Sometimes you eat the bear. Sometimes the bear eats you. When it comes to struggling average Americans, this week the data showed the bear having a feast. The Conference Board's consumer confidence measure slipped a full 10 points, a very dramatic move, although at week's end that was not confirmed by a generally sideways move in the University of Michigan's consumer sentiment report. The reason may have to do with politics, specifically the Democratic party's collective pearl-clutching fainting spell after they were reduced to a 59-seat "minority" in the Senate:
"Consumers have been getting more impatient with the slow progress of the stimulus program, and confidence in the Obama administration's economic policies has begun to wane," Richard Curtin, director of the [Michigan] surveys, said in a statement.New and existing home sales both tanked, with new home sales setting a record low. Existing sales were essentially exactly where they were when they bottomed a year ago. Unlike "cash for clunkers", it appears that the $8000 home buyer credit did only pull demand forward. If so, however, we should expect a rebound in a few months as that plays out.
If that wasn't bad enough, initial jobless claims rose to 496,000, the highest weekly number in 3 months. The 4-week moving average also increased to 472,750, and that number cannot be explained by snowstorms several weeks ago. My best guess is that we are seeing municipal and state government layoffs, but we'll find out more about that in a week.
When you get away from American consumers and start talking about manufacturing, it's like you are in a different country. The Chicago PMI "posted a surprise increase from 61.5 in January to 62.6 in February." This reading is among the highest in the last 20 years, and confirms all of the other manufacturing reports out in the last several months. Strip away those pesky people, and industries are having a terrific recovery.
For another example, here is a graph of the American Trucking Association's index for January, which was reported this week:
The graph shows that trucking loads have increased 2/3's of the way from their recession bottom to their pre-recession top, and are now virtually equal to where they were in January 2007, the last January before the recession began. The American Trucking Association noted that this "gain boosted the SA index ... to ... its highest level since September 2008."
One leading Doomer at Daily Kos was sure that the GDP report for 4Q 2009 would be revised, and he was right - just not in the direction he thought: it was revised upward 0.2% to 5.9% annualized. If this revision holds up, we only need Q1 2010 GDP to be +0.5% for YoY GDP to be 2.0%, and if Q1 2010 GDP is +2.5%, the YoY GDP will also be +2.5%, which strongly supports at least some job growth.
Turning to the high-frequency weekly numbers, the ICSC same store retail sales for the week ending February 20 increased 4 0% YoY and 2.3% WoW. Similarly, ShopperTrak "reported that year-over-year GAFO retail sales increased 6.2 percent for the week ending Feb. 20 while sales rose 4.4 percent versus the previous week ending Feb. 13," saying:
Sales reached a seasonal peak as Valentine’s and President’s Day spending spurred shopping early in the week providing both a year-over-year and week-over-week boost. Additionally, ShopperTrak reported GAFO sales levels increased last week as the Eastern markets recovered from blizzard like conditions and consumers dug out to visit various retail locations and spend.This week, at least, points to a better real retail sales report for February, but we will see in a few weeks.
If truck traffic was increasing briskly, rail traffic was more mixed, as cyclical, intermodal, and total traffic remained up year over year, but cyclical traffic declined compared with last week. Baseline traffic is again below where it was a year ago, a real conundrum.
Gasoline demand last week was up from a year ago, the first YoY increase this year. Prices at the pump increased to $2.66/gallon. Oil on Friday was just below $80/barrel.
The Daily Treasury Statement for February 24, 2010 showed $129.7B in withholding taxes paid this month vs. $126.0 for the same date last year. February 2009 ended with $142.9B paid. We have two more days of reporting this year (vs. three last year), so the jury is out as to whether this month will show an actual YoY increase for the first time since a year into the Recession.
Finally, following my blog Tuesday, Tim Iacono of The Mess that Greenspan Made updated his CS-CPI graph, and here it is:
Will consumers drag down the economy, or will the economy pull up consumers? My bet is on the second: as several bloggers noted this week, developing economies, in particular in Asia, are leading the recovery. The average American consumer is no longer the locomotive, but the caboose.
P.S.: This week, this blog posted its 4,000th entry. Thanks to all who read and comment!
6 comments:
But John Williams is claiming that inflation is currently running at 9.8%, so how does your case-shiller CPI account for that?
Interesting....I wonder where John Williams puts his money knowing that inflation is at 9.8%.....
"and that number cannot be explained by snowstorms several weeks ago" Wasn't there just a record setting blizzard in the Northeast that ended today? The weather has been awful the entire month in one place or another.
More straightforward than the graph is that from 2000-2006 CPI-CS inflation was 5.2%/yr while CPI-OER was 2.9. What would people be saying if we thought 5.2% inflation/yr for the next 6 years was a low-inflation environment?
What happens to GDP growth given that inflation rate? It would have meant that real gdp was lower in 2006 than in 2000! It was also lower in 2004 than in 2000. Would Bush have been re-elected in 2004 had real gdp growth been negative?
For those that bemoan fed printing, think about other sources of money creation. Bank leverage creates money, and somehow the biggest investment banks increasing their leverage ratio was not viewed as potentially harmful money creation. And nearly all this money went into RE - either residential or commercial.
These alternative measures of inflation are especially important because measuring economic output dramatically impacts political decisions that impact the ceonomy.
Same store sales numbers are meaningless. This is because so many stores have closed over the past year, so the traffic from the old store go to stores that remain open. This is also why the retail sales numbers are so flawed as well, as they take into account same store sales in their methodology. Mish did a good job pointing that out today on his site. Sales tax receipts are down from 5%-10% in almost every state. As for withholding taxes, they are tracking down 8.25% year over year. Adjusted for the Obama tax cuts, they are down about 5% year over year. Then when you consider that rents are down year on year and rental occupancy has plunged, combined with the fact that retail sales are up strongly yoy on higher gasoline prices, which is inflation; then we're looking at final demand being so low, that GDP when it's all said and done should be down to 3% for Q4 of 2009 in the ultimate years down the road revisions. The trucking tonnage index is also flawed because its based on a survey which is flawed, like retail sales, because so many small trucking companies have gone out of business.
It sounds like the situation is getting desperate. A recovering economy is absolutely useless unless it moves money around, and it ain't gonna do that in a consumer-based economy without jobs.
Forget the Great Depression; it's like everything's going in reverse. We're throwing a sizeable percentage of our population into Hoovervilles as the economy's recovering.
The jobs recovery is already a few months late, and with D.C. in gridlock, another CCC is out of the question. What the hell can we do?
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