Friday, March 11, 2011

Weekly Indicators: Nihon ni oojishin edition

- by New Deal democrat

The monthly data out this week was sparse, and contradictory. The Census Bureau reported that retail sales for February were up 1.0% unadjusted for inflation. January's sales were revised upward significantly, from 0.3% to 0.7%, taking a poor "real," inflation-adjusted number to a pretty good one. With the oil price spike in February, keep in mind that this number won't look nearly so good once inflation is figured in.

On the other hand the University of Michigan's consumer sentiment index fell to its lowest reading since October. More ominously, its forward looking expectations index fell all the way from 71.6 to 58.3, the lowest reading since the depths of the Great Recession in March 2009. This is a leading indicator (although one very prone to fluctuation and of relatively minor weight). In addition to the issue of Oil, I would not discount the effect of the appearance that one political party is nakedly making war on the working class. (Oil and political stupidity were what I identified back in January as the biggest threats to the economy this year).

Turning to the high-frequency weekly indicators:

The BLS reported that Initial jobless claims last week were 397,000. The 4 week average is 392,000. This is the third time in the last four weeks that this number has come in below 400,000.

Oil was trading at about $101.50 a barrel Friday morning, having spent the entire week above $100. It remains at a level above 4% of GDP and thus there WILL be a significant economic damage. How much and for how long it will last remain the questions . Gas at the pump rose $0.14 more last week to $3.52 a gallon. This is an increase of $.40 in just six weeks! Despite that, this week gasoline usage was 200,000 barrels a day higher than last year, or over 2%. I expect this comparison to deteriorate if the oil price spike continues.

Railfax was up 3.6% YoY. Baseline and cyclical traffic remain barely ahead of last year's level. Intermodal traffic (imports) is increasing YoY. Shipments of motor vehicles also improved YoY.

The Mortgage Bankers' Association reported an increase of 12.5% in seasonally adjusted mortgage applications last week. This series continues to meander generally in a flat range since last June. Nevertheless, this 8 month period of flatness is the longest time since 2006 that this series has gone without a major decline. Refinancing also increased 17.2%, and also remains near its lowest point since last July 3. This is not an auspicious start to Spring selling season.

The American Staffing Association Index remained at 90 for the 5th week in a row. This series has completely stalled out in terms of relative YoY gains. In other words, it has stopped making progress towards its pre-recession peak, although it remains 13% ahead of where it was a year ago.

The ICSC reported that same store sales for the week of February 26 increased 2.3% YoY, and also increased 2.6% week over week. This series' YoY comparisons had been trending lower since the first of the year, but for the last two weeks there have been good YoY comparisons. Shoppertrak reported that sales rose 3.6% YoY for the week ending March 5. It attributed this to the change in the week of President's Day this year vs. last year. On a week over week basis, sales increased 4.6%. It is remarkable so far how well these series have held up in the face of spiking energy costs.

Weekly BAA commercial bond rates dropped -.01% to 6.05%. This compares with a +0.01% increase in the yields of 10 year treasuries to 3.47%. Both series are down from recent highs, and there is still no relative weakness in corporate bonds.

M1 was up 0.1% w/w, up 1% M/M, and still up a strong 9.2% YoY, so Real M1 is up 7.9%. M2 was up 0.2% w/w, up .5% M/M and up 4.1% YoY, so Real M2 is up 2.4%. M2 is back into the "yellow zone" below 2.5%, and has been hovering around this mark for about a month. There has never been a recession without both negative real M1 and real M2 below +2.5% YoY.

Adjusting +1.07% due to the recent tax compromise, the Daily Treasury Statement showed that for the first seven days of March, $60.0 B was collected vs. $59.7 B a year ago, for a gain of +0.3 B YoY. For the last 20 days, $157.8 B was collected vs. $144.4 B a year ago, for a gain of $13.4 B, of over 9%. 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.

Despite the continued good news in initial jobless claims, and the welcome revision to retail sales, Oil remains a choke collar around the economy. Last year I put together a list of harbingers - data series that telegraphed the summer slowdown. Looks like it's time for an update.

In the meantime, have a nice weekend!