Saturday, April 6, 2013

Weekly Indicators: significant deterioration to negativity edition

 - by New Deal democrat

Monthly March data released in the past week was dominated by the jobs report, showing only 88,000 jobs had been created. Despite that, aggregate hours worked increased significantly. The unemployment rate declined, with the normal issue about how much is due to workers simply giving up looking vs. the wave of Boomer retirements. The ISM reported that manufacturing activity decelerated to just slightly positive, and services activity decelerated slightly. Vehicle sales declined very slightly. Consumer credit for February was up, while January was revised down.

Let's start this week's look at the high frequency weekly indicators by noting some increasingly negative data:

Employment metrics

Initial jobless claims
  •   385,000 up 28,000

  •   4 week average 354,250 up 11,250
American Staffing Association Index
  • flat at 91 w/w up 2.4% YoY

Initial claims had established a new lower range of between 330,000 to 375,000 this year. In the last two years, beginning at the end of the first quarter there has been a spike of 20,000+ in jobless applications, and we certainly have seen the pattern repeat in the last two weeks.  The ASA is still running slighty below 2007, and slightly ahead of last year.

Daily Treasury Statement tax withholding

  • $145.8 B (adjusted for 2013 payroll tax withholding changes) vs. $151.8 B, -4% YoY for the last 20 days.  The unadjusted result was $169.7 B for a 11.8% increase.

  • $186.6 B was collected during the month of March vs. $166.4 B unadjusted in 2012, a 12% increase YoY.
Except for last week, these are the best YoY comparisons in over two months. While my best estimate is that collections should be up 15% due to the payroll tax increases that took effect on January 1, since that may not be accurate, now that we have enough data from this year I'm starting to make comparisons with earlier this year, and those comparisons have been improving.


Railroad transport from the AAR
  • -5500 or -1.9% carloads YoY

  • -3300 or -1.8% carloads ex-coal

  • -11,200 or -3.8% intermodal units

  • -14,800 or -2.8% YoY total loads
Shipping transport Rail transport had its worst week in a long time this past week, and now bears watching more closely.  The Harpex index remains slightly off its 3 year low of 352, and the Baltic Dry Index remains above its recent low.

Consumer spending Gallup had been very positive for 3 months. This week's YoY comparison is with the best spending days of the first half 2012, and was still up over 5%. At the same time, April spending has been the lowest daily amount so far this year.  The ICSC varied between +1.5% and +4.5% YoY in 2012. with one exception, the report for the last few weeks has been near or even below the bottom of this range. The JR report this week is at the top of its typical YoY range for the last year.  Although the Gallup data is now more wobbly, consumer spending has still not collapsed due to the tax withholding increase.

Housing metrics

Housing prices
  • YoY this week. +4.0%
Housing prices bottomed at the end of November 2011 on Housing Tracker, and have averaged an increase of +2.0% to +2.5% YoY during 2012. This week prices continued their retreat from the best YoY comparison in about 7 years, established several weeks ago, but were still very positive.

Real estate loans, from the FRB H8 report:
  • down 3 or -0.1% w/w

  • down 2 or -0.1% YoY

  • +1.9% from its bottom
Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  In the last month these have completely stalled and are now slightly negative.

Mortgage applications from the Mortgage Bankers Association:
  • +1% w/w purchase applications

  • +4% YoY purchase applications

  • -6% w/w refinance applications
Purchase applications had been going sideways for 2 years. In the last couple of months they have finally broken out of that range - slightly - to the upside.  Refinancing applications were very high for most of last year with record low mortgage rates, but have decreased recently with an increase of mortgage rates.

Interest rates and credit spreads
  •  4.83% BAA corporate bonds down -0.02%

  • 1.90% 10 year treasury bonds down -0.04%

  • 2.93% credit spread between corporates and treasuries up +0.02%
Interest rates for corporate bonds have generally 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.  The  last several months have seen a marked increase in rates and credit spreads have widened.

Money supply

  • +1.5% w/w

  • -0.9% m/m

  • +8.1% YoY Real M1

  • +0.2% w/w

  • +0.3% m/m

  • +4.7% 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 remained above a new low set several weeks ago.  Real M2 also made a YoY high of about 10.5% in January 2012.  Its subsequent low was 4.5% in August 2012. In absolute terms, M2 made a high almost 3 months ago and is down -0.3% from that peak. The behavior of M2 continues to bear close scrutiny.

Oil prices and usage
  •  Oil $92.37 down -$4.70 w/w

  •   gas $3.65 down $0.03 w/w

  • Usage 4 week average YoY +1.7%
The price of a gallon of gas has declined sharply since the end of February, and is actually down narly 10% YoY.  Unusually for the last year plus, the 4 week average for gas usage for the ninth week in a row was positive YoY. This probably reflects cooler weather in February and March compared with last year.

Bank lending rates The TED spread recently increased slightly off its 18 month+ low.  LIBOR remained at its new 52 week low and is close to a 3 year low.

JoC ECRI Commodity prices
  • down 0.77 to 127.32 w/w

  • +2.55 YoY
I have looked over my "Weekly Indicators" columns since January. The evidence that the economy was beginning to soften showed up in my first column in February, and the high frequency indicators have become more neutral or evidencing a stall since then. This week they have come close to a critical mass of negativity. Previously very few of the indicators were actually negative, but those are increasing, and there are very few strongly positive indicators now.

The positives include housing prices and mortgage applications, gas prices lower than one or two years ago, and increasing petroleum usage. Money supply is positive, although less so than previously. Commodities are mildly positive. Consumer spending as measured by Johnson Redbook is positive, as is Gallup although Gallup is much less positive than the last 4 months.

Basically neutral indicators include shipping rates, interest rates, temporary jobs, and depending on the reference point, tax withholding. Overnight banking loans haven't budged.

Negatives have expanded to include rail transport, real estate loans, credit spreads, and initial jobless claims.

The tone remains had been positive, but muted, in the last several months. It is now tilting a little more towards negativity. My suspicion is that the combination of the payroll tax increase and sequestered budget cuts are now showing up int he high frequency data. This is not good.

Have a nice weekend.