Weekly Indicators: a hurricane blew through it edition

  - by New Deal democrat

The big economic news this week was that 171,000 jobs were added in October, and August and September were revised up substantially. This was the best employment report in over half a year. Unemployment edged up slightly as more people rejoined the labor force. Personal income was up, but spending was up more, so the savings rate went down further. Construction spending was up, although residential spending backed off slightly. House prices as reported by Case-Shiller increased again. Consumer confidence was up for October to a new post-recession high. Factory orders were up, although not enough to completely take back the August decline. Both ISM manfuacturing and the Chicago PMI essentially trod water.

I watch the high frequency weekly indicators not because they lead the economy, but because they are a snapshot of the virtual present, as opposed to looking in the rear view mirror. While there is plenty of noise, they should show turns or continuations in a trend before they show up in monthly or quarterly data.

Same Store Sales and Gallup consumer spending varied from weakly positive to substantially negative, although Gallup is almost certainly due to the hurricane:

The ICSC reported that same store sales for the week ending October 26 rose +0.5% w/w and were up +2.8% YoY.  Johnson Redbook reported a 1.8% YoY gain. Johnson Redbook has consistently been lower than the other series for consumer spending. The 14 day average of Gallup daily consumer spending as of November 1 was $66, compared with $71 last year for this period. This is the worst showing in a long time for Gallup, and would probably have been poor anyway, but Hurricane Sandy almost certainly impacted this number.

Bond yields were mixed and credit spreads narrowed further:

Weekly BAA commercial bond rates were not reported this week, presumably due to closures in the financial markets. Yields on 10 year treasury bonds, however, rose .02% to 1.81%.  The credit spread between the two decreased to 2.74%, a new 15 month low (using last week's corporate bonds as the comparison). This continues an excellent trend, as it demonstrates a lack of fear of corporate default.

Housing reports were generally positive:

The Mortgage Bankers' Association reported that the seasonally adjusted Purchase Index rose 1% from the prior week, and is up 6% YoY. These remain in the upper part of their 2+ year range. The Refinance Index fell -6% for the week, retreating further from recent multi-year highs.

The Federal Reserve Bank's weekly H8 report of real estate loans this week decreased by 4, or-.01%, to 3526. The YoY comparison, however, increased to +1.4%, and is also 1.4% above its bottom.

YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker  increased +2.6% from a year ago.  YoY asking prices have been positive for 11 months.

Money supply has been somewhat mixed in the last couple of months but remains quite positive on a yearly basis:

M1 was off -0.5% for the week, but increased +2.6% month over month.  Its YoY growth rate rose again to 13.9%. As a result, Real M1 also rose to +11.9% YoY. M2 was flat for the week, and was up 0.8% month over month.  Its YoY growth rate remained even at 7.2%, so Real M2 also remained at 5.2%. The growth rate for real money supply is still quite positive.

Employment related indicators were neutral to positive:

The Department of Labor reported that Initial jobless claims declined 6000 from last week's unrevised 369,000. The four week average fell by 750 to 367,250, a little more than 1% above its post-recession low.

The American Staffing Association Index was again level at 95. The index is equal to its high reading for the year. The trend in this index is similar to last year.

The Daily Treasury Statement showed that for the month of October, $152.5 B was collected vs. $ 137.6 B a year ago, a $14.9 B or +10.9% increase. For the last 20 days ending on Thursday, $130.1 B was collected vs. $127.5 B for the comparable period in 2011, a gain of $2.6 B or +2.0%. This is the weakest 20 day YoY comparison in tax collections in many weeks, although it is certainly still positive.

Rail traffic remained negative YoY, but still due to coal, while the diffusion index decreased considerably:

The American Association of Railroads  reported that total rail traffic was down -2.2% YoY.  Non-intermodal rail carloads were again off a huge -7.0% YoY or -21,500, almost entirely due to coal hauling which was off -20,600. Excluding coal, carloads were still off -900, but it is possible this was affected by preparations for the anticipated landfalling hurricane in the northeast. Negative comparisons remained even at 11 types of carloads.  Intermodal traffic was up 9,400 or +3.9% YoY.

Finally, the prices of oil and gasoline fell, and gasoline usage was again down slightly:

Gasoline prices fell $.12 more last week to $3.57. This is nevertheless still very high. Oil prices per barrel declined from $86.28 to $84.86. Gasoline usage for one week was 8611 M gallons vs. 8767 M a year ago, down -1.8%. The 4 week average at 8493 M vs. 8501 M one year ago, was down -0.1% YoY.

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

The TED spread rose slightly off its 52 week low, to 0.22. The one month LIBOR  fell to a new 52 week low of 0.2090. Both are well below their 2010 peaks.

The Baltic Dry Index fell from 1051 to 986, well above its recent 52 week low of 662. The longer term declining trend in shipping rates for the last 3 years remains. The Harpex Shipping Index fell by 1 to 371, another new 52 week low.

Finally, the JoC ECRI industrial commodities index fell again slightly from 118.35 to 118.21, and is negative YoY for the second week in a row.

The recent divergeance between transportation and other metrics reappeared this week. Both shipping rates and rail car loads declined. Commodity prices also declined. Mortgage refinancing declined again, but off multi-year highs. Gallup consumer spending declined substantially, but due to the likely effects of the hurricane, this should be discounted until we have at least one more week of data.

Meanwhile housing, money supply, bank overnight rates, and corporate yields and credit spreads all remained very positive. Jobless claims and same store sales were mildly positive. Gas prices have declined sharply, also very positive.

Generally there are some caution flags, but not enough to cause real concern unless they remain after the hurricane's effects have receded. Have a nice weekend.