Weekly Indicators for June 9 - 13 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

While there were no significant changes in the indicators, there is evidence of  a downturn in consumer spending compared with the tariff front-running of several months ago, as well as a continued decline in the US$. A geopolitics-related spike in oil prices is also unwelcome.

Put this together and you *may* have the first evidence of actual stagflation taking hold.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me with a penny or two for collecting and organizing the data for you.

The state of freight

 

 - by New Deal democrat

It is very difficult to track the impacts of Tariff-palooza! on the US supply chain, due to delays in any sort of accurate reporting. But below is the best overall picture I have been able to decipher.

Mainly the delay is focused on the trucking industry, because rail is very concentrated and reports in detail each week. Below is the agglomeration of intermodal (dark red) and total (light red) rail traffic, the Cass Freight Index for trucking (gold), the Truck Tonnage Index (light blue), and the Freight Transportation Services Index for all types of freight (dark blue), all normed to 100 just before the pandemic:

Note that of these, only the Cass Freight Index has been reported for May. The rest are only current through April.

Earlier this week I showed that intermodal rail traffic had turned negative for the past three weeks. In this week’s report, the AAR’s total freight reading also turned negative YoY:

The AAR also reports a monthly graph for all loads except coal and grain. Here is the update through May:

This is a fairly serious turndown. Notably, coal loads have been well above last year’s levels, but the AAR ascribes that to the fact that much of these loads moves through Baltimore, and last year as you may remember the fallen Francis Scott Key blocked the harbor for several months. Of interest, coal loads are below their 2023 numbers:

The trucking industry’s own index was last reported in May for April, showing a monthly decline, but the YoY comparison was higher by 0.1%:

As they wrote: “In April, the ATA advanced seasonally adjusted For-Hire Truck Tonnage Index equaled 113.0, down from 113.3 in March. The index, which is based on 2015 as 100, was up 0.1% from the same month last year, the fourth straight year-over-year increase, albeit the smallest increase over this period.”

Their report for May should be released in the next 7 to 10 days, and should be much more illuminating.

Historically, the Cass Index has been the most sensitive to the downside. As the below two graphs indicate, you need the *total* freight index, including both rail and trucking, to decline YoY in order to suggest that a recession is likely:

As indicated above, the total Freight Transportation Services Index was just updated this week for April. The YoY view shows an increase of 0.7%:

That’s anemic, but it is still positive. We should have a much better idea of what May looked like once the Trucking Index for May is released later this month.

New 21 month high in the four week average of initial claims; and new 3.5 year high in continuing claims. But no recesion signal

 

 - by New Deal democrat

This week’s update in jobless claims was decidedly mixed.

Initial claims were unchanged at 248,000. Nevertheless this level was only equaled once and exceeded once in the past year. The four week moving average increased 5,000 to 240,500, the highest number since September 2023. With the typical one week delay, continuing claims increased 54,000 to 1.956 million, the highest level since November 2021:

While the above suggests a ratcheting up of weakness, the YoY% changes are most important for forecasting purposes, and so measured initial claims were only up 2.9%, the four week average up 6.0%, and continuing claims up 7.2%:

For the past 8 months, these comparisons have been in the range of +5% +/-5%, and that pattern has not changed. While the YoY increase suggests weakness, so long as the comparisons remain under +10% there is not even a yellow flag caution for recession. The most noteworthy number is continuing claims, which suggests that while there is no significant increase in the number of people being laid off, those who have been laid off are finding it significantly harder to find new jobs. Again, this suggests weakness but is not recessionary at this point.

Since it is early in the month, instead of taking a look at what this might mean for the unemployment rate, leet’s update the “quick and dirty recession indicator,” which consists of a YoY decline in stock prices, and a YoY increase of 10% or more in the four week average of initial claims:

Neither conditions is fulfilled. There is no suggesting of any imminent recession.

Consumer price inflation: once again, all clear except for (slowly disinflating) shelter

 

 - by New Deal democrat

The story of consumer prices in May is the same as it has been for the past several months: virtually everything except for shelter costs, and the even more lagging sector of transportation services, were somnolent. If the Fed wanted to, it could have declared victory many months ago.

To cut to the chase, for the month CPI rose 0.1%, core CPI rose 0.1%, and ex-shelter CPI was unchanged. On a YoY basis, CPI rose 2.4%, core CPI rose 2.8%, and ex-shelter CPI was up 1.5%.

Here is the month over month look at all three:

And here is the YoY look:

Of note, CPI less shelter has been under 2.5% for 2 full years, while headline and core inflation, which include shelter, have been decelerating very slowly and are currently at or very close to their lowest YoY increases in the past 4 years.

Within shelter, actual rent rose 0.2% for the month, and is up 3.8% YoY, while the fictitious Owners’ Equivalent Rent rose 0.3% for the month, and is up 4.2% for the year. Here’s what both of them look like in comparison with the FHFA house price index:

The YoY measure of each division of shelter CPI has been declining about -0.1% each month. Both are currently at their lowest YoY readings in over 3 years, and can be expected to continue to slowly disinflate, as they follow with a lag house prices as measured by, e.g., the FHFA purchase only index, which have continued to increase at basically a normal pre-pandemic pace for the past year:

 

As I wrote above, transportation services (mainly maintenance and repair as well as insurance) are even more lagging, since they react to the increased cost of vehicles and parts. Even here, the story is moderating (mainly due to airfares), as for the month they declined -0.2%, and on a YoY basis they are up only 2.5%, except for last month the best reading in over 4 years. Maintenance and repair costs declined -0.1%, and were up 5.1% YoY, while insurance (not shown) rose 0.7% in the month and was up 7.0% YoY:

The only other current problem child, with YoY readings over 4.0%, are electricity, up 0.9% for the month and up 4.5% YoY; and gas utility delivery, down -1.0% for the month but still up 15.3% YoY.

The former problem children of new and used vehicle prices continued to normalize, down -0.3% and -0.5% for the month, respectively; and up 0.4% and 1.8% YoY (below are normed to 100 as of just before the pandemic to better show the price increases during that time):

Finally, energy prices continued to disinflate, down -1.0% for the month and down -3.5% YoY (normed to 100 as of just before the pandemic):

In short, consumer inflation except for shelter continues to be not a problem at all. At their current pace of deceleration, it will take about another year for both actual rent and Owner’s Equivalent Rent to decline to under 3.0% YoY. With minor exceptions, everything else is already there and has been for several months.

Updating some high frequency metrics for economic activity

 

 - by New Deal democrat

There’s no new important data again today, so let me update a few high frequency indicators in which I am looking for signs of weakness.

First, Redbook’s consumer retail sales weekly report came out this morning, showing a 4.7% YoY increase. This is one of the 8 lowest increases in the past 52 weeks:

Clearly the front-running of tariff price increases we saw in March and April is over. On the other hand, even a 4.7% increase YoY is still higher than the inflation rate.

Meanwhile, he resumption of collections on student loan payments has had a big effect not just on those loans, but also on auto loans and credit card balances:

All of the money that has to go to the resumption of payments on student loans is money that is not available for other purchases.

Weekly bankruptcies have increased in the past several months, but not anything out of the ordinary seasonally or compared with the pattern in the past several years:

Turning to the supply chain, the trend in the updated weekly rail intermodal data shows a continued fall-off compared with last year:

Note that seasonally rail traffic should be increasing, not decreasing.

But surprisingly, inbound container traffic to the Port of LA has completely rebounded in the past several weeks:

Finally, there’s no significant sign yet of a YoY decline in new business applications, although in the past week high propensity applications were down -0.1% YoY:

So, while there are some signs of a slowdown, there is no definitive evidence of an actual downturn in economic activity at this point.

A look at the goods producing sector

 

 - by New Deal democrat

As per usual for the week after the employment report, there is no new data until Wednesday’s CPI report. So let’s take a further look at some of the information from Friday’s report, as well as several other reports from last week in the goods-producing and sales sector.

In the 40 years after WW2, when goods producing jobs peaked, so did the economy. That is less so now, but goods producing jobs are still typically the first to weaken.

In Friday’s report, goods producing jobs declined. In the past year, only 39,000 such jobs have been added (blue, right scale below) in the entire economy, or only a 0.2% gain (red, left scale):

While this is weak, in the past 40 years typically it has taken an actual YoY decline in goods producing jobs to be consistent with the onset of a recession:

Another leading indicator in the goods producing sector is car sales (blue, left scale in the graph below), and even more so heavy truck sales (red, right scale):

Historically heavy truck sales have gone down first, and by more than 10% - typically about 20% - before a recession has begun. Heavy truck sales are just reaching that drop off:

The surge in car sales was front-running the tariffs. With that done, a more significant drop off in those as well is likely.

Last week we also saw a decline in new orders for durable goods (gold) and core capital goods (red). But perhaps even more importantly, orders for consumer durables (blue) also declined:

This is significant because consumer goods orders typically decline closer to recessions than durable goods orders for manufacturing. Here is the pre-pandemic record of all three, with the YoY levels normed to the current YoY reading:

The data is very noisy, but in the past 30 years YoY changes like at the present have been associated at very least with very weak expansions, if not on the cusp of contractions.

The one big contrary indicator, as I wrote on Friday, is in the construction sector, where jobs have been added almost every single month in the past several years:

Here is what the long term YoY picture is for both total construction (blue) and residential construction job (red):

All 3 of the pre-COVID recessions in the past 40 years have been preceded by an outright decline in residential construction jobs, and at very least a sharp deceleration in the growth of other construction jobs. By contrast, at present the former is up over 2% YoY and the latter about 1.5%. 

The continued strength in residential construction employment is particularly surprising, given the decline in housing permits, starts, and units under construction. But until they turn down, the goods producing sector is mainly indicating weakness rather than outright contraction.

Weekly Indicators for June 2 - 6 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

Very slowly the effects of price increases and supply disruptions from the tariffs are making their way into the data. This week was the first suggestion it may have begun to affect consumer spending.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me a little bit for my efforts collecting and organizing it for you.