Saturday, August 6, 2011

Weekly Indicators: signs of a rebound edition

- by New Deal democrat

This past week was bookmarked by the conclusion of this episode of idiocy in Washington on Monday, which at the end of Friday bore its rancid fruit in the downgrade of the US's credit rating. Such is the consequence economic hostage-taking and capitulating thereto. The other big news was a positive surprise in July nonfarm payrolls and upward revisions to May and June. Motor vehicle sales for July also improved. Real personal spending was flat, and real income increased .03%. On the other hand, manufacturing's poor streak continued with a surprisingly poor ISM report and durable goods. ISM services also declined.

Oh, and there was a stock market crashette on Thursday.

This week I want to reiterate why I look at high-frequency indicators. Simply put, by the time you get two monthly data points, at least 7 weekly data points (x 11 series) have been reported. If those show a clear continuation or break in trend, you will know about it long before it is apparent as a trend in the monthly data. This year, the weekly data began to show serious signs of a stall by the end of March, while most commentators were still complacent.

This week, for the second week in a row, the high-frequency weekly indicators show signs of a rebound. Eight were positive, two were neutral, and only one was negative.

First, let's look at the positive signs:

The BLS reported Initial jobless claims of 400,000. The four week average decreased to 407,750. Jobless claims have now broken out to the downside from their recent range of 410,000 - 430,000. With the exception of two months earlier this year, initial jobless claims are at their best level since 2007.

With the exception of some weakness in May and June, same store sales have been holding up all year like a champ. This week the ICSC reported that same store sales for the week of July 30 increased 4.0% YoY, and increased 0.3% week over week. Shoppertrak reported a 4.1% YoY increase for the week ending July 30 and a WoW increase of 0.5%. This is the sixth week in a row of a strong rebound for the ICSC, joined for the third week by Shoppertrak.

The Mortgage Bankers' Association reported that seasonally adjusted mortgage applications increased 5.1% last week. For the 9th time in 10 weeks, the YoY comparison in purchase mortgages was positive, up 5.9% YoY. Refinancing also increased 7.8% w/w.

If home buying data has turned positive YoY in the last few months, home prices declines have become less negative. YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker showed that the asking prices declined -3.8% YoY. The areas with double-digit YoY% declines decreased by one to 7. The areas with YoY% increases in price increased by two to 10. This continues the record of improving YoY comparisons in this series. By way of comparison, just a couple of months ago only 3 or 4 areas had actual increases, and well over 10 had decreases. At the beginning of this year, only one metro area was showing YoY increases.

Both Real M1 and Real M2 are solidly bullish. M1 increased 1.1% w/w, and also increased 1.6% m/m, and 14.7% YoY, so Real M1 was up 11.3%. M2 increased 0.2% w/w, and also increased 2.0% m/m, and 7.9% YoY, so Real M2 was up 4.5%.

Comparing the entire month of July m/m and YoY, M1 was up 2.5% m/m and 10.6% YoY, so Real M1 was up 7.2%. M2 was up 2.2% m/m and 7.6% YoY, so Real M2 was up 4.2%.

Withholding tax payments have rebounded strongly from with their May - June stall. Adjusting +1.07% due to the 2011 tax compromise, the Daily Treasury Statement showed that for the first 3 days of August 2011, $32.76 B was collected vs. $31.9 B a year ago, for an increase of $7.8 B. For the last 20 days, $148.9 B was collected vs. $130.1 B a year ago, for an increase of $18.8 B, or 14.5%.

Weekly BAA commercial bond rates decreased .03% to 5.72%. Contrastingly, yields on 10 year treasury bonds remained the same at 2.97%. This continues to indicate slowly increasing deflationary fears, but an actual decrease in relative distress in the corporate market.

Finally, Oil finished at $86.63 a barrel on Friday. This is the lowest price since last November, and is nearly $10 below its recession-trigger level.

Two series remained neutral or mixed:

The American Staffing Association Index remained steady at 88. This trend of this series for the year remains worse than 2007, but slightly better than the early recession of 2008 - and just slightly better than a complete stall.

The American Association of Railroads reported that total carloads increased 0.3% YoY, up 1500 carloads to 533,300 YoY for the week ending July 30. Intermodal traffic (a proxy for imports and exports) was up 7600 carloads, or 3.3% YoY. The remaining baseline plus cyclical traffic was down 6000 carloads, or -2.0% YoY%. This is the second time in four weeks that this series has gone negative. Using the breakdown that Railfax graciously provided to me, baseline traffic was down 11,400 carloads, or -6.0% YoY, while cyclical traffic was up 5400 carloads, or +5.0% YoY.

Finally, one important series remained very negative:

Gas at the pump rose another $.01 to $3.71 a gallon. Gasoline usage at 9218 M gallons was -2.8% lower than last year's 9477. This is the sixth week in a row that gasoline usage has been significantly less than last year. Further, with the exception of 3 weeks, this comparison has been negative YoY since the week of March 12. This series, more than any other, presaged economic weakness this year. It will be interesting to see what happens as Oil's decline from $115 several months ago to $86 now filters through into prices at the gasoline pump.

At the beginning of this year, I believed that high and rising Oil prices, and idiocy in Washington, would bring the economy to a standstill by midyear. For now, Oil has backed off. Will the downgrade in the US's credit rating chasten the idiots, at least to do no further harm?

Enjoy your weekend!