It Was Another Week Of Positive Data, But Energy Prices Are Getting Scary Again

There was little monthly or quarterly data this past week.  Productivity increased in the second quarter, as did unit labour costs.  The US trade balance got less worse.  The wholesale inventory to sales ratio ticked up.  Both import and export prices declined.I report on high frequency weekly indicators because they are as close as we can reasonably get to observing economic trends in real time.  Turns will show up here before they show up in monthly or quarterly data.  Recently I’ve been focusing on consumer purchases and the effects of the Oil choke collar as the keys to the economy for the second half of this year.

So let’s start once again this week with Same Store Sales, which were positive, and Gallup very so:

The ICSC reported that same store sales for the week ending August 4 rose 0.6% w/w, and were up +2.4% YoY.  Johnson Redbook reported a 2.0% YoY gain.  Shoppertrak, did not report. 

The 14 day average of Gallup daily consumer spending  continued an upward spike that started at the end of July and as of August 9 was at $83, $6 over last year’s $77 for this period.  This is the second week of real strength after six weeks in a row of weakness. This is very encouraging but we will still have to see if consumers are regaining their footing.

On the other hand, the energy choke collar remains close to re-engaging and renewed declines in usage signals weakness:

Gasoline prices rose significantly last week, up $.14 from $3.51 to $3.65.  Oil prices per barrel rose slightly for the week, from $91.40 to $92.87.  Gasoline usage, at 8839 M gallons vs. 9244 M a year ago, was off -4.4%  The 4 week average at 8737 M vs. 9122 M one year ago is off -4.2%, also a significant YoY decline.  The renewed decline in energy usage compared with last year must be considered a sign of weakness unless there is some new surprise level of efficiency compared with one year ago to explain the discrepancy.

Employment related indicators were also positive this week.

The Department of labour reported that Initial jobless claims declined 4,000 to 361,000 from the prior week’s unrevised figure.   The four week average rose by 2750 to 368,250 (as the comparison week of 350,000 dropped out).  The lowest 4 week average during the entire recovery has been 363,000.  This number does not appear to be compatible at all with further economic weakness. 

The Daily Treasury Statement showed that for the first 7 days of August 2012, $51.7 B was collected vs. $52.8 B a year ago.  For the last 20 days ending on Thursday, $133.4 B was collected vs. $128.1 B for the same period in 2011, a gain of +4.1%. 

The American Staffing Association Index rose to 93.  This index was generally flat during the second quarter at 93 +/-1, and has returned to that level after its July 4 seasonal slump. It nevertheless is not rising from that range and so indicates some weakness.

Bond prices and credit spreads both decreased again:

Weekly BAA commercial bond rates rose .03% to 4.80%.  These remain close to the lowest yields in over 45 years. Yields on 10 year treasury bonds  rose 0.7% to 1.54%.  The credit spread between the two declined to 3.26%, which is about halfway between its 52 week maximum than minimum, and a significant improvement from one month ago.  Tightening credit spreads are a good sign. 

Housing reports remained mixed:

The Mortgage Bankers’ Association reported that the seasonally adjusted Purchase Index declined -1% from the week prior, and were also down -12% YoY, back into the middle part of its two year range.  Mortgage applications declined precipitously in August 2011, so this YoY comparison is likely to change in the next few weeks.  The Refinance Index fell -2% but is still near its 3 year high.

The Federal Reserve Bank’s weekly H8 report of real estate loans this week rose +0.1% again.  The YoY comparison rose to +1.1%.  On a seasonally adjusted basis, these bottomed last September and are also up +1.1%. 

YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker  were up + 2.1% from a year ago.  YoY asking prices have been positive for over 8 months.

Money supply remains generally positive despite now being compared with the inflow tsunami of one year ago:

M1 was off -0.8% last week, but was up +2.6% month over month.  Its YoY growth rate fell to +13.9%, so Real M1 is up 12.2% YoY.  M2 rose +0.1% for the week, and was up 0.6% month/month.  Its YoY growth rate fell to 7.4%, so Real M2 grew at +5.7%.  Real money supply indicators after slowing earlier this year,  have increased again,  although YoY comparisons are now declining as the tsunami of cash arriving from Europe last summer disappears from the comparisons.

Rail traffic was positive and its diffusion index improved:

The American Association of Railroads  reported a +1.7% increase in total traffic YoY, or +8,700 cars.  Non-intermodal rail carloads were up +0.4% YoY or 1000, despite coal hauling being off -8000.  Negative comparisons fell from 8 to 6 types of carloads.  Intermodal traffic was up 6700 or 3.3% YoY. 

Turning now to high frequency indicators for the global economy:

The TED spread fell .02 to 0.34, at a 52 week low. The one month LIBOR declined to 0.240. It has back to its April – May range, it remains well below its 2010 peak, and has still within its typical background reading of the last 3 years.  Even with the recent scandal surrounding LIBOR, it is probably still useful in terms of whether it is rising or falling.

The Baltic Dry Index fell from 852 to 774. It is now only 104 points above its February 52 week low of 670.  The Harpex Shipping Index fell another 14 points to 400.  It is up only 25 from its February low of 375.

Finally, the JoC ECRI industrial commodities index rose from 116.70 to 119.10.  This is still near its recent 52 week low.  YoY comparisons for this number will shortly improve (or get less worse) as its August 2011 swoon will leave the comparison period.  Nevertheless, its decline remains a strong sign  that the globe taken as a whole has been slipping back into recession.

While the global data remains very weak, this was a very good week for US data generally, although due to the withering corn crop, ethanol prices and therefore gasoline prices have increased smartly.  There was an air pocket of sudden weakness last August, and so many of the YoY comparisons should improve in the next few weeks.  That the consumer is spending again after a two month hiatus is especially a relief.

Have a nice weekend!

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