Friday, March 25, 2011

Weekly Indicators: Accumulating signs of a slowdown Edition

- by New Deal democrat

In the rear-view mirror department, 4th Quarter 2010 GDP was revised back up to 3.1%. Monthly data reported this week, however, was depressing. New home sales were recorded at an all-time low, although balanced against December's big uptick, the last three months are still better than the three months previous to them. More ominous, however, was the big decline in consumer confidence, and in particular expectations about the future. These are the worst in 2 years, and are a leading indicator. Durable goods also came in very weak. While this is a volatile indicator, over the last 6 months it has trended sideways. Did I mention that this is also a leading indicator? In short, Oil's choke collar is biting into the economy.

Turning now to the high-frequency weekly indicators:

The BLS reported that Initial jobless claims last week were 382,000. The 4 week average is 385,000. This is the fifth week in a row that this number has been initially reported below 400,000. This bodes well for the next payrolls report.

On the other hand, Oil was trading at about $105.65 a barrel Friday midday, the third full week it has been above $100. It remains at a level above 4% of GDP. There WILL be a significant economic damage and I believe we are now observing the start of that damage. Gas at the pump declined $0.01 last week to $3.56 a gallon. Gasoline usage again was slightly lower than last year. I expect this comparison to deteriorate so long as the oil price spike continues.

Railfax was up 5.7% YoY. Baseline traffic is now no higher than last year's levels, and cyclical traffic is only slightly higher. Waste materials are now below last year's levels. Shipments of motor vehicles, however, continued to improve YoY. Intermodal freight's rate of advance over last year declined last week. With the exception of motor vehicles, rail freight is now also signalling a significant slowdown.

The Mortgage Bankers' Association reported an increase of 2.7% in seasonally adjusted mortgage applications last week. This series has meandered generally in a flat range since last June. On the plus side, this is the longest time since 2006 that this series has gone without a major decline. Refinancing also increased another 2.7%, but despite that remains near its lows since last July.

The American Staffing Association Index remained at 91. This series has stalled at the 90-91 level for 6 weeks. It is signalling stagnation, not growth, and is stalled relative to its pre-recession peak.

The ICSC reported that same store sales for the week of March 19 rose 3.0% YoY, and decreased -0.1% week over week. Shoppertrak reported a 4.0% YoY gain for the week ending March 19, and a WoW gain of 3.9%. Unlike almost every other series, these two series' YoY comparisons have been improving over the last month.

Weekly BAA commercial bond rates declined -.10% to 5.98%. This compares with a -0.15% deline in the yields of 10 year treasuries to 3.29%. Both series are down from recent highs. This was the second week in which the relative move in corporate bonds signalled weakness.

M1 was unchanged w/w, up 0.5% M/M, but up a strong 9.0% YoY, so Real M1 is up 7.8%. M2 was down -0.3% w/w, up 0.3% M/M and up 4.6% YoY, so Real M2 is up 2.4%. M2 is back into the "yellow zone" below 2.5%, but M1 is still strongly in the "green zone" as it has been for several years.

Adjusting +1.07% due to the recent tax compromise, the Daily Treasury Statement showed that for the first 17 days of March, $135.5 B was collected vs. $134.6 B a year ago, for a gain of +0.6% YoY. For the last 20 days, $162.1 B was collected vs. $150.9 B a year ago, for a gain of $11.2 B, of over 7.4%. I suggest using this series with extra caution, because the adjustment for the withholding tax compromise is only a best guess, and may be significantly incorrect.

For the first time since mid-2010, the LEI may have a negative month in March. Consumer confidence, durable goods, and (Feb.) hosuing permits are all down strongly. The stock market and money supply look like they will record essentially neutral readings. Only the bond spread yield and initiall unemployment claims look like strong positives. It is worth noting, on the plus side, that ECRI's growth indicator continues to be positive, and they are not revising their forecast of continued growth. Neverthelss, as I said at the outset, it appears that the Oil choke collar is indeed beginning to constrict the economy.

Finally, the Census Bureau reported today that the Latino population has increased to 50.5 million people, or about 16% of the total US population. All of which make Los Estados Unidos the third most populous Latin American country after Brazil and Mexico (surpassing Argentina and Columbia). And on that note: Buen fin de semana!