Saturday, May 4, 2013

Weekly Indicators: May Day rebound edition

 - by New Deal democrat

The big news was the continuing expansion of employment in April, and the decline in the unemployment rate. Average hourly earnings increased, but the workweek decreased. As the manufacturing workweek is a component of the Index of Leading Indicators, this will be reflected in that compilation. April light vehicle sales declined. The ISM manufcaturing index was barely positive, the Chicago PMI barely negative. ISM services were positive.

In the rear view window, Q1 productivity and unit labor costs, and the employment cost index all rose. March factory orders and construcition spending declined. Pending home sales rose slightly, as did the Case-Shiller home price index. Personal income and spending both rose as the personal savings rate remained flat at a very low level.

Let's start this week's look at the high frequency weekly indicators by looking at transports and consumer spending, which were the two areas with significant changes last week:


Railroad transport from the AAR
  • -7200 or -2.6% carloads YoY

  • -6200 or -3.5% carloads ex-coal

  • +5100 or +2.1% intermodal units

  • -2100 or -0.4% YoY total loads
Shipping transport Rail transport went negative for the third time in a month, even excluding coal, although intermodal shipments improved. This still has to be watched carefully to see if this is the beginning of a slump.  The Harpex index remains slightly off its January 1 low of 352, and the Baltic Dry Index remains above its recent low.

Consumer spending Gallup's YoY comparisons have been very positive since last December. They got less positive in the early part of April, but have rebounded again.  The ICSC varied between +1.5% and +4.5% YoY in 2012. In the last month or so it has been near or even below the bottom of this range, but rebounded this week. The JR report this week also rebounded the upper part of its typical YoY range for the last year.

Employment metrics

Initial jobless claims
  •   324,000 down 15,000

  •   4 week average 342,250 down 15,250
American Staffing Association Index
  • 92 unchanged w/w, down -0.04% YoY
Initial claims established a new lower bound to their recent range of between 330,000 to 375,000. The spring increase of the last two years has not materialized this year.  The ASA is still running slighty below 2007, but now slightly behind last year as well. In other words, the comparison is continuing to deteriorate on a YoY basis.

Daily Treasury Statement tax withholding
  • $128.4 B (adjusted for 2013 payroll tax withholding changes) vs. $134.7 B, or -4.7% YoY for the last 20 days.  The unadjusted result was $149.5 B for a 11.0% increase.

  • $163.6 B was collected during April vs. $148.6 B unadjusted in 2012, a $15.0 B or a +10.1% increase YoY.
These are still good YoY comparisons compared with the last three months. While my best estimate is that collections should be up 15% due to the payroll tax increases that took effect on January 1, that appears not to be accurate, so now that we have enough data from this year I am making comparisons with earlier this year, and those comparisons did improve in April.

Housing metrics

Housing prices
  • YoY this week +5.8%
Housing prices bottomed at the end of November 2011 on Housing Tracker, and averaged an increase of +2.0% to +2.5% YoY during 2012. This weeks's YoY increase once again ties the record increase in March this year.

Real estate loans, from the FRB H8 report:
  • down 2 or -0.1% w/w

  • up 12 or +0.3% YoY

  • +2.1% from its bottom
Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  In the last two months the comparisons have softened significantly.

Mortgage applications from the Mortgage Bankers Association:
  • -1.4% w/w purchase applications

  • +13% YoY purchase applications

  • +3% w/w refinance applications
After going sideways for 2 years, this year purchase applications have finally risen slightly.  Refinancing applications were very high for most of last year with record low mortgage rates, but have decreased slightly recently.

Interest rates and credit spreads
  •  4.53% BAA corporate bonds down -0.01%

  • 1.73% 10 year treasury bonds unchanged

  • 2.80% credit spread between corporates and treasuries down -0.01%
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 saw a marked increase in rates and credit spreads have widening, followed by a sudden and strong positive reversal in the last several weeks.

Money supply

  • +1.2% w/w

  • +3.7% m/m

  • +10.9% YoY Real M1

  • -0.2% w/w

  • +0.7% 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 increased sharply.  Real M2 also made a YoY high of about 10.5% in January 2012.  Its subsequent low was 4.5% in August 2012. It has increased slightly in the last month or so.

Oil prices and usage
  •  Oil $95.61 up +$2.61 w/w

  • Gas $3.52 down -$0.02 w/w

  • Usage 4 week average YoY -1.8%
The price of a gallon of gas has declined sharply since the end of February, and is down about 10% YoY. The 4 week average for gas usage remained negative after nine weeks in a row of being positive YoY.

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 1.69 to 125.43 w/w

  • +0.35 YoY
Although April employment and March income and spending were positive, most of the other monthly data was negative, especially indluding anything related to manufacturing. Government construction spending also pulled down that number. As always recently, housing remained a bright spot.

The high frequency indicators were more mixed this week. All money indiators, including money supply, corporate bond rates and interest rate spreads, and bank lending rates, were positive. Housing prices and mortgage applications were positive. Jobless claims were extremely positive. Consumer spending, which had been weakening, turned more positive again. Shipping rates were positive. Gas prices hit new multi-month lows.

Negatives again included rail shipments, joined this week by temporary staffing, which continues to deteriorate. Oil prices increased. Commodities tumbled.

Tax withholding remains a question mark. It is negative after my best estimated adjustment, which is obviously off, but relative to the last few months, this past week was very good.

This was a positive week, marked by low gas prices and low initial claims, but temporary staffing and rail weakness are a real concern. So long as the consumer keeps spending, we are keeping our heads above water.

Have a nice weekend.