Monthly data reported in the last week was sparse. Consumer confidence was up, but the leading portion of the index, expectations, declined. Consumer credit surged as did the trade deficit. More troubling were producer prices which are flirting with tipping into deflation. Commodity prices are only up 0.4% YoY, and finished consumer prices while up 1.9% YoY are only up 0.4% for the last 6 months on a seasonally adjusted basis.
The high frequency weekly indicators this week show mixed but spreading signs of weakness. Ironically, the best performing sector is housing and real estate generally.
So let's start with the Housing reports :
The Mortgage Bankers' Association reported that the seasonally adjusted Purchase Index increased +3.4% from the prior week, and was down slightly, -0.4% YoY. The Refinance Index fell -1.3%.This index continues to be near the upper end of its 2 year generally flat range. The Federal Reserve Bank's weekly H8 report of real estate loans, which had been negative YoY for 4 years, turned positive onver one month ago. This week, real estate loans held at commercial banks rose +0.2% w/w, and bettered their YoY comparison at +1.0%. On a seasonally adjusted basis, these bottomed in September and are now up +1.6%.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up +3.1% from a year ago. YoY asking prices have been positive now for more than 5 months. Either this indicator will turn, or the Case-Shiller repeat sales index is likely to turn within the next several months. I do not see how the divergence between the two can continue much longer.
Employment related indicators were strongly contradictory:
The Department of Labor reported that Initial jobless claims rose 3,000 to 368,000 last week. The four week average fell 4500 to 379,000. It seems more likely that in April we saw a quirk of seasonality rather than a more ominous sign.
The American Staffing Association Index remained at 93. It is just two points below the all time records from 2006 and 2007 for this week. It is possible that it could exceed all readings but those of 2006 by June sometime.
The Daily Treasury Statement for the first 8 days of May showed $51.6 vs. $59.3 B for April 2011. For the last 20 reporting days, $128.7 B was collected vs. $132.2 B a year ago, a decrease of $3.5 B, or -2.6%. There has been a marked fall-off in treasury receipts YoY since mid-April. This is the first time in close to half a year that this comparison went negative. If this continues for another few weeks it will be ominous. For now it is a yellow flag.
Sales were also mixed:
The ICSC reported that same store sales for the week ending May 5 fell -0.3% w/w, but were up +3.3% YoY. Johnson Redbook reported a 2.6% YoY gain. Shoppertrak reported a decline of -2.7% YoY and belatedly reported a +17.7% YoY increase last week. The 14 day average of Gallup daily consumer spending turned negative for the first time since early March at $68 vs. $71 in the equivalent period last year. Gallup's result should be taken with a grain of salt because this date was at the apex of a short-lived surge of spending in early May last year.
Bond prices rose and credit spreads increased:
Weekly BAA commercial bond rates remained at 5.15%. Yields on 10 year treasury bonds fell another-.03% to 1.95%. The credit spread between the two widened to 3.20%. Falling bond yields and widening spreads, as has happened for the last month, are a sign of weakness, and over half of the improvements from the October maximum credit spread have been given back.
Rail traffic ex-coal remained slightly positive this week.
The American Association of Railroads reported a +0.2% increase in total traffic YoY, or +1200 cars. Non-intermodal traffic was down by -5,800 cars, or -2.0% YoY. Excluding coal, this traffic was up 6,200 cars. Ethanol-related grain shipments were also off. Intermodal traffic was up 6,800 carloads, or +3.0%. Railfax's graph of YoY traffic continued to show that the YoY improvement in hauling of cyclically sensitive materials remains strong.
Money supply remained generally positive:
M1 fell -0.1% last week, but rose +1.0% month over month. Its YoY level increased to +17.9%, so Real M1 is up 15.3%. YoY. M2 rose 0.6% for the week, and was up +0.2% month over month. Its YoY advance fell slightly to +9.4%, so Real M2 was up 6.8%. Real money supply indicators continue to be strong positives on a YoY basis, although they have had a far more tepid advance since September of last year.
The energy choke collar has loosened:
Gasoline prices fell for the fourth straight week, down another .04 to $3.79. Oil fell again, from $98.49 to $96.13. Oil remains at, and gasoline above, the point where they can be expected to exert a constricting influence on the economy. The 4 week average of Gasoline usage, at 8707 M gallons vs. 8826 M a year ago, was off -3.2%. For the week, 8864 M gallons were used vs. 8826 M a year ago, for a gain of +0.4%. This is the first YoY gain in nearly a year.
Turning now to high frequency indicators for the global economy:
The TED spread remained at 0.390, near the bottom of its recent 3 month range. This index remains slightly below its 2010 peak. The one month LIBOR also remained flat at 0.239. It is well below its 12 month peak set 3 months ago, remains below its 2010 peak, and has returned to its typical background reading of the last 3 years.
The Baltic Dry Index fell from 1157 to 1138. It is about 1/3 of the way back from its February 52 week low of 670 to its October 52 week high of 2173. The Harpex Shipping Index rose another 12 points from 428 to 440 in the last week, and is up 65 from its February low of 375.
Finally, the JoC ECRI industrial commodities index fell sharply from 124.99 to 122.82. This indicator appears to have more value as a measure of the global economy as a whole than the US economy.
This week's high frequency data showed spreading pockets of weakness: Withholding tax receipts, Gallup consumer spending, credit spreads, and commodity prices all were negative. Temporary employment, layoffs, sales, money supply, and real estate data were positive. With weakness came the loosening of the Oil choke collar.
Watch retail sales and industrial production in the coming week to see whether or not this weakness shows up in the important monthly coincident reports.