Saturday, March 23, 2013

Weekly Indicators: just lukewarm edition

 - by New Deal democrat

First of all, a welcome to our many new readers. Every weekend, I look at data that gets reported on a weekly basis. While it can be noisier than monthly or quarterly data, it has the virtue of being virtually up to the minute. Amplifications or reversals of trend will show up here before they show up in monthly data, which can already be two months old by the time they are reported.

Monthly data released in the past week included the Conference Board's Index of Leading Indicators, up .5 for February. January was also revised upward to +.5. After faltering for the second summer in a row in 2012, these have been more positive in recent months, indicating a strengthening economy this spring and summer. Housing starts and permits (a component of the LEI) also made new post-recession highs in February. Existing home sales also rose slightly. The Philly Fed report was also slightly positive.

Let's start again this week's look at the high frequency weekly indicators by checking what is happening with tax withholding:

Employment metrics

Daily Treasury Statement tax withholding

  • $157.1 B (adjusted for 2013 payroll tax withholding changes) vs. $162.2 B, -3.1% YoY for the last 20 days.  The unadjusted result was $180.8 B for an 10.3% increase.

  • $145.2 B was collected for the first 15 reporting days of March vs. $130.1 B unadjusted in 2012, an 11.5% increase YoY.
Initial jobless claims
  •   336,000 up 4,000

  •   4 week average 339,750 down 7,000
American Staffing Association Index
  • down 1 to 90 w/w up 2.6% YoY
Employment metrics were mixed this week, with initial claims remaining very positive, but temporary staffing turning neutral. Then we have the ongoing quandary as to what is happening with tax withholding.  Initial claims have established a new lower range of between 330,000 to 375,000.  The ASA is still running slighty below 2007, and slightly ahead of last year.

To reiterate, I am adjusting my YoY tax withholding figures to reflect the increase in personal withholding taxes. While the YoY collections are up substantially, they should be up over 15% to compensate for the tax increase. (Last week several commenters asked me to clarify this. Last year's tax withholding for SS was 6.2% from the employer, plus 4.2% from the employee, plus 1.45% Medicare withholding. The total withholding was approximately 12%. This year employee withholding increased to 6.2%, so total withholding increased to approximately 14%. The increase from 12 to 14 is just over 15%)  Since I can think of no reason why employment itself should have fallen off a cliff in January, it is very possible that there is a lag in the payment of withholding taxes with the new increase.  If this hypothesis were correct, I would have expected tax withholding to be much more reliable before now, but that doesn't appear to have happened.

Consumer spending Gallup has been very positive for 3 months. This week's YoY comparison is with one of the best spending weeks in 2012, and was still up over 10%.  The ICSC varied between +1.5% and +4.5% YoY in 2012. with one exception, the report for the last few weeks has been near the bottom of this range.. The JR report this week is at the top of its typical YoY range for the last year.  Even in the worst case, it still looks like consumer spending has not collapsed due to the tax withholding increase. The rebound in the last several weeks may be due to tax refunds finally arriving in consumers' hands.

Housing metrics

Housing prices
  • YoY this week. +4.5%
Housing prices bottomed at the end of November 2011 on Housing Tracker, and have averaged an increase of +2.0% to +2.5% YoY during 2012. This week backed off last week's best YoY comparison in about 7 years.

Real estate loans, from the FRB H8 report:
  • down 5 or -0.1% w.w

  • unchanged YoY

  • +2.1% from its bottom
Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  In the last month these have stalled.

Mortgage applications from the Mortgage Bankers Association:
  • -4% w/w purchase applications

  • +6% YoY purchase applications

  • -8% w/w refinance applications
Purchase applications had been going sideways for 2 years. In the last couple of months they have finally broken out of that range - slightly - to the upside.  Refinancing applications were very high for most of last year with record low mortgage rates, but did decreased recently with an increase of mortgage rates.

Interest rates and credit spreads
  •  4.91% BAA corporate bonds up 0.06%

  • 2.04% 10 year treasury bonds up 0.08%

  • 2.87% credit spread between corporates and treasuries down -0.02%
Interest rates for corporate bonds have generally been falling since being just above 6% two years ago in January 2011, hitting a low of 4.46% in November 2012.  Treasuries have fallen from about 2% in late 2011 to a low of 1.47% in July 2012. Spreads have varied between a high over 3.4% in June 2011 to a low under 2.75% in October 2012.  The  last several months have seen a marked increase in rates and credit spreads have widened, although the situation eased in this past week.

Money supply

  • -2.1% w/w

  • -1.6% m/m

  • +8.3% YoY Real M1

  • unchanged w/w

  • -0.2% m/m

  • +4.6% YoY Real M2
Real M1 made a YoY high of about 20% in January 2012 and has generally been easing off since.  This week's YoY reading remained above a new low set several weeks ago.  Real M2 also made a YoY high of about 10.5% in January 2012.  Its subsequent low was 4.5% in August 2012.  It was weak once again this week. In absolute terms, M2 made a high over 2 months ago and is down -0.7% from that peak. The behavior of M2 thus bears close scrutiny.

Oil prices and usage
  •  Oil $93.71 up $0.26 w/w

  •   gas $3.70 down $0.01 w/w

  • Usage 4 week average YoY +1.5%
The price of a barrel of Oil has backed off recent seasonal highs, and is actually down YoY.  Unusually for the last year plus, the 4 week average for gas usage for the seventh week in a row was positive YoY.  This may be due to winter weather having been actually winter-like this year.


Railroad transport from the AAR
  •  +1400 or +0.5% carloads YoY

  • +4100 or +2.4% carloads ex-coal

  • +1600 or +0.7% intermodal units

  • +3100 or +0.6% YoY total loads
Shipping transport Rail transport appears to have returned to its general trend from last year, but was just barely positive in all respects this week.  The Harpex index remains slightly off its 3 year low of 352, and the Baltic Dry Index remains above its recent low.

Bank lending rates The TED spread increased slightly from its 18 month+ low.  LIBOR remained at its new 52 week low and is close to a 3 year low.

JoC ECRI Commodity prices
  • down -0.12 to 127.97 w/w

  • +2.49 YoY
In general the weekly indicators have remained positive, but increasingly less so, over the course of the last month or so. Housing prices and mortgage applications remain very positive, while broader real estate loans have turned neutral. Initial jobless claims are strongly positive, and leading, employment indicators, while temporary staffing has turned more neutral. Tax withholding receipts, which "should" be up about 15% YoY, are only up about 10% (although this week was the best YoY comparision in 2 months.).

Rail and shipping are positive, but just barely so. Commodities are neutral. Money supply, especially real M2, reamins positive, but at the very low end of YoY comparisons. Corporate bond rates are up slighly. Spreads between corporates and government bonds are down slightly. Overnight bank lending rates remain somnolent.

Probably the brightest spots are consumer spending, still resilient in the face of the payroll tax increase, and gas prices, which are negative YoY and accomodative, and gas usage, which has been up YoY for several months.

Overall the tone remains positive, but muted. Have a nice weekend.