The big monthly news this week was August’s LEI, which declined -0.1. This index is only up 0.1 for the last 5 months. The Conference Board, which compiles the index, believes this indicates continued but very slow growth. While building permits, starts, and existing home sales continued to show a recovering housing market from very low levels, the Empire State and Philly Indexes added to the evidence that manufacturing is actually contracting.
The high frequency weekly indicators should show turns before they show up in monthly or quarterly data. These are quite mixed, which is a weakening from a few months ago.
Let’s start once again with energy. The price of oil declined last week, but gasoline prices and usage still show the choke collar engaged:
Gasoline prices rose yet again last week, up $.04 from $3.85 to $3.89. Gas prices have risen $0.53 since their early July bottom, and are now only $0.05 cheaper than at their highest point this spring.Oil prices per barrel fell sharply from $99.00 to $92.89. Gasoline usage was slightly negative on a YoY basis. For one week, it was 8632 M gallons vs. 8818 M a year ago, down -2.1%. The 4 week average at 8892 M vs. 8973 M one year ago, was down -0.9%.
Employment related indicators were again mixed this week.
The Department of labour reported that Initial jobless claims wre steady at 382,000 from the prior week’s unrevised figure. The four week average rose another 3,000 to 378,000, about 4% above its post-recession low. If higher oil prices are again acting as a governor preventing fast economic growth, then this number, unfortunately, should continue to rise in coming weeks, and there is now evidence of at least some impact.
The American Staffing Association Index rose by one back to 93. This index was generally flat during the second quarter at 93 +/-1, and for it to be positive should have continued to rise from that level after its July 4 seasonal decline. It has not done so. This is a red flag, as the trend from spring into fall is worse than in 2007, 2009, 2010 and 2011. Only 2008 had a worse 6 month trend.
On the other hand, the Daily Treasury Statement showed that 13 days into September, $99.5 B was collected vs. $93.5 B a year ago, a $6.0 B or a 7% increase. For the last 20 days ending on Thursday, $134.0 B was collected vs. $127.4 B for the comparable period in 2011, a gain of $6.6 B or +5.2%.
Same Store Sales and Gallup consumer spending were all solidly positive:
The ICSC reported that same store sales for the week ending September 8 were down -2.5%% w/w (as is typical after school starts), but were up +2.1% YoY. Johnson Redbook reported another solid 2.4% YoY gain. The 14 day average of Gallup daily consumer spending as of September 20 was $72, compared with $65 last year for this period. Gallup’s YoY comparison has been strongly positive for 7 of the last 9 weeks.
Bond yields rose and credit spreads were steady:
Weekly BAA commercial bond rates rose .12% to 4.94%. Yields on 10 year treasury bonds also rose .12% to 1.76%. The credit spread between the two remained at 3.18%, which is closer to its 52 week minimum than maximum, an improvement from several months ago.
Housing reports were all positive:
The Mortgage Bankers’ Association reported that the seasonally adjusted Purchase Index fell about 4% from the prior week, but is up about 8% YoY. Generally these remain in the middle part of their 2+ year range. The Refinance Index also rose about +1% for the week.
The Federal Reserve Bank’s weekly H8 report of real estate loans this week rose 20 to 3534. The YoY comparison rose to +2.2%, which was also the seasonally adjusted bottom. The raw number is an 18 month high, and the percentage gain is the best in 3 years.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up +2.2% from a year ago. YoY asking prices have been positive for almost 10 months.
Money supply remains quite positive:
M1 declined -0.6% for the week, but was up +2.3% month over month. Its YoY growth rate continued to rise sharply, to +14.3%. As a result, Real M1 also rose to +12.6%. YoY. M2 increased +0.3% for the week, and was up 0.6% month over month. Its YoY growth rate also rose again to +6.8%, so Real M2 rose to +5.1%. The growth rate for real money supply is still quite positive, despite the summer 2011 incoming tsunami of Euro-cash having disappeared from the comparison.
Rail traffic was completely flat YoY due primarily to coal, but 12 of 20 carload types had YoY negative comparisons:
The American Association of Railroads reported that total rail traffic was essentially unchanged YoY, up only +0.1%. Non-intermodal rail carloads were again off a substantial -2.9% YoY or -8,700, once again entirely due to coal hauling which was off -13,100. Negative comparisons expanded from 8 to 12 types of carloads. Intermodal traffic was up 8,400 or +3.9% YoY.
Turning now to the high frequency indicators for the global economy:
The TED spread declined sharply again to yet another new 52 week low of 0.27. The one month LIBOR also declined sharply to 0.2165, and also set another new 52 week low. Both are well below their 2010 peaks and in the middle (TED) or low end (LIBOR) of tier respective 3 year ranges.
The Baltic Dry Index rose sharply from 662, which was a 52 week low, to 774. This is only a one month high and the declining trend in shipping rates for the last 3 years is fully intact. The Harpex Shipping Index fell yet again, down 4 from 390 to 386, and is now only 11 above its February 52 week low.
Finally, the JoC ECRI industrial commodities index was essentially steady at 124.65 only up .01 from last week. It is still down YoY. This number has improved sharply over the last month.
The sharp bifurcation in the numbers continued. Housing sales, prices, and mortgage refinancing are all positive at this point. Consumers are yet again holding up like champions. Money supply remains strongly positive. It looks like Oil and gasoline prices may have temporarily peaked. Remember the Euro crisis? The TED spread and LIBOR say it is back to simmering on the back burner.
At the same time manufacturