- by New Deal democrat
In the rear view mirror, Q1 GDP was revised up 0.1% to +1.9%. Monthly data focused on home sales. Both new and existing home sales for May declined slightly from April, but in the longer perspective simply continued to bounce along the bottom they first made two years ago. Durable goods orders fared better, up 1.9% from the previous month. New orders for non-defense capital goods, a component of the LEI, increased 5.8% from the month before. Durable goods may be the first signal that the Japan-induced slowdown in manufacturing is ending.
Virtually all of the coincident high-frequency weekly indicators show a complete stall or something close to it this week:
Highlighting the deterioration in tone, the ICSC reported that same store sales for the week of June 18 increased 2.2% YoY, and decreased -0.7% week over week. The yearly comparison here has continued to decrease in the last few weeks. Shoppertrak reported a 1.0% YoY increase for the week ending June 18 and a WoW increase of 8.6%. YoY weekly retail sales numbers had been a bright spot, but comparisons have been slowly weakening. This week marks the first time when same store sales have joined other indicators in signaling a real slowdown.
Similarly, the American Staffing Association Index remained flat. The index has been rebenchmarked, so the new value is 87. This series is just barely above a stall, and is a significant danger sign. It is weaker than early 2007, but not trending down as during the recession.
Railfax was up 3.2% YoY for the week, or 9,200 carloads. Baseline traffic is actually down -0.14% from a year ago. Cyclical traffic is up 2.24% YoY. Intermodal traffic (a proxy for imports and exports) is up 2.71% compared with a year ago. Railfax continues to flirt more and more with going negative, and has almost done so on a carload basis.
The BLS reported that initial jobless claims last week were 429,000. The four week average increased slightly to 426,250. We have stabilized under 430,000, but this is still considerably higher from earlier this year.
Weekly BAA commercial bond rates remained the same at 5.73%. This compares with yields on 10 year treasury bonds decreasing .01% to 2.99%. The continuing decline in treasury rates shows fear of deflation, and the relative increase in corporate rates shows a slight increase in relative distress in the corporate market.
Adjusting +1.07% due to the 2011 tax compromise, the Daily Treasury Statement showed that for the first 17 days of June 2011, $7109.4 B was collected vs. $115.2 B a year ago, for a decrease of $5.8 B, or -5% YoY. For the last 20 days, $139.2 B was collected vs. $131.6 B a year ago, for an increase of $7.6 B, or 5.7%. Use this series with extra caution because the adjustment for the withholding tax compromise is only a best guess, and may be significantly incorrect. Neverthless, that in the past few weeks some negative YoY comparisons have appeared is emphatically not good.
M1 was down -0.2% w/w, up 0.6% m/m, and up 13.1% YoY, so Real M1 was up 9.7%.
M2 was up 0.1% w/w, up 0.5% m/m, and up 5.3% YoY, so Real M2 was up 1.9%.
Real M1 remains very bullish, while Real M2 remains stuck in the caution zone under 2.5%
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker showed that the decline worsened -.2% to -4.7% The areas with double-digit YoY% declines increased by one to 10. The areas with YoY% increases in price decreased by two to 3.
There was some good news this week, however, and particularly so because it involves two areas that generally lead the economy:
Oil finished at $91 a barrel on Friday, which means it is now below the level of 4% of GDP (which according to Oil analyst Steve Kopits is the point at which a recession has been triggered in the past). Gas at the pump fell for the fifth week in a row, declining $.06 more to $3.65 a gallon. Gasoline usage at 9319 M gallons was +.8 higher than last year's 9241. This is the third time in four weeks that gasoline usage has exceeded last year, after a two month period of negative YoY comparisons. In other words, the Oil choke-collar continues to loosen.
The Mortgage Bankers' Association reported that seasonally adjusted mortgage applications decreased 2.8% last week. It was 4.4% higher than this week last year. This is the fourth week in a row that YoY comparisons in purchase mortgages were positive. Except for the rush at the two deadlines for the $8000 mortgage credit, these are the first YoY increases since 2007. Refinancing decreased 7.2% w/w with a slight increase in mortgage rates.
Ultimately it is the loosening of the Oil choke collar and the bottoming of the housing market in prices as well as sales which will lead to a longer-term, more sustainable recovery in the economy (that, and fixing systemic financial risk and dealing with global wage arbitrage, prospects as to which Versailles has not shown the slightest interest). The improvement in housing and oil as shown above is helpful. The concern is that contractionary policy emanating from Versailles will swamp those effects.
'Stop Celebrating Our Falling Deficits'
19 minutes ago
8 comments:
Last weekend, it seemed like the whole world was about to implode into a Lehman-style black hole over the situation with Greece, but then all of a sudden, there was peace throughout global markets again, even though there has been no significant resolution of Greece's adoption of Austerity.
