Saturday, February 11, 2012

Weekly Indicators: continuing positive, but watch gasoline Edition

- by New Deal democrat

There was very little in the way of monthly data released during the past week: consumer confidence fell slightly, the trade deficit widened very slightly, and consumer credit increased strongly. Turning now to the high frequency weekly indicators:

Weekly employment-related data mainly continued to impress, with the significant exception of withholding tax collections.

The Department of Labor reported that Initial jobless claims fell by 9,000 to 358,000, the second lowest report in close to 4 years. The four week average declined by 9000 to 366,750. This too is the lowest reading since mid-2008.

The American Staffing Association Index rose by 1 to 87 last week. It is now not just significantly higher than last year, but very close to its pre-recession 2007 levels.

The Daily Treasury Statement showed that for the last 20 reporting days, $146.5 B was collected vs. $146.7 B a year ago. Since for the month of January we were up 10% YoY, this reflects poor collections this past week, and raises a yellow flag for further watching.

Housing reports were also positive:

The Mortgage Bankers' Association reported that seasonally adjusted purchase mortgage applications rose +0.1% week over week, although they were still down -4.1% YoY. The overall trend remains flat since June 2010. Refinancing rose +9.4% in the last week, as rates fell to historic lows.

For the eighth week in a row, YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were positive, up +4.2% YoY. This is yet another week establishing the record best YoY reading since this index began nearly 6 years ago. The number of metropolitan areas with YoY positive sking prices increased to 34. The number with YoY declines of greater than 5% decreased to 5.

Sales and transportation were also positive:

The ICSC reported that same store sales for the week ending February 4 increased 3.5% YoY, and were up 1.8% week over week. Once again, Shoppertrak, did not report, however Johnson Redbook reported a 2.5% YoY gain, an improvement over the last several weeks.

The American Association of Railroads reported mixed weekly rail traffic for the week ending February 4, 2012, with U.S. railroads originating 284,546 carloads, up 6.2% compared with the same week last year. Intermodal volume for the week totaled 232,990 trailers and containers, up 16.8% compared with the same week last year. Total carloads were up 10.7% from one year ago.

Money supply and Credit spreads were generally positive:

M1 decreased -0.2% last week, and +2.2% month over month. It is also up 18.8% YoY, so Real M1 is up 15.8%. This is about 6% off peak YoY gain at the end of last summer. M2 increased +0.1% week over week, up +0.9% month over month, and up 10.2 YoY, so Real M2 was up 7.2%. This is about 3% less than its YoY reading at the crest of the tsunami.

Weekly BAA commercial bond rates decreased .16% to 5.13%. Yields on 10 year treasury bonds fell .13% to 1.88%. This had a whiff of fear of deflation, but on the other hand, the credit spread between the two had a 52 week maximum difference in October but once again continued to tighten this past week.

Gasoline usage in particular continues to be much lower YoY:

Oil rose about $1 this week to close at $98.67 a barrel. This is at the recession-trigger level calculated by analyst Steve Kopits (adjusted for general inflation). Gas at the pump rose $.04 to $3.48. Measured this way, we are back above the 2008 recession trigger level. Gasoline usage, at 8039 M gallons vs. 8524 M a year ago, was off -5.7%. The 4 week moving average is off -6.8%. Since last March the YoY comparisons have been almost uniformly negative, and substantially so since July. This week once again featured one of the biggest declines in the 4 week average since then.

Now let's turn to new high frequency indicators designed to track the global slowdown/recession:

The TED spread is at 0.425 down from 0.456 week over week. This index is back below its 2010 peak, and has declined from its 3 year peak of 6 weeks ago. The one month LIBOR is at 0.250, down .011 from one week ago. It is well below its 12 month peak set five weeks ago, remains below its 2010 peak, and ihas now completely returned to its typical level of the last 3 years.

The Baltic Dry Index at 695 finally broke its fall this week, up 48 from 647, although still well off its October 52 week high of 2173 (please note that even so this is nothing even remotely close to its decline during the Great Recession). The Harpex Shipping Index declined another two to 390 in the last week, although it remains just above its 52 week low of 389 set five weeks ago. Please remember that these two indexes are influenced by supply as well as demand, and have generally been in a secular decline due to oversupply of ships for over half a decade. The Harpex index concentrates on container ships, and led at recent tops and lagged at troughs. The BDI concentrates on bulk shipments such as coal and grain, and lagged more at the top but turned up first at the 2009 trough.

Finally, once again the Shadow Weekly Leading Index accurately foretold an increase in ECRI's WLI. We already have the value for 3 of its components, including the S&P 500, which was off a slight -0.2% for the week. The Dow Jones Bond Index increased .50 to 116.87. I don't know how I missed this, but the DJBI made an all time high on February 2 at 116.99. The JoC-ECRI industrial metals index rose from 124.41 to 126.20, reversing almost all of its decline of one week before. The first is flat, the second two significant positives for the calculation of ECRI's weekly leading index next Friday.

With the singular exceptions of tax withholding and gasoline prices, all of the data was positive this week and continues to reflect a recovery attempting to attain escape velocity. That gasoline is already close to $3.50 a gallon, however, is strong evidence that the Oil choke collar is already beginning to engage -- a choke collar that already strangled one attempt at self-sustaining recovery one year ago. Meanwhile this past week several bearish blogs -- Zero Hedge and Mish -- noticed that gasoline usage is significantly less than last year. This should be no surprise to readers of these weekly updates, as I literally started to report on this phenomenon last March, and its intensification beginning last September. Whether the development is as bearish as they believe is a subject for another day. But what is clear once again is the value of watching high frequency weekly indicators in real time.

Have a nice weekend.