Saturday, July 13, 2013

Weekly Indicators: the Oil choke collar engages edition

 - by New Deal democrat

There was sparse monthly data reported in the last week. Consumer credit increased. Producer prices increased sharply due to the increase in oil prices in June. Consumer sentiment about the present increased. Consumer sentiment about the future, an element of the LEI, decreased even more.

The big story among the high frequency weekly indicators continued to be the spike in the price of Oil, so let's start with that:

Oil prices and usage
  • Oil $105.95 up +$2.73 w/w

  • Gas $3.49 down -$0.01 w/w

  • Usage 4 week average YoY up +2.4%
The price of Oil increased further again this week to a new 52 week high. I am unable to find any rational reason for this. The price of a gallon of gas fell slightly, but will probably turn around next week. The 4 week average for gas usage was, for the first time in a long time, up YoY.

Interest rates and credit spreads
  •  5.36% BAA corporate bonds down -0.06%

  • 2.56% 10 year treasury bonds up +0.01%

  • 2.80% credit spread between corporates and treasuries down -0.07%
Interest rates for corporate bonds had generally been falling since being just above 6% in January 2011, hitting a low of 4.46% in November 2012. Treasuries previously were at a 2.4% high in late 2011, falling to a low of 1.47% in July 2012, but have spiked back above that high. Spreads have varied between a high over 3.4% in June 2011 to a low under 2.75% in October 2012. After being close to that low 6 weeks ago, interest rate spreads backed up significantly but have now turned back down slightly.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:
  • -3% w/w purchase applications

  • +5% YoY purchase applications

  • -4% w/w refinance applications
Refinancing applications have decreased sharply in the last 7 weeks due to higher interest rates. Purchase applications have also declined from thier multiyear highs in April, and this week were only slightly positive YoY.

Housing prices
  • YoY this week +8.6%
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 made another new 6 year record.

Real estate loans, from the FRB H8 report:
  • +0.1% w/w

  • +0.7% YoY

  • +2.4% from its bottom
Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  In the last several months the comparisons have completely stalled, although this week was again positive YoY.

Money supply

  • +1.1% w/w

  • -2.1% m/m

  • +9.8% YoY Real M1

  • +0.7% w/w

  • +0.4% m/m

  • +5.3% YoY Real M2
Real M1 made a YoY high of about 20% in January 2012 and eased off thereafter. Earlier this year it increased again but has backed off its highs.  Real M2 also made a YoY high of about 10.5% in January 2012.  Its subsequent low was 4.5% in August 2012. It increased slightly in the first few months of this year and has stabilized since.

Employment metrics

American Staffing Association Index
  • 94 unchanged w/w, also unchanged YoY
Initial jobless claims
  •   360,000 up +17,000

  •   4 week average 351,750 up +6,250
Tax Withholding
  • $69.6 B for the first 8 days of the month of July vs. $162.4 B last year, up +$7.2 B or +11.5%

  • $152.6 B for the last 20 reporting days vs. $137.4 B last year, up +$15.2 B or +11.1%
The ASA deteriorated to being flat or negative compared with last year in the last several months, although it rebounded slightly this week. Daily tax withholding remained in the lower part of its YoY range compared with its YoY average comparison in the last 6 months. Initial claims remain within their recent range of between 325,000 to 375,000, and have flattened out just as they have in the last 3 springs and summers. This week's spike may be due to the shortened 4th of July workweek, so I am discounting it for now.


Railroad transport from the AAR
  • +4900 carloads up +2.0% YoY

  • +3800 carloads or +2.6% ex-coal

  • +2200 or +1.1% intermodal units

  • +7200 or +1.6% YoY total loads
Shipping transport Rail transport has been both positive and negative YoY in the last several months. This week it was positive once again. The Harpex index had been improving slowly from its January 1 low of 352, but has flattened out in the last 4 weeks. The Baltic Dry Index increased this week and is close to its 52 week high.

Consumer spending Gallup's YoY comparisons are still very positive, but less so than they have been since last December. The ICSC varied between +1.5% and +4.5% YoY in 2012, while Johnson Redbook was generally below +3%. The ICSC, which had been stalling, improved this week, and Johnson Redbook remains close to the high end of its range.

Bank lending rates The TED spread is still near the low end of its 3 year range.  LIBOR rose remains slightly above the new 3 year low it established four weeks ago.

JoC ECRI Commodity prices
  • up 1.14 to 123.13 w/w

  • +5.98 YoY
Surprisingly, despite the big run-up in Oil prices, most of the indicators remained positive, including house prices (at a new YoY record high), credit spreads, consumer spending, money supply, and bank rates. Rail had a positive week also. Slight positives included real estate loans and shipping, as well as commodity prices.

In addition to Oil prices, which should start to constrict economic activity in a month or two if they remain at this level, negatives continued to include bond prices, mortgage refinancing and purchase mortgages. Jobless claims were also a negative for the first time in a long time.

The sharp rise in interest rates and the sharp decrease in mortgage refinancing have now been joined by a big spike in Oil prices, which will shortly be felt at the pump. The big coincident indicators of the economy, consumer spending and initial jobless claims, were mixed, with consumer spending improving and jobless claims spiking. If the spike in jobless claims continues for a couple more weeks, that would be a bad sign, but I am discounting it for now.

Have a nice weekend.