- by New Deal democrat
The big monthly news this week was the continued advance of the Leading Economic Indicators for March, up 0.4. February was revised upward to up 1.0. The LEI was greatly helped by the strong monthly rebound of housing permits from February to March, and strong vendor deliveries in the ISM manufacturing survey, showing that manufacturing remains on a tear, and is powering the recovery. Similarly, the Philly Fed survey declined from stratospheric levels last month, but was still showing strong expansion. Other housing data - starts and existing home sales - also bounced strongly higher from February's poor readings.
Will strong manufacturing and associated exports help the US overcome the renewed Oil shock? Will there be a slowdown, or something worse? That's where we are now.
Turning to the high-frequency weekly indicators:
Oil finished the trading week at $112.29 a barrel, the sixth full week it has been above $100. It remains at a level above 4% of GDP. Gas at the pump increased $.05 more to $3.84 a gallon. In the last 6 months, gas prices have gone up over $1 a gallon. Gasoline usage at 9062 M gallons was 1% lower than last year's 9152. This YoY comparison has been negative for the last six weeks in a row, averaging -1.5% for the last four weeks. If this level of decline continues for another month or so, that will be equivalent to the decline near the end of 2007.
The BLS reported that Initial jobless claims last week were 403,000. The four week average has gone back up to 399,000, This series has not made a new low in seven weeks, and has been back over 400,000 for two weeks in a row.
Railfax was up 3.9% YoY. Baseline traffic is still barely ahead of last year's levels. Cyclical traffic's advance over last year is holding even. Only intermodal traffic (a proxy for imports and exports) continued significantly higher last week. Waste materials continued below last year's levels and shipments of motor vehicles continued well ahead of last year's pace.
The Mortgage Bankers' Association reported an increase of 10.0% in seasonally adjusted mortgage applications last week, to a level last seen in December 2010. Because this may have been due to special factors, expect a similar decrease next week. In general this series has meandered in a range since last June. Refinancing increased 2.7%, and remains near its June-July 2010 lows. But neither series is in a long term decline any more.
The American Staffing Association Index remained at 92 for the third week, after stalling at he 90-91 level for 7 weeks. So far this year this series' slow progress is similar to that of 2007 and 2008.
The ICSC reported that same store sales for the week of April 2 rose 3.0% YoY, and increased 0.3% week over week. Shoppertrak reported a meager 1.4% YoY increase for the week ending April 16. It also reported a WoW decline of 2.1%. Calendar affects (Easter week this year vs. last year) continue to strongly affect these results, but the Shoppertrak result in particular is not what one would expect getting closer to Easter. This is the first hint in these series of any fallout from $100+ Oil.
Adjusting +1.07% due to the recent tax compromise, the Daily Treasury Statement showed that for the first 14 days in April 2011, $105.5 B was collected vs. $96.6 B a year ago, for an increase of $8.9 B YoY. For the last 20 days, $133.7 B was collected vs. $126.9 B a year ago, for an increase of $6.8 B, or 5.4%. I suggest using this series with extra caution, because the adjustment for the withholding tax compromise is only a best guess, and may be significantly incorrect.
Weekly BAA commercial bond rates decreased .03% to 6.07%. This compares with an identical 03% decrease in the yields of 10 year treasuries to 3.51%. Over the last 6 months both series have seen higher interest rates, but government bonds have generally been weaker. There remains no sign of corporate distress here.
M1 was down 1.0% w/w, up 1.3% M/M, and up 11.9% YoY, so Real M1 is up 9.2%. M2 was unchanged w/w, up 0.2% M/M and up 4.7% YoY, so Real M2 is up 2.0%. Although Real M1 is still strongly in the "green zone" where it has been since before the end of the "great recession," Real M2 continues to fade further back into the "yellow zone" below 2.5%.
Finally, this week I want to pay tribute to market pundit Joe Battipaglia, who passed away suddenly last week. I first heard him in about 1994. Bears like Jim Rogers were persuasively making their case, the market would swoon 10%, Elaine Gharzarelli would say her market indicators now foretold a crash, and along would come raging bull Joe Battipaglia, making the case that tech advances were a tsunami of rising efficiency. Of course, the market would turn within minutes of Gharzarelli's pronouncement of Doom. Battipaglia wasn't just right. He was right for the right reasons. But he wasn't a permabull. He was much more sober and cautious at all of the right times this past decade, but bullish again in the last couple of years.
In short, amidst all of the pundits talking their book to the rubes, Joe Battipaglia stood out as someone who continued to be mainly right, and mainly for the right reasons. Allow me to pay him the highest compliment for a pundit: when Battipaglia talked, I stopped and listened. He will be missed.
Remember that all things must pass, including our own brief tenures. Carpe Diem! Enjoy this weekend.