Friday, April 15, 2011

Weekly Indicators: the Slowdown begins edition

- by New Deal democrat

Back in January in my look ahead for 2011, I said that there would be growth in Q1, but likely a slowdown or stall in Q2 and Q3 due to Oil and Austerian stupidity. The numbers are bearing out that scenario to date.

The lead story in monthly numbers this week had to be the +0.5% CPI increase. Prices are already up 1.5% so far this year. While retail sales for March were up 0.4%, inflation means that real retail sales were negative for the first time since last summer. Industrial production did rise strongly, up 0.8%, as did the early April reading of the Empire State manufacturing survey. Consumer sentiment for the first half of April remained sour. The inventory to sales ratio for business was the leanest in years, so business are better able to withstand any slowdown in sales than in a long time.

Turning now to the high-frequency weekly indicators:

Oil was trading at $109.70 a barrel midday on Friday, the sixtth full week it has been above $100. It remains at a level above 4% of GDP. Gas at the pump increased $.11 to $3.79 a gallon. In the last 6 months, gas prices have gone up a full $1 a gallon. This qualifies as a price shock in my book. Gasoline usage at 9181 M gallons was 1.5% lower than last year's 9325. This YoY comparison has been negative for the last five weeks in a row, although the relative comparison was less bad last week. These indiciators simply leave no doubt that consumers are cutting back due to the shock in prices - yet another example of the early warning given by tracking these weekly indicators in real time.

The BLS reported that Initial jobless claims last week were 412,000, the highest in two months. This series has not made a new low in six weeks. The 4 week average is 396,000.

Railfax was up 6.2% YoY. Baseline traffic is still barely ahead of last year's levels. Intermodal traffic (a proxy for imports and exports) continued significantly higher last week, driving almost all of the YoY improvement. Waste materials continued below last year's levels (this may be fallout from municipal funding cuts for recycling). Shipments of motor vehicles, however, continued well ahead of last year's pace.

The Mortgage Bankers' Association reported a decrease of 4.7% in seasonally adjusted mortgage applications last week. This series has meandered generally in a flat range since last June. Refinancing decreased 7.7%, and with the exception of one week in February is back to its June-July 2010 lows. The silver lining is that refinancing has not hit a new low in 9 months, and applications remain ahead of their level from 11 months ago - the longest such period in the last 4 years.

The American Staffing Association Index remained at 92 for the second week, after stalling at he 90-91 level for 7 weeks. This series continues to make no relative headway against its pre-recession peak.

The ICSC reported that same store sales for the week of April 2 rose 2.9% YoY, and increased 0.1% week over week. Shoppertrak reported an 8.7% YoY increase for the week ending April 2, reversing the 8.9% YoY decrease of a week ago. It also reported a WoW decline of 3.4%. Unlike almost every other series, these two series' YoY comparisons have been remaining steady or improving over the last month. Shoppertrak cautioned that calendar affects (Easter week this year vs. last year) strongly affected this week's result. The ICSC YoY result is about average for this year so far.

Weekly BAA commercial bond rates increased.05% to 6.10%. This compares with a 07% increase in the yields of 10 year treasuries to 3.54%. Over the last 6 months both series have seen higher interest rates, but government bonds have generally been weaker. There is no sign of corporate distress here.

Adjusting +1.07% due to the recent tax compromise, the Daily Treasury Statement showed that for the first 8 days in April 2011, $66.2 B was collected vs. $60.1 B a year ago, for a gain of $6.1 B YoY. For the last 20 days, $132.2 B was collected vs. $133.2 B a year ago, for a decline of $1.0B. 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. Nevertheless we are beginning to see some losses rather than gains in this metric YoY and that is disconcerting.

M1 was unchanged w/w, up 2.0% M/M, and up a strong 13.3% YoY, so Real M1 is up 10.6%. M2 was up 0.3% w/w, unchanged M/M and up 4.7% YoY, so Real M2 is up 2.0%. Real M1 remains strongly in the "green zone," but Real M2 continues its fade into the "yellow zone" below 2.5%.

The weekly and monthly series are lining up very much like during last Summer's slowdown. Manufacturing and industrial production are powering forward, while consumer oriented data is stalling. That we had negative real retail sales in March even before the latest spurt in gasoline prices in the last couple of weeks is a particularly poor portent.

Despite that, have a nice weekend!