Weekly Indicators: are consumers voting against Washington idiocy? edition

 - by New Deal democrat

Monthly data reported this past week included August personal income, spending, and savings, all up. Case=Shiller home prices increased, as did new home sales. Durable goods were essentially flat. The Conference Board's consumer confidence index declined, but the U. Michigan consumer confidence index increased.

We are told that the September jobs report may not get published on Friday if the government shuts down. Two years ago, during the debt ceiling debacle, it was consumer spening holding up that told me that the economy would not tip back into recession. Consumers may be behaving differently this time around. Let's start this edition of the high frequency weekly indicators by looking at that:

Consumer spending

• ICSC -1.0% w/w +1.6% YoY


• Johnson Redbook +3.9% YoY


• Gallup daily consumer spending 14 day average at $85 up $9 YoY

In the last month, Gallup's 14 day average of consumer spending has become much less positive than earlier this year, and this week was the poorest YoY comparison yet. This was also one of the poorest weeks for absolute spending this year (although we need to be careful with that, since mid-autumn typically is weak). Last year the ICSC varied between +1.5% and +4.5% YoY in, while Johnson Redbook was generally below +3%. The ICSC had one of its weakest 2013 readings this week. Johnson Redbook, however, remains at the high end of its range, and has actually been improving.

Steel production from the American Iron and Steel Institute

• +1.8% w/w


• +7.2% YoY

Steel production over the last several years has been, and appears to still be, in a decelerating uptrend. It had been negative YoY, but turned positive two weeks ago.

Transport

Railroad transport from the AAR

• -4300 carloads down -1.5% YoY


• +1200 carloads or +0.7% ex-coal


• +8600 or +3.4% intermodal units


• +4400 or +0.8% YoY total loads

Shipping transport

• Harpex unchanged at 403


• Baltic Dry Index up +142 to 2043

Rail transport had been very mixed YoY during midyear, but this week was the seventh positive week in a row since then. The Harpex index had been improving slowly from its January 1 low of 352, but has generally flattened out for the last few months. The Baltic Dry Index has rebounded to make nearly a 3 year high. In the larger picture, both the Baltic Dry Index and the Harpex declined sharply since the onset of the recession, and have been in a range near their bottom for about 2 years, but stopped falling earlier this year, and now are in uptrends.

Employment metrics

Initial jobless claims

• 305,000 down -4,000


• 4 week average 308,000 down -6750

The American Staffing Association Index was up 2 to 100. It is up +5.1% YoY

Tax Withholding

• $139.6 B for the first 13 days of September vs. $125.2 B last year, up +14.4 B or +11.5%


• $150.3 B for the last 20 reporting days vs. $135.2B last year, up +15.1 B or +11.1%

We can now estimate that after adjusting for state reporting glitches, one week ago initial jobless claims were ~327,000, still a 6 year low, and the 4 week average was 325,250. Jobless claims remain firmly in a normal expansionary mode. Like each of the last three years that this same, a good, downside breakout has occurred.

Temporary staffing had been flat to negative YoY in spring, but has broken out positively in the last two months. The only time it has ever been higher was one week in 2006 and in the second half of 2007. Tax withholding, after a relatively poor August, is again posting better (but just average) comparisons.

Oil prices and usage

• Oil down -$1.88 to $102.87 w/w


• Gas down -$0.05 at $3.50 w/w


• Usage 4 week average YoY up +0.9%

The price of Oil continued its retreat from its recent 2 year high. The 4 week average for gas usage is slightly positive again.

Interest rates and credit spreads

• 5.49% BAA corporate bonds down -0.05%


• 2.79% 10 year treasury bonds -0.13%


• 2.70% credit spread between corporates and treasuries up +0.08%

Interest rates for corporate bonds had been falling since being just above 6% in January 2011, hitting a low of 4.46% in November 2012. Treasuries fell to a possible once-in-a-lifetime low of 1.47% in July 2012, and have decisively risen about 1.5% above that mark. Spreads retreated from last week's 2 year low. Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

• +7% w/w purchase applications


• +7% YoY purchase applications


• +5% w/w refinance applications

Refinancing applications have decreased sharply in the last 5 months due to higher interest rates. Purchase applications have also declined from their multiyear highs in April, but remain slightly up YoY.

Housing prices

• YoY this week +10.9%

Housing prices bottomed at the end of November 2011 on Housing Tracker, and averaged an increase of +2.0% to +2.5% YoY during 2012. This weeks's YoY increase remains near a 7 year record.

Real estate loans, from the FRB H8 report:

• +0.2% w/w


• -0.7% YoY


• +1.4% from its bottom

Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  Over the last few months, the comparisons stalled and now have turned negative.

Money supply

M1

• -0.1% w/w


• +0.7% m/m


• +6.2% YoY Real M1

M2

• unchanged w/w


• +0.4% m/m


• +4.9% YoY Real M2

Real M1 made a YoY high of about 20% in January 2012 and decelerated since then. Earlier this year it increased again but this week it tied its new 2 year low from last week (although it is still positive).  Real M2 also made a YoY high of about 10.5% in January 2012.  Its subsequent low was 4.5% in August 2012. It increased slightly in the first few months of this year, then stabilized, but has declined again in the past several months.

Bank lending rates

• 0.243 TED spread down -0.003% w/w


• 0.180 LIBOR up +0.001 w/w

The TED spread is still near the low end of its 3 year range, although it has risen slightly in the last few months.  LIBOR established yet another new 3 year low during this week.

JoC ECRI Commodity prices

• down -0.73 to 123.76 w/w


• -0.54 YoY

The overall story this week remains as it has been for the last several months. The long leading indicators of interest rates, mortgage refinance applications and real estate loans have all turned negative, although they were less so this week. Purchase mortgage applications do remain slightly positive YoY. Money supply is also decelerating although still positive. Spreads between corporate bonds and treausries also were negative again this week.

The shorter leading indicators of initial jobless claims are very positive, even adjusting for California's computer problems. Temporary employment has turned strongly positive in the last two months. The oil choke collar has disengaged. Commodities are neutral.

The coincident indicators of transportation -- rail traffic and shipping - remain positive. Steel production is positive. Bank lending rates are at or near or at record lows. Tax withholding has also improved moderately in the last couple of weeks. House prices remain strongly positive.

A new concern, however, has to be consumer spending. Both Gallup and the ICSC have become quite weak, although still positive. Johnson Redbook, on the other hand, is strongly positive. Two years ago, during the debt ceiling debacle, it was consumer spending especially as reported by Gallup, that showed that consumers were voting very positively with their wallets, and we were not slipping into a double-dip recession. With Washington once again on the verge of destroying economic growth, higher interest rates may be causing the consumer to spend much more cautiously. This is really unfortunate because left to its own devices, the economy appears to be picking up steam for the rest of the year. I still remain much more cautious about 2014.

Have a nice weekend!