Monthly data reported in the last week was mixed, due to revisions in the prior month’s data. Retail sales were up, just barely. There was no consumer inflation. Housing permits fell sharply, but only because the prior month’s numbers were revised even more sharply higher. This caused the Index of Leading indicators to record a slight decline. Housing sales are in a definite uptrend. Industrial production rose strongly, but less so taking into the negative revision to the prior month. Regional manufacturing reports were mixed with NYS up strongly, and Philly in contraction.
The high frequency weekly indicators this week, with one exception, were neutral to positive as the Oil choke collar disengages due to the now-annual ritual of late spring Europanic.
Let’s start with the exception. Rail traffic was mixed again this week. The American Association of Railroadsreported a -1.3% decrease in total traffic YoY, or -8,100 cars. Non-intermodal traffic was down by -15,200 cars, or -5.2% YoY. Excluding coal, this traffic was up 5,800 cars. Ethanol-related grain shipments were also off, as were chemicals, metals, and scrap. Intermodal traffic was up 7,100 carloads, or +3.1%. Railfax’s graph of YoY traffic continued to show that the YoY improvement in hauling of cyclically sensitive materials remains strong. Oddly, it remains baseline, non-cyclical shipments that are declining, and declining ever more sharply.
Housing was mixed but at slightly higher recent levels:
The Mortgage Bankers’ Association reported that the seasonally adjusted Purchase Index fell -2.4% from the prior week, and was down slightly, -1.0% YoY. The Refinance Index jumped 13.0% with record low mortgage rates. This index continues to be near the upper end of its 2 year generally flat range.
The Federal Reserve Bank’s weekly H8 report of real estate loans, which had been negative YoY for 4 years, turned positive over one month ago. This week, real estate loans held at commercial banks was flat w/w, and their YoY comparison declined -0.1% to +0.9%. On a seasonally adjusted basis, these bottomed in September and remain up +1.6%.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up +2.4% from a year ago. YoY asking prices have been positive now for almost 6 months. Median current list prices are now higher than at any point last year. Either this indicator will turn, or the Case-Shiller repeat sales index is likely to turn within the next several months. I do not see how the divergence between the two can continue much longer.
Employment related indicators were also neutral to positive:
The Department of labour reported that Initial jobless claims rose 2,000 to 370,000 last week. The four week average fell 4000 to 375,000. It seems more likely that in April we saw a quirk of seasonality rather than a more ominous sign.
The Daily Treasury Statement for the first 13 days of May showed $87.7 vs. $95.6 B for April 2011. This has everything to do with the month starting on a Tuesday rather than a Monday. Compare Monday through Wednesday in the equivalent period and this year is $4.0 B ahead of last year. For the last 20 reporting days (4 x each day of the week), $132.7 B was collected vs. $129.6 B a year ago, an increase of $3.1 B, or +2.4%. This reverses last week’s decline, but is still a weak advance.
The American Staffing Association Index remained at 93 for the third week. It remains two to three points below the all time records from 2006 and 2007 for this week of the year.
Same Store Sales continue to be solidly positive.
The ICSC reported that same store sales for the week ending May 12 fell -0.8% w/w, but were up +4.5% YoY.Johnson Redbook reported a 3.7% YoY gain. Shoppertrak reported a gain of 12.0% YoY after last week’s YoY decline of -2.7%. The 14 day average of Gallup daily consumer spending turned positive again this week at $71 vs. $68 in the equivalent period last year.
Money supply was mixed:
M1 fell -1.5% last week, and also fell -0.6% month over month. Its YoY level increased to +16.5%, so Real M1is up 14.2%. YoY. M2 was flat for the week, and was up +0.4% month over month. Its YoY advance rose slightly to +9.6%, so Real M2 increased to +7.3%. Real money supply indicators continue to be strong positives on a YoY basis, although they have had a far more subdued advance since September of last year.
Bond prices rose and credit spreads were flat:
Weekly BAA commercial bond rates fell .07% to 5.08%. Yields on 10 year treasury bonds also fell .07% to 1.88%. The credit spread between the two remained even at 3.20%. Strongly falling bond yields mean that fear of deflation is strong. Spreads have been widening for the last month until this week.
Finally, the energy choke collar is disengaging:
Gasoline prices fell for the fourth straight week, down another .04 to $3.75. Oil fell almost $5 this week, $96.13 to $91.48. Oil prices are now below the point where they can be expected to exert a constricting influence on the economy. Since gasoline prices follow with a lag, we can expect gasoline to fall to that point in about a month as well. The 4 week average of Gasoline usage, at 8692 M gallons vs. 8864 M a year ago, was off -1.9%. For the week, 8971 M gallons were used vs. 9048 M a year ago, for a decline of -0.9%. Gasoline usage is moving to parity with the reduced levels that began to be established one year ago.
Turning now to high frequency indicators for the global economy:
The TED spread remained at 0.390, near the bottom of its recent 3 month range. This index remains slightly below its 2010 peak. The one month LIBOR rose slightly to 0.240. 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 slightly from 1138 to 1141. It is about 1/3 of the way back from its February 52 week low of 670 to its October 52 week high of 2173. The Harpex Shipping Index rose another 5 points from 440 to 445 in the last week, and is up 70 from its February low of 375.
Finally, the JoC ECRI industrial commodities index fell sharply for the second week in a row, from 122.82 to 120.25. This indicator appears to have more value as a measure of the global economy as a whole than the US economy.
When the US is in a recession, that doesn’t mean that every single state’s economy is contracting. Texas or Washington state might be doing well, for example. The sharp declines in the JoC ECRI index and treasury bond yields seem to be all about Europanic. The global economy as a whole might be slipping into contraction thanks largely to austerian stupidity in Europe (but note that global shipping rates appear to have bottomed).
But when we look at the up to the moment indicators for the US, we see a slow improvement in housing, refinancing of mortgages at lower rates, consumer purchases remaining strong, payroll taxes modestly improving, the Oil choke collar loosening, and both industrial and retail consumers of energy focusing like lasers on efficiency. On the other hand, rail traffic is an actual drag, even if there are very good reasons for the decline that are longer-term economic positives. In short, the US economic expansion appears intact.