There was little in the way of monthly data this past week. The bright spot was the ISM services index which rose slightly. Productivity fell, which is actually a positive for jobs and wages. Wholesale inventories were up. Factory orders decreased, continuing their streak, along with durable goods, of being the most negative of the leading indicators.
Let me repeat a few points about this column. First, it is not designed to be predictive but rather an up-to-the-moment report on the economy by use of high frequency weekly indicators. Second, while there is some randomness in each week’s data, if there is a turning point in the economy, it should show up in these indicators first before it shows up in monthly indicators.
Housing reports were mixed:
The Mortgage Bankers’ Association reported that the seasonally adjusted Purchase Index was reported to have fallen “slightly” from one week before, and was down -3.0% YoY. The Refinance Index rose 2.0% with lower mortgage rates. Despite the declines of the last few weeks, this index continues to be in the upper part of its 2 year generally flat range.
The Federal Reserve Bank’s weekly H8 report of real estate loans, which turned positive at the end of March after having been negative for 4 years, fell less than -0.1% w/w, and the YoY comparison declined -0.1% to +0.9%. On a seasonally adjusted basis, these bottomed in September and remain up +1.3%.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up + 2.3% from a year ago. Median asking prices, at $236,118, have now been higher YoY for over 6 months, and are higher than at any point last year, when the highest month featured median asking prices of $231,233. To repeat my point from last week, either this index had to turn or the Case-Shiller repeat sales index had to turn. This index has been steadily higher, but the Case-Shiller index on a seasonally adjusted basis has now turned up for two months in a row. As I anticipated, the Housing Tracker index led the other indexes. Barring the appearance of the long-a’coming foreclosure tsunami, the bottom in prices is here.
Employment related indicators were also mixed:
The Department of labour reported that Initial jobless claims fell 6,000 to 377,000 last week. The four week average rose 3,250 to 377,750. This may be a seasonal adjustment issue or something more ominous may be going on.
The Daily Treasury Statement for the first 5 days of June showed $39.4B vs. $38.3B for the first 5 days of June 2011. For the last 20 reporting days, $132.5B was collected vs. $117.8B a year ago, an increase of $15.5 B, or +12.5%. This is a more positive YoY comparison that has been usual in the last several months.
The American Staffing Association Index fell by one to 93. This is in keeping with prior years for the week including Memorial Day. It remains equal to 2007 and is several points below its all time record from 2006 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 26 rise +0.4%w/w, and were up +2.8% YoY. Johnson Redbook reported a 3.1% YoY gain. Shoppertrak reported a gain of 3.2% YoY. The 14 day average of Gallup daily consumer spending remained positive again this week at $73 vs. $71 in the equivalent period last year.
Money supply was mixed again:
M1 fell -0.3% last week, and also fell -0.7% month over month. Its YoY level decreased to +15.4%, so Real M1 is up 13.1%. YoY. M2 was flat for the week, but rose +0.4% month over month. Its YoY advance fell slightly to +9.4%, so Real M2 increased to +7.1%. 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 slightly and credit spreads continued to blow out:
Weekly BAA commercial bond rates fell .08% to 5.01%. Yields on 10 year treasury bonds fell .15% to 1.61%. The credit spread between the two increased further to 3.40%, a 52 week maximum. The trend of strongly falling bond yields means that fear of deflation is strong.
Rail traffic also was mixed again.
The American Association of Railroads report showed that total traffic for the week was flat YoY. Non-intermodal traffic was negative again, with 9 of 20 groups participating, down by -8400 cars, or -3.1% YoY. Excluding coal, this traffic was up +5,100 cars. Intermodal traffic was up 8,300 carloads, or +4.1%.
The graphs by Railfax are once again very instructive, showing cyclical traffic up about 5% YoY, while it is the non-cyclical baseline traffic which is off more than 10% YoY.
The energy choke collar continues to disengage:
Gasoline prices fell for the seventh straight week, down another .06 to $3.61. Oil was generally flat this week and ended at $84.10. Oil has only been less expensive for about 1 in the last 12 months, and are now well 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 as well. The 4 week average of Gasoline usage, at 8796 M gallons vs. 9167 M a year ago, was off -4.0%. For the week, 8648 M gallons were used vs. 9143 M a year ago, for a decline of -5.4%. This is not enough to cause me concern as June last year was one of the few months that did not have a YoY decline.
Turning now to high frequency indicators for the global economy:
The TED spread fell 0.1 to 0.39, near the bottom of its recent 4 month range. This index remains slightly below its 2010 peak. The one month LIBOR rose 0.001 to 0.241. 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. It remains interesting that neither of these two measures of fear have budged even slightly with the Europanic of the last month.
The Baltic Dry Index fell for the third week in a row, down from 904 to 877. It remains 207 points above its February 52 week low of 670. The Harpex Shipping Index fell 2 points from 459 to 457 last week, the first time it has not risen in close to 4 months.
Finally, the JoC ECRI industrial commodities index fell again this week, down from 117.74 to 116.25. This is at a 52 week low. This indicator appears to have more value as a measure of the global economy as a whole than the US economy.
The only domestic data which look poor YoY are gasoline usage and rail traffic, and while the decline is real, it still appears to have everything to do with energy efficiency. Initial claims, purchase mortgages, and real estate loans, which are seasonally adjusted, have retreated but not so much so as to set off alarm bells yet. Consumer spending continues to hold up like a champ, fuelled no doubt in part by the continuing refinancing boom. Those areas faring the poorest are all related to European and/or Asian weakness: credit spreads, shipping rates, and commodity prices.
In short, US data, while mixed in this week’s report, continues to look weakly positive, and certainly better than it was last August and September. This coming week in monthly data will give us retail sales, producer and consumer prices, and industrial production, which will generally complete the picture for May. Watch to see if real sales and production are weakly positive or not.