Friday, June 10, 2011

Weekly Indicators: good news and bad news on housing Edition

- by New Deal democrat

There was almost no monthly data released this week (which was a welcome respite after two weeks of brutally bad news), so let's immediately turn to the high-frequency weekly indicators:

Oil finished slightly above $102 a barrel on Thursday. It still remains slightly above 4% of GDP. That it has refused to budge below $98 even after the bad economic news of the last several weeks is especially concerning. I guess it's going to take more serious "double-dip Doom" news to drive the point home to speculators. On the other hand, gas at the pump fell for the third week in a row, declining $.01 more to $3.78 a gallon. Gasoline usage at 9163 M gallons was 0.3% lower than last year's 9194. The last four weeks have averaged equal usage compared with a year ago.

On the housing front, there was good news and bad news. As to the more sales-oriented data, the Mortgage Bankers' Association reported that seasonally adjusted mortgage applications declined 4.4% last week. It was 9.0% higher than this week last year. The purchase series has now been generally flat for over a year, and this is the third 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 increased 1.3% with the continued decline in mortgage rates.

The bad news on the housing front came with the price-oriented data. With the heightened scrutiny of the decline in housing prices recently, I have added the weekly report of median asking house prices from 54 metropolitan areas at Housing Tracker. This week the median YoY decline increased from -5.7% to -5.85%. The areas with double-digit YoY% declines increased by one t o 11. The areas with YoY% increases in price declined by one to 3.

The BLS reported that Initial jobless claims last week were 427,000. The four week average declined to 424,000. We are back at levels last seen late last autumn - but still significantly lower than the rest of last year - and likewise considerably higher from earlier this year.

Railfax was up 3.7% YoY for the week. It failed to update its carload or YoY percentage change data. Four week averages continued to show Baseline traffic slightly less than one year ago, and Cyclical traffic up slightly. The YoY 4 week average in Intermodal traffic (a proxy for imports and exports) decreased significantly. In summary, the YoY change in Total rail traffic is still positive, but the comparison continues the deterioration it has been undergoing since the beginning of this year.

The American Staffing Association Index dropped 1 point to 93. Seasonally it should be rising. This is not good at all, although the longer term advance still looks like the first half of 2007 - slow growth, but not stalled. Any further stalling of this index would be a significant danger sign.

The ICSC reported that same store sales for the week of June 4 increased 2.5% YoY, and increased 0.4% week over week. The yearly comparison here, while still good, has been decreasing in the last few weeks. Shoppertrak reported a strong 4.4% YoY increase for the week ending June 4 (the fourth strong week in a row) and a WoW decrease of 1.2%. Weekly retail sales numbers continue to be a bright spot, generally showing the consumer not rolling over due to gas prices.

Weekly BAA commercial bond rates decreased another .04% to 5.70%. This yields of 10 year treasury bond decreased .09% to 3.01%. The continuing decline in treasury rates does show fear of deflation, and the smaller decline in corporate rates additionally 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 6 days of June 2011, $44.9 B was collected vs. $49.4 B a year ago, for a decrease of $4.5 B YoY. For the last 20 days, $132.9 B was collected vs. $125.8 B a year ago, for an increase of $7.1 B, or 5.6%. Use this series with extra caution because the adjustment for the withholding tax compromise is only a best guess, and may be significantly incorrect.

M1 was up 1.1% w/w, up 2.3% m/m, and up 13.5% YoY, so Real M1 was up 10.4%.
M2 was up 0.1% w/w, up 0.7% m/m, and up 5.1% YoY, so Real M2 was up 2.0%.
Real M1 remains very bullish, while Real M2 remains stuck in the caution zone under 2.5%.

With a few exceptions (retail sales), the weekly data continue to show the slowdown or stalling of the economy (Gas usage, staffing, cyclical traffic). Signs of an outright contraction, however, remain sparse (baseline rail traffic). The bond market's signal of concern about a deflationary bust is particularly noteworthy, as is the Oil market's continued belief that $100+ oil prices are sustainable.

The housing market data, however, is more encouraging in terms of the long term. Mortgage applications have stabilized without the help of any artificial support for the first time in 4 years. Lower prices mean the housing in more and more metro areas will turn into "bargains" that draw in buyers (see: Florida). In other words, home sales may have reached equilibrium, and if prices continue to fall, we could see them beginning to increase.

Enjoy your weekend. I may post a weekend diversion, so be sure to check in.