Saturday, January 19, 2013

Weekly Indicators: Consumers, on a tear, ignore increased tax withholding edition

- by New Deal democrat

December monthly data reported this past week included housing permits and starts, both up to new 4 year highs. These are important long leading indicators and, needless to say, quite positive. Producer prices declined slightly, and consumer prices were flat. Retail sailes were up signficantly. The only negative news was the continuing decline in consumer confidence, especially expectations. Both housing permits and consumer expectations are components of the LEI which will be reported this week.

Let's start this look at the high frequency weekly indicators by checking out how the increase in tax withholding may be affecting consumer spending.

Consumer spending
  • ICSC -0.6% w/w +3.3% YoY

  • Johnson Redbook +1.9% YoY

  • Gallup daily consumer spending 14 day average $83 up $19 or +30% YoY!!!
Gallup remains blazingly positive, with spending up sharply compared with January last year, and remaining close to holiday season levels. The ICSC varied between +1.5% and +4.5% YoY in 2012. Johnson Redbook is also in its generally YoY growth range from 2012.

Housing metrics

Housing prices
  • YoY this week. +2.7%
Housing prices bottomed at the end of November 2011 on Housing Tracker, and have averaged an increase of +2.0% to +2.5% YoY for the last year, so this is a particularly positive reading.

Real estate loans, from the FRB H8 report:
  • -0.2% w.w

  •  +1.8% YoY

  • +2.6% from its bottom
Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012, and have recently shown somewhat more YoY strength.

Mortgage applications
  • +13% w/w purchase applications

  • +5% YoY purchase applications

  • +15% w/w refinance applications
Purchase applications have been going sideways for 2 years, and this week's reading was at the top of that range, the best reading since April 2011. Refinancing applications were very high for most of last year with record low mortgage rates. With the recent increase in rates, these declined substantially in the several months, but have turned back up in the last two weeks.

Interest rates and credit spreads
  • -0.01%% to 4.70% BAA corporate bonds

  • +0.03% to 1.90% 10 year treasury bonds

  • -.04% to 2.80% credit spread between corporates and treasuries
Interest rates for corporate bonds have been falling since being just above 6% two years ago in January 2011, hitting a low of 4.46% in November 2012. Treasuries have fallen from about 2% in late 2011 to a low of 1.47% in July 2012. Spreads have varied between a high over 3.4% in June 2011 to a low under 2.75% in October 2012. That makes the credit spread this week exceptionally positive.

Money supply

  • -0.7%% w/w

  • -0.5% m/m

  • +8.3% YoY Real M1

  • +0.1% w/w

  • +1.5% m/m

  • +5.7% YoY Real M2
Real M1 made a YoY high of about 20% in January 2012 and has generally been easing off since. This week's YoY reading is a new low since then. Real M2 also made a YoY high of about 10.5% in January 2012. Its subsequent low was 4.5% in August 2012. Both are still quite positive in absolute terms.

Oil prices and usage
  •  Oil $95.56 up $2.00 w/w

  •   gas $3.30 flat w/w

  • Usage 4 week average YoY -0.6%
Gas prices remain seasonally low. Usage continues to run negative YoY as it has for most of the last year plus.

Employment metrics
Initial jobless claims
  •   335,000 down 36,000

  •   4 week average 359,250 down 6,500
American Staffing Association Index
  • up 13 from 74 to 87 w/w
Daily Treasury Statement tax withholding
  •  $171.6 B (adjusted for 2013 tax changes) vs. $171.1 B +0.3% YoY last 20 days

  •  $106.6 B (unadjusted) vs. $109.1 B down -2.5 B 1st 12 days of January monthly YoY
Initial claims made a new 5 year low this week. The increase in the ASA Index is normal in early January. In the second half of 2012 the index's performance compared with 2011 declined significantly, although the absolute index was higher. Next week is probably the last week for any seasonal influence to dominate. Tax withholding was very weak this past week, which may be an anomaly. Please note I am adjusting my YoY figures to reflect the increase in personal withholing tax rates since the first of the year.


Railroad transport
  •  -19,100 or -6.4% carloads YoY

  • +2300 or +1.5% carloads ex-coal

  • -23,700 or +10.4% intermodal units

  • +4700 or +0.9% YoY total loads

  • 13 of 20 types of carloads up YoY, an increase of 7 from last week
Shipping transport
  • Harpex flat at 356

  • Baltic Dry Index up 77 to 837
Rail transport has been whipsawing between very positive and very negative readings over the last month. This may well be the aftermath of the dock strikes. Hopefully it will return to less volatile readings in the next week or two. The Harpex index is near its 3 year low of 352, but the Baltic Dry Index is well above its 52 week low of 52, although far off its 52 week high of 1100.

Bank lending rates
  • 0.232 TED spread down -0.008 w/w

  • 0.2047 LIBOR down .001 w/w
The TED spread is near its 52 week low. LIBOR is at a new 52 week low and is close to a 3 year low.

JoC ECRI Commodity prices
  • up 1.08 to 128.13 w/w

  • +3.44 YoY
Very little was negative this week. The Daily Treasury Statement was barely positive YoY. Gasoline usage continues to run negative YoY. Money supply was less positive than it has been recently. Consumer confidence, especially expectations about the future, continues to decline.

Almost everything else was positive to extremely positive. Consumer spending, especially as measured by Gallup, remains quite strong, despite the increased tax withholding in their paychecks. Initial jobless claims are quite positive. Bank lending rates and interest rate spreads are also very positive. Gas prices remain accomodative. House prices, loans, and mortgage applications are all positive, suggesting that the positive housing trend reflected in starts and permits will continue. Shipping rates are up slightly.

I remain most interested in when or whether the 2% increase in withholding tax rates will have an effect on consumers, although it certainly hasn't shown up yet! Right now, the high frequency indicators show continued economic expansion.

Have a nice weekend.