Did they really just kick the can down the road? Are they waiting for the results of the eurobank stress tests? Bloomberg says regulators want to be sure to release those results at a time when ALL global markets are closed. WTF? How bad off are those eurobanks??? According to the report, they're looking to release the data in mid-July, which coincidentally is when Greece is supposed to finish its suicidal Austerity plan.
Oh, and the US debt ceiling is supposed to be raised by August 2nd. I do not have faith that the Wall Street wing of the GOP will be able to convince the Tea Party wing of the GOP to accomplish this.
Did last week's withdrawal from the financial abyss merely result in delaying Armageddon until early August and make it dependent upon the world's politicians ability to control their restive populations -- leftists in Greece and rightists in America?
I am not sure I trust either the Greeks or us Americans to accomplish that.
There may be a need to rethink oil.
As always, very grateful for the fine and sane analysis here.
If oil is in fact supply limited, as the peak oil people are saying -- and they appear to have an excellent case -- the only way you can knock down oil prices over a significant time period -- liquidating emergency oil reserves is only a temporary paliative -- is to have demand fall.
Falling demand might be said to be a hint that the economy is deteriorating.
Readers looking for an image of oil prices might look at the collar the Romans used for horses and oxen, in which the creatures pushed with their windpipes rather than their shoulders, tending to choke any creature that was actually doing work.
IM<HO, the Greeks might do better to emulate the Icelanders, and incidentally when they re-adopt the drachma they should unilaterally redefine all debts owed by Greeks in Greece as being payable in drachma at some reasonable rate, like 1:1.
The only way you can relieve the oil choke collar is to replace the oil.
Jimdotz:
You make sense, but then why isn't the TED spread cooperating (go to stockcharts.com and enter $TED)?
Interbank lending is still very coomplacent.
George Phillies:
I generally agree with you that "The only way you can relieve the oil choke collar is to replace the oil," but I would add that efficiency improvements, e.g., hybrid cars, and "replacing" the Oil by way of vast new oil fields (Brazil) also come into play.
NDd, I agree that the TED spread does not seem especially troubled even thought its values, and their RSI and MACD indicators are all rising these last few days. But why would you choose only the TED spread as the arbiter of insecurity? Is there any reason to prefer that particular index to others when the fear reaction last weekend seemed to truly and broadly span the globe?
This is totally subjective of me, but I got the feeling that marketeers of all stripes simply didn't want to believe that the system could implode once again and so chose to ignore it once politicians put off the problem. In short, I got the sense that no-one knows how to play all this so the broad reaction was to play ostrich for the next few weeks. BUT I have absolutley no special insight on this at all.
With respect to market issues, sometimes unreality takes control. After all, it was reasonably obvious that Adjustable-rate subprime mortgages and relatives were extremely marginal, but they were salable. I am inclined to believe that the market is ignoring the modest but significant likelihood that the American Congress will not agree to raise the Federal debt limit.
The market is having some trouble with the idea that the Greeks will decline to do what the IMF wants, that the Greeks or another European power will simply repudiate its excessive debt, more radically than Iceland did, or the like.
There is also in my opinion wishful thinking about evading the peak oil issue. The increase in oil use in poorer countries such as China -- the world's largest car market, and none of those vehicles are replacements -- outruns efficiency changes in the wealthier countries. Brazil's oil production is rationally compared with increases in its oil consumption.
Could someone competent -- not me, this is not my expertise -- be persuaded to compare the indicators now and the indicators last spring, when the apocalypse merchants were predicting a new depression? I have the vague impression that last year Apocalypsism was an evidence-free theory, and this summer 'soft spot' has support.
Mind you, I vaguely remember the later fifties, and so I find that the notion that the economic cycle dips every two or three years is hardly surprising.
An interesting piece this morning from Bloomberg on the Greek situation that includes a discussion of the TED spread:
http://mobile.bloomberg.com/news/2011-06-27/euro-strength-sustained-in-widest-libor-gap-since-2009-as-greek-vote-looms?category=%2F
Some interesting snippets:
--------------------
The difference between the three-month euro interbank offered rate, that European banks say they see each other charging over the period, and the corresponding London rate for dollar loans, increased to 128 basis points on June 24, the most since January 2009. The gap widened this year as the European Central Bank began raising interest rates, while the Federal Reserve kept borrowing costs at a record low.
China will keep investing in Europe’s sovereign bond market, Premier Wen Jiabao told the British Broadcasting Corp. in an interview yesterday, saying the purchases “show our confidence in the economies of Europe and the euro zone.”
“There have been distinct forces capping the euro on the upside this year, and distinct ones capping it on the downside,” Caio Natividade, the London-based head of foreign-exchange derivative strategy for Deutsche Bank, said in a telephone interview. The slowing U.S. recovery has also provided support for the euro.
--------------------
Post a Comment