Saturday, March 31, 2012

Weekly Indicators: springtime getaway edition

- by New Deal democrat

This is a slightly truncated version of Weekly Indicators, as I'm preparing it before leaving on a weekend trip, where I will be doing my part to assist the recovery.

The monthly data releases this week included GDP, which was unrevised. The alternative GDI measure, however, came through very strong for the 4th quarter of last year. Case-Shiller house prices continued to fall. Durable goods rebounded, but did not overcome January's large drop. Chicago's PMI remained strongly positive. Consumer confidence increased. Personal income rose a little. Personal spending rose a lot. The savings rate declined sharply.

Turning to the high frequency weekly indicators , let's start with retail sales and gasoline prices and usage. If the Oil choke collar is causing the economy to constrict, here's where we should be seeing it:

The energy choke collar remains engaged:

Gasoline prices are about 8.7% higher than one year ago while usage continues to be much lower: Oil was about $3 lower at $103.50 Friday morning. Gas at the pump rose another $.05 to $3.92. Gasoline in particular is significantly above the point where it can be expected to exert a constricting influence on the economy. Gasoline usage, at 8710 M gallons vs. 8886 M a year ago, was off only -1.8% YoY. The 4 week moving average remains off -6.1%. The 4 week average is not off sufficiently from its YoY readings from the last 6 months, and the weekly number is the best in months.

Sales remained positive.

The ICSC reported that same store sales for the week ending March 24 fell - 0.5% for the week, but rose +2.7% YoY. Johnson Redbook reported a 3.3% YoY gain. The 14 day average of Gallup daily consumer spending at $78 is the highest spring reading since the recession, and indeed equals the highest at any point except for the holiday season, up 20% YoY.

Between gasoline usage and same store retail sales, as of this week anyway, consumers apparently failed to get the memo that they are supposed to be exhausted.

Turning to housing, the Mortgage Bankers' Association reported that the seasonally adjusted Purchase Index increased +3.3% from the prior week, and was also +1.0% higher YoY. The Refinance Index decreased -4.9% from the previous week, reflecting higher rates and a pause before the new government refinancing assistance program starts.

YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up +3.8% from a year ago. This number peaked at over +4% in February. It remains at odds with the Case-Shiller reports of worsening YoY declines in price for comparable sales, although the NAR, Census Bureau, and FHA average sales prices have also turned positive or within a percent thereof as of their last report. Typically non-seasonally adjusted home sales prices peak in about June, so we should see in the next 3 months whether asking prices capitulate or if comparable sales prices firm.

Employment related indicators were positive or neutral:

The Department of Labor reported Initial jobless claims of 359,000 last week. The four week average declined by 3500 to 365,000, the lowest revised number in 4 years. Had there not been seasonal revisions, which increased recent weeks' numbers by 10,000 +/-1000, this week's report would have been almost exactly the same as last week's. There will be two more weeks where the new seasonal revisions will increase the number compared with the former adjustments, before turning lower later in April.

The American Staffing Association Index increased again by one to 89. It is now well above last year's level is approaching its 2007 level.

The Daily Treasury Statement shows that 20 days into March, $155.9 B has been collected in withholding taxes vs. $151.2 B a year ago, for an increase of 3.1% YoY.

Money supply, however, was flat to negative on a weekly and monthly basis:

M1 fell -0.9% last week, and was lower by -0.2% month over month. On a YoY basis it rose to +17.2%, so Real M1 is up 14.4%. YoY. M2 fell -0.3% for the week, and up only +0.1% month over month. Its YoY advance fell to +9.6%, so Real M2 was up 6.8%. The YoY comparisons are becoming tighter (although still historically high), and have generally stalled on a weekly and monthly basis for the last couple of months, which is becoming noteworthy.

Bond prices and credit spreads both fell:

Weekly BAA commercial bond rates rose +.06% t0 5.34%. Yields on 10 year treasury bonds rose +.11% to 2.32%. The credit spread between the two, which had a 52 week maximum difference of 3.34% in October, declined another .05 to 3.02%. As I have previously said, narrowing credit spreads are not at all what I would expect to see if we were going into a recession. As they are a strong component of ECRI's WLI, this is probably a big part of why their growth index is no longer negative (it is exactly at 0.0). According to Prof. Moore's 1992 book, the first signal of a recovery after a recession is when the growth index rises to 1.0. In another couple of weeks, ECRI may have a lot more 'splainin' to do.

Rail traffic remained negative but with the same explanation.

The American Association of Railroads reported a -11,100 car decline in weekly rail traffic YoY for the week ending March 24, 2012, for a decline of -2.2% YoY. Intermodal traffic was up 10,400 carloads, or +4.2%, but other carloads decreased -21,500, or -7.2% YoY. The entire decline in carloads is still due to coal shipments which were off -23,600 carloads or -17.4%. Railfax's graph of YoY traffic by types remains in a positive trend but deteriorated again this week, also due entirely to the steep decline in coal hauling.

Turning now to high frequency indicators for the global economy (as of Thursday):

The TED spread rose .01 to 0.41. This index remians slightly below its 2010 peak, generally steady for the last 6 weeks, and has declined from its 3 year peak of 3 months ago. The one month LIBOR remained at 0.241. It is well below its 12 month peak set 3 months ago, remains below its 2010 peak, and has returned to its typical background reading of the last 3 years.

The Baltic Dry Index rose 22 to 930. It has risen 280 from its 52 week low, but is still well off its October 52 week high of 2173. The Harpex Shipping Index also rose 3 from 393 to 39 in the last week, up 18 from its 52 week low. 6Please 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, through Thursday the JoC ECRI industrial commodities index fell from 125.74 to 124.47. This is the most significant decline in several months. I have serious questions how well this indicator forecasts the US as opposed to the global economy.

The monthly data showed that the rebound has been real, no recession was "imminent" 6 months ago, and it pretty much takes contraction off the table for Q1 2012 as well. Further, while gasoline prices remain an ongoing concern, and while decreased mining, shipping, and usage of coal (probably due to the non-winter winter) will exert a negative influence on Q1 GDP, the remaining high frequency indicators were virtually all positive again this week. Consumers continuing to hold up is a very good sign for the economy going forward.

Have a good weekend.