Sunday, July 8, 2012
Weekly Indicators remain weakly positive edition
- by New Deal democrat
Monthly data reported last week included the fourth straight weak jobs number at +80,000. The unemployment rate remained at an unacceptable 8.2%, Hourly earnings did increase, as did the average workweek. Construction spending increased, as did factory orders, although the general trend for durable goods and factory orders has been sideways for close to a year. Car sales also improved over May, although they are below the January through April level. ISM services weakened but remained in expansion. ISM manufacturing actually contracted. This is really weak data, although most of it remains positive.
Again and again the theme this week for the high frequency weekly indicators is that they were weakly positive. Let's start with the jobs-related numbers.
Employment related indicators were weak:
The Department of Labor reported that Initial jobless claims fell 12,000 from the prior week's unrevised 386,000 to 374,000 last week. The four week average fell 1000 to 385,750. The rise in jobless claims in the last several months is a serious concern, but there remains some question of whether there is a seasonal adjustment issue or whether something more ominous is going on, as we had a similar rise during the second quarter of 2011.
The Daily Treasury Statement for the last 20 days ending July 3 showed $136.6B vs. $125.9B for the same period in 2011, an increase of $10.7B, or +8.5%. This should be taken with an extra grain of salt due to the potential impact of payments around the July 4 holiday.
The American Staffing Association Index remained at 93. This index has been flat for the last two months, mirroring its 2nd quarter flatness last year. Despite that, due to the July 4 artifact it is extremely close to its all time high for this week of the year. A decline next week due to the same artifact is likely.
Rail traffic turned mixed again:
The American Association of Railroads reported a +1.8% increase in total traffic YoY, or +9,200 cars. Non-intermodal rail carloads were down -2.5% YoY or -9700, as coal hauling again fell YoY. Intermodal traffic was up 16,500 or 7.0% YoY. Eleven of the 20 carload types were negative YoY, the highest since the recovery began. The spreading of weakness in rail hauling is very concerning.
Same Store Sales have weakened significantly.
The ICSC reported that same store sales for the week ending June 23 were up 0.2% w/w, and were up +1.4% YoY. Johnson Redbook reported a 1.7% YoY gain. Shoppertrak reported a +3.5% YoY gain after a 2.9% YoY gain the week prior. The 14 day average of Gallup daily consumer spending at $70 was barely positive compared with $69 last year. This is the fourth week in a row in which consumer spending has weakened significantly, barely if at all improving YoY. A few months back I noted that YoY consumer spending had consistently run better than 2.0% for the duration of the recovery. Gallup has now declined under that for the entire month. and both the ICSC and Johnson Redbook reports are under 2%. In June at long last the consumer wavered.
Housing reports were mixed:
The Mortgage Bankers' Association reported that the seasonally adjusted Purchase Index rose -.6% from the week prior, and was down approximately 7% YoY, back into the middle part of its two year range. The Refinance Index fell 8.4%, but it still near its 3 year high set two weeks ago.
The Federal Reserve Bank's weekly H8 report of real estate loans, which turned positive YoY in March after having been negative for 4 years, this week rose 0.2%, and the YoY comparison improved to +1.1%. On a seasonally adjusted basis, these bottomed in September and remain up +1.2%. The YoY growth rate has generally weakened in the last month.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up + 2.6% from a year ago. YoY asking prices have been positive for more than 7 months, remain higher than at any point last year, and at their maximum seasonal point on a seasonally adjusted basis. Only the possibility that the long-in-coming foreclosure tsunami might finally materialize remains as a reason to think we have not seen the bottom in housing prices.
Money supply was also weakly positive and is now being compared with the inflow tsunami of one year ago:
M1 rose +0.1% last week, and was flat month over month. Its YoY growth rate declined to +15.0%, so Real M1 is up 13.3%. YoY. M2 rose +0.6% for the week, and was up 0.6% month/month. Its YoY growth fell again to 8.7%, so Real M2 grew at +7.0%. Real money supply indicators after slowing earlier this year, have increased again, but YoY comparisons are started to wane as expected.
Bond prices were mixed and credit spreads declined:
Weekly BAA commercial bond rates decreased by .02% to 5.00%. With the exception of one week, these are the lowest yields in over 45 years. Yields on 10 year treasury bonds remained flat at 1.64%. The credit spread between the two fell to 3.36%, an improvement from its 52 week low set two weeks ago. The recent collapse in government bond yields shows fear of deflation due to economic weakness. Corporate yields have finally followed, a good sign.
The energy choke collar remains disengaged:
Gasoline prices fell for the eleventh (and probably last) straight week, down another .08 to $3.36. Oil prices per barrel wound up nearly neutral for the week, closing Friday at $84.45, off 52 cents from last week. Oil prices remain well below the point where they start to constrict the economy, and gasoline has followed. The 4 week average of Gasoline usage, at 8918 M gallons vs. 9315 M a year ago, was off -4.3%. For the week, 8846 M gallons were used vs. 9001 M a year ago, for a decline of -1.7%. The 4 week average is a significant YoY decline; however, June and early July of 2011 were the only months after March 2011 where there was a YoY increase in usage, so the YoY comparison now is especially difficult. If this decline persists past the middle of July, it will be a red flag, so it is a good sign that the one week difference was slight.
Turning now to high frequency indicators for the global economy:
The TED spread rose 0.1 to 0.39, in the middle of its recent 4 month range. This index remains slightly below its 2010 peak. The one month LIBOR remained even at 0.246. It has risen slightly above its recent 4 month range, it remains well below its 2010 peak, and has still within its typical background reading of the last 3 years. Even with the recent scandal surrounding LIBOR, it is probably still useful in terms of whether it is rising or falling.
The Baltic Dry Index rose another 117 from 1040 to 1157. It is 487 points above its February 52 week low of 670, although well below its October 2011 peak near 2200. The Harpex Shipping Index fell for the fifth straight week from 438 to 435, but is still up 60 from its February low of 375.
Finally, the JoC ECRI industrial commodities index continued to rebound from its recent cliff-dive, up from 114.53 to 117.78. This is still near its 52 week low. Its recent 10%+ downturn during the last few months remains a strong sign of all that the globe taken as a whole is slipping back into recession.
With the exception of housing, money supply, and the daily treasury statement, weakness has grown widespread. At the same time, only one item in the US has actually has turned negative -- the diffusion of negative YoY rail carloads. All the others have generally remained positive on a weekly, monthly, and yearly basis. At the same time, renewed slight weakness in shipping rates, the continued slump in the JoC ECRI index (although it has rebounded slightly), and the continued records lows in US interest rates strongly suggest the world as a whole has slipped back into contraction. The US remains the "least worst" economy.