Friday, February 11, 2011

Weekly Indicators: Some dishes are best served cold edition

- by New Deal democrat

Patience is said to be a virtue. So you must be a little patient with me until I get to my promised third installment discussing last week's employment report. I'll put it up early next week. This week I've been engaged in a kind of audit that I decided really needed to be finished before tonight, although the final result requires patience on my part as well.

There really was little monthly data this week - consumer confidence edged up. So let me take this opportunity for a reminder that I first started looking at high frequency indicators to see if the recovery had "legs." Then last summer they accurately and in real time showed that the economy was experiencing a slowdown but no double-dip. Now I am mainly watching for sings of re-acceleration (initial jobless claims) vs. the choke collar of Oil prices.

Speaking of cold, it appears the succession of bad winter storms last week really played havoc with this week's high frequency data:

The BLS reported initial jobless claims of 383,000, and the 4 week moving average fell to 416,000. While I'd love to be able to do a happy-dance, and I hope that this result is "the real thing, " the fact is that initial claims have been very erratic due to the weather. The 457,000 reading a few weeks ago was due to delayed filing of claims, and I suspect we will see another spike next week. The 4 week average is a much better "read" and that has been generally moving in a range for over a month. In short, take this week's reading with an extra grain of salt.

The Mortgage Bankers' Association reported an decrease of 5.5% in seasonally adjusted mortgage applications last week, which maintains this series generally in a flat range since last June. Refinancing decreased 7.7%, and remains near its lowest point in a year. Higher mortgage rates have really bitten these two series. A decline in refinancing in particular means slower consumer deleveraging.

Gas at the pump made a new post-recession high at $3.13 a gallon, while Oil ended the week at about $86.50 a barrel. Gasoline usage was significantly lower than last year - over 200,000 barrels a day, or 2.6%. This is the second consecutive negative YoY reading, and is more evidence that gas prices are beginning to "bite" - but again the unusually stormy winter weather could be the culprit.

The American Staffing Association Index remained at 90 for the week ending January 30. This was 13% higher than a year ago, and remains only about 9% below the peak January levels from 2008. This is equal to the closest so far the index has come to pre-recession levels.

Railfax, for the first time in a long time, showed total rail shipments were -0.6% lower in the week ending February 5 than during the same week last year. Shipments of waste and scrap metal were actually below last year's levels, as was intermodal freight, and food and grains. At this point, then the slowdown cannot be dismissed, but again it is possible that an unusually stormy winter is playing a role, as municipalities devote resources to plowing rather than recycling and trash. Since Canadian railroads were particularly hard hit, it may be that there is a unique Canadian factor impacting these results.

The ICSC reported that same store sales for the week of February 5 increased 2.5% YoY, and 2.2% week over week. Shoppertrak reported that sales rose 1.1% YoY for the week ending February 5, and also increased 1.2% from the week before. These are very tepid compared with recent readings.

Weekly BAA commercial bond rose +.09% to6.17%. This is at the top end of its range over the last two months. This compares with a 0.14% increase in the yields of 10 year treasuries, which have also been in a tight range for over a month. This certainly does not imply relative weakness for corporate bonds.

M1 was up 2% w/w, up 1.2% M/M and up a strong 9.0% YoY, so Real M1 is up 7.6%. M2 was up 0.4% w/w, up 0.2% M/M and up 4.3% YoY, so Real M2 is up 2.9%. Both of these are now in ranges where economic expansion has always taken place.

Adjusting +1.07% due to the recent tax compromise, the Daily Treasury Statement showed adjusted receipts for the first 7 days of February of $54.4 B vs. $57.7 B a year ago, for a loss -6.0% YoY. For the last 20 days, $148.3 B was collected vs. $138.6 B a year ago, for a gain of $6.5%

In short, one of two things happened in the first week of February: (1) the economy went into a sudden nosedive; or (2) the winter storms caused a decline in almost all activities - including layoffs. I vote for (2), but we'll see in a few weeks.

In the meantime, have a good weekend!