Saturday, August 20, 2011

Weekly indicators: at the crossroads edition

- by New Deal democrat

Monthly data showed NY area manufacturing in decline, and Mid-Atlantic manufacturing fell off a cliff to one of its worst readings ever. Despite that, industrial production was up in July. Inflation was hot at +0.5%. Home sales declined, but remained generally flat in the larger picture. Leading Indicators for July were up +.9, largely on the back of a surge in money supply thought partly to be a flight to safety from European to American banks.

The high frequency weekly indicators reflected that emotional volatility and appear to be at a crossroads where any further deterioration will signal outright contraction - but are within their range from the last month.

This week let's begin by looking at those items which had the biggest moves. The first three smell of panic:

Money supply -a leading indicator - continued to surge. M1 was flat for the week, but increased 5.5% m/m, and 20.8% YoY, so Real M1 was up 17.2%. M2 increased 0.4% w/w, and also increased 2.6% m/m, and 9.9% YoY, so Real M2 was up 6.3%. The YoY increase in M1 in the last two weeks is the highest in history.

Weekly BAA commercial bond rates decreased .07% to 5.31%. Yields on 10 year treasury bonds much further, however, down .35% to 2.27%. This indicates almost a huge increase in fear of deflation, and also a significant increase in the relative distress in the corporate market, indicating increased relative fear of rising corporate defaults.

The Mortgage Bankers' Association reported that seasonally adjusted mortgage applications decreased a whopping -10.1% last week. For only the 2nd time in the last 12 weeks, the YoY comparison in purchase mortgages was negtive, down -1.1% YoY. Refinancing increased another 8.0% w/w due to cliff-diving interest rates, but was still -16.3% below last year.

Other series also tipped back into contraction this week:

The American Staffing Association Index declined from 88 to 87. This series' trend is now worse than 2007, and has completedly stalled, just as it did in mid 2008.

The Oil choke collar loosened slightly more. Oil finished at $82.70 a barrel on Friday. This is the lowest price in a year, and is over $10 below its recession-trigger level. Gas at the pump fell $.07 to $3.60 a gallon. Gasoline usage was -2.8% lower than a year ago, at 9195 M gallons vs. 9459 M a year ago.

The American Association of Railroads reported that total carloads decreased -0.1% YoY, down 600 carloads YoY to 527,900 for the week ending August 13. Intermodal traffic (a proxy for imports and exports) was up 1900 carloads, or 0.8% YoY. The remaining baseline plus cyclical traffic was down 3400 carloads, or -1.6% YoY%. Rail traffic has been negative YoY for 3 of the last 6 weeks. Using the breakdown of cyclical vs. baseline traffic that was graciously provided to me by Railfax, baseline traffic was down 3400 carloads, or -1.2%YoY (all of which and then some can be laid to coal shipments, down 5600 carloads YoY), while cyclical traffic was up 4200 carloads, or +3.9% YoY.

Employment related data has been improving considerably in the last month, and several other series remained sanguine:

Initial jobless claims have clearly reversed their April - June upturn and are solidly trending back downward. The BLS reported Initial jobless claims of 408,000. The four week average decreased to 402,500. Jobless claims remain decisively below their recent range, and with the exception of 7 weeks in February - April of this year, are lower than they have been in 3 years.

Adjusting +1.07% due to the 2011 tax compromise, the Daily Treasury Statement showed that for the first 14 days of August 2011, $93.7 B was collected vs. $92.5.7 B a year ago, for an increase of $1.2 B. For the last 20 days, $142.6 B was collected vs. $125.9 B a year ago, for an increase of $16.7 B, or 13.3%. With the exception of last week, withholding tax collections have rebounded strongly for the last 5 weeks.

Retail same store sales continue to perform well. The ICSC reported that same store sales for the week of July 30 increased 3.5% YoY, and decreased -0.5% week over week. Shoppertrak reported a 3.6% YoY increase for the week ending July 30 and a WoW increase of 2.5%. This is the sixth week in a row of a strong rebound for the ICSC, joined for the third week by Shoppertrak.

Finally, continuing a real positive trend boding well for the longer term future, YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker showed that asking prices once again declined only -2.9% YoY. For the second week in a row, this is the smallest YoY decline since May 2007. The areas with double-digit YoY% declines remained at 6. The areas with YoY% increases in price increased by one more to 12. A few months ago only 3 or 4 areas had actual increases, and well over 10 had decreases. At the beginning of this year, only one metro area was showing YoY increases.

The question we face is whether the rapid contraction -- shown in the Philly Fed, in consumer confidence, in purchase mortgage applications, in treasury bond yields, and mirrored in surging money deposits -- that may have been a visceral pavlovian freeze in reaction to the debt debacle and fears about Europe, become self-reinforcing or not.

Have a nice weekend!