Saturday, September 3, 2011

Weekly Indicators: lack of confidence hurricane warning edition

- by New Deal democrat

In the rending of garments over yesterday's jobs report, it is easy to overlook that most of the monthly data reported last week was actually good. Personal income and spending both rose at a robust clip. The Chicago PMI came it at 56.5. The ISM manufacturing index remained slightly positive. Factory orders surprised to the upside. Other series did not decline as much as feared - Case Shiller for example declined, but less than expected, and the YoY% of decline may have troughed. Only consumer confidence, as expected, plummeted. Even the jobs number is best considered ex-Verizon strike at +45,000.

The high frequency weekly indicators continued to reflect the pummeling taken by consumer (and employer?) confidence most likely primarily due to the debt debacle.

Let's look at the signs in order of their magnitude again this week:

Money supply -a leading indicator - continued its surge. M1 was up 1.0% for the week, and also increased 5.4% m/m, and 20.1% YoY, so Real M1 was up 17.5%. Iincreased 0.2% w/w, and also increased 2.4% m/m, and 10.2% YoY, so Real M2 was up 7.6%. The YoY increase in M1 in the last month is the highest in the history of the series. The YoY increase in M2 is at readings typically associated with the end of recessions rather then their onset. While this is an emotional, probably panic-driven move, it is still very positive for the economy going forward.

The Oil choke collar tightened slightly last week, as Oil finished at $84.12 a barrel on Friday. It is still about $10 below its recession-trigger level. Gas at the pump rose $.05 to $3.63 a gallon. Gasoline usage was -1.7% lower than a year ago, at 9229 M gallons vs. 9386 M a year ago. With few exceptions, gasoline usage has been negative for almost 6 months. It continues to surprise me how little weight gasoline prices are given in most economic commentary this year.

The Mortgage Bankers' Association reported that seasonally adjusted mortgage applications increased 0.9% last week. For the third week in a row, the YoY comparison in purchase mortgages was negative, down -8.2% YoY. Refinancing decreased 12.2% w/w due to an increase in interest rates. Refinancing has surged recently with sharp decline in interest rates.

Median asking house prices from 54 metropolitan areas at Housing Tracker showed that the asking prices again declined -2.0% YoY. This is the smallest YoY decline in the 5 year history of this series (YoY measurements were possible beginning in April 2007). The areas with double-digit YoY% declines remained at 6. The areas with YoY% increases in price also remained at 13. Thus, one quarter of all metro areas are now showing YoY increases.

Retail same store sales continue to perform well. The ICSC reported that same store sales for the week of August 20 increased 3.0% YoY, and increased 0.1% week over week. Shoppertrak reported a 5.0% YoY increase for the week ending August 20 and a WoW increase of 0.7%. This is the seventh week in a row of a strong rebound for the ICSC, joined for the fourth week by Shoppertrak.

Adjusting +1.07% due to the 2011 tax compromise, the Daily Treasury Statement showed that for all of August 2011, $144.0 B was collected vs. $135.5 B a year ago, for an increase of $8.5 B. For the last 20 days, $119.4 B was collected vs. $111.9 B a year ago, for an increase of 6.7%. With the exception of one week, withholding tax collections have rebounded strongly for the last 6 weeks.

The American Association of Railroads reported that total carloads decreased -0.5% YoY, down 3700 carloads YoY to 536,000 f. Intermodal traffic (a proxy for imports and exports) was, unusually, also down 1700 carloads, or- 0.5% YoY. The remaining baseline plus cyclical traffic was down 2500 carloads, or -0.8% YoY%. Rail traffic has been negative YoY for 4 of the last 8 weeks. Using the breakdown of cyclical vs. baseline traffic that was graciously provided to me by Railfax, baseline traffic was down 9200 carloads, or -4.7%YoY, while cyclical traffic was up 6700 carloads, or +6.2% YoY. Please note that rail traffic in this reporting period and next week as well may have been affected by Hurricane Irene.

Initial jobless claims coninued their recent range just above 400,000, as the BLS reported Initial jobless claims of 409,000. The four week average increased to 410,250. Jobless claims remain lower than for all but two months in the last 3 years.

The American Staffing Association Index remained at 87 for the third week. This series has completely stalled, and in fact has decreased one point since peaking one month ago.

Weekly BAA commercial bond rates increased .11% to 5.40%. Yields on 10 year treasury bonds increased only .02% to 2.19%. This indicates a slight but continuing increase in the relative distress in the corporate market, indicating increased relative fear of rising corporate defaults.

Finally, one metric which has been extremely telling in the last 45 days has been the daily Consumer Confidence tracking poll by Gallup. It began to decline precipitously on July 5. It bottomed on August 2 and essentially remained at that bottom - until the last few days, when it regained about 1/3 of the ground lost.

For now, gasoline usage and mortgage applications continue to be strong negatives, joined less substantially by temporary staffing and rail traffic. These are offset by a surge in money supply, withholding tax payments, retail sales, and a near-leveling off in house prices. Initial jobless claims are a neutral. Since so much of the poor data in the last month or so may have been provoked by a profound loss of confindence due to the debt debacle, the significant upturn in the last few days of the Gallup economic confidence poll may signal that the poor news is not becoming self-reinforcing. Keep your fingers crossed - and have a great Labor Day weekend!