare Q3 this year to two years ago. 

CPI-W and COLA Adjustment Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Note: The year labeled for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).

CPI-W was up 0.4% year-over-year in July, and although this is very early - we need the data for July, August and September - my current guess is COLA will be slightly positive this year - but COLA could be zero again.

Contribution and Benefit Base

The law prohibits an increase in the contribution and benefit base if COLA is not greater than zero, so there was no change in the contribution and benefit base for 2016. However if the there is even a small increase in COLA (it will be close this year), the contribution base will be adjusted using the National Average Wage Index (and catch up for last year).

From Social Security: Cost-of-Living Adjustment Must Be Greater Than Zero
... ... any amount that is directly dependent for its value on the COLA would not increase. For example, the maximum Supplemental Security Income (SSI) payment amounts would not increase if there were no COLA.

... if there were no COLA, section 230(a) of the Social Security Act prohibits an increase in the contribution and benefit base (Social Security's maximum taxable earnings), which normally increases with increases in the national average wage index. Similarly, the retirement test exempt amounts would not increase ...
The contribution base will be adjusted using the National Average Wage Index. This is based on a one year lag. The National Average Wage Index is not available for 2015 yet, but wages probably increased again in 2015. If wages increased the same as last year, then the contribution base next year will increase to around $127,000 from the current $118,500.

Remember - this is an early look. What matters is average CPI-W for all three months in Q3 (July, August and September).

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