Weekly Indicators: surprising strong September rebound edition

  - by New Deal democrat

In the rear view mirror, 2nd Quarter GDP was revised down to a miserable +1.3% annualised, and households deleveraged substantially in that quarter as well. Industrial production and durable goods orders for August plummeted, and manufacturing in the Chicago region contracted in September. Spending rose, but was competely consumed by inflation. Income failed to keep up. Housing prices rose, new home sales went sideways, and consumer confidence rose or fell depending on what index you used.

Watching high frequency weekly indicators should show turns or continuations in before they show up in monthly or quarterly data. The message this week is that they do not confirm a continuation in the punk trend established by the August monthly data.

Let's start this week with Employment related indicators, which surprisingly were all strongly positive this week.

The Department of Labor reported that Initial jobless claims at 359,000 declined -23,000 from the prior week's unrevised figure.   The four week average fell another 4,000 to 374,000, about 3% above its post-recession low.

The American Staffing Association Index rose by two to 95. This is a typical seasonal bump, but does return the index to its high reading for the year. It has generally been flat at 93 +/- 1 since March. This week's increase is enough to at least temporarily remove the red flag from this indicator.

The Daily Treasury Statement showed that 18 days into September, $125.0 B was collected vs. $118.4 B a year ago, a $6.6 B or a 5.5% increase. For the last 20 days ending on Thursday, $133.2 B was collected vs. $126.7 B for the comparable period in 2011, a gain of $6.6 B or +6.7%.

Same Store Sales and Gallup consumer spending were all solidly positive:

The ICSC reported that same store sales for the week ending September 8 were up0.6% w/w and were also up +2.9% YoY.  Johnson Redbook reported another solid 2.0% YoY gain. The 14 day average of Gallup daily consumer spending as of September 27 was $76, compared with $65 last year for this period. Gallup's YoY comparison has been strongly positive for 8 of the last 10 weeks.

Bond yields were mixed and credit spreads narrowed:

Weekly BAA commercial bond rates fell .06% to 4.88%. Yields on 10 year treasury bonds rose .05% to 1.81%.  The credit spread between the two remained at 3.07%, which is close to its 52 week minimum. This is an excellent move.

Housing reports were all positive:

The Mortgage Bankers' Association reported that the seasonally adjusted Purchase Index rose about 7% from the prior week, and is up 8.6% YoY. Generally these remain in the middle part of their 2+ year range. The Refinance Index also fell about -9.9% for the week, with higher mortgage rates.

The Federal Reserve Bank's weekly H8 report of real estate loans this week fell 7 to 3548. The YoY comparison also decreased slightly to +2.0%, which was also the seasonally adjusted bottom. This is just slightly off of last week's mulit-year best numbers.

YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker  were up +2.2% from a year ago.  YoY asking prices have been positive for 10 months.

Money supply remains quite positive:

M1 declined -2.1% for the week! But it was up +2.5% month over month.  Its YoY growth rate fell from last week's +14.3% to 13.0%. As a result, Real M1 also rose to +11.3% YoY.  M2 increased +0.1% for the week, and was up 0.7% month over month.  Its YoY growth rate also rose again to +7.1%, so Real M2 rose to +5.4%. The growth rate for real money supply is still quite positive, despite the summer 2011 incoming tsunami of Euro-cash having disappeared from the comparison.

Rail traffic was negative YoY for the first time in a long time, but still due primarily to coal:

The American Association of Railroads  reported that total rail traffic was down -0.9% YoY.  Non-intermodal rail carloads were again off a huge -4.1% YoY or -12,500, once again entirely due to coal hauling which was off -16,500.  Negative comparisons declined from 12 to 11 types of carloads.  Intermodal traffic was up a miniscule 1,800 or +0.7% YoY.

Finallym the price of oil declined slightly last week, but gasoline prices and usage still show the choke collar engaged:

Gasoline prices finally fell last week, down $.05 from $3.80 to $3.84. Gas prices had risen $0.53 since their early July bottom.Oil prices per barrel fell slightly from $92.89 to $92.17. Gasoline usage remained negative on a YoY basis. For one week, it was 8770 M gallons vs. 8964 M a year ago, down -2.3%. The 4 week average at 8819 M vs. 8907 M one year ago, was down -1.0%.

Turning now to the high frequency indicators for the global economy:

The TED spread held steady at its new 52 week low of 0.27. The one month LIBOR  declined again to 0.2142, setting another new 52 week low. Both are well below their 2010 peaks and in the middle (TED) or low end (LIBOR) of their respective 3 year ranges.

The Baltic Dry Index fell slightly from 774 down 8 to 766, still well above its recent 52 week low of 662. The declining trend in shipping rates for the last 3 years remains fully intact. The Harpex Shipping Index fell yet again, down 8 from 386, and is now only 3 above its February 52 week low.

Finally, the JoC ECRI industrial commodities index declined 0.22 for the week to 124.4. It is still down slightly YoY. This number has improved sharply over the last month.

Almost all of the high frequency data this week was positive, much of it strongly so. Only the three transportation-related metrics were negative: rail traffic, shipping rates, and gasoline usage. All of these suggest considerable coincident weakness in the economy. But the positives were legion: gas prices declined, credit spreads narrowed, corporate bond prices increased, money supply remains strongly positive, overnight rates have sunk into a deep sleep, the recovery in housing continues, employment tax withholding has rebounded, temporary staffing has bounced, and the US consumer continues to spend like a champ! These positives suggest that the coincident weakness will pass rather than deepen. As always, energy prices are a wild card and bear close watching.

Have a nice weekend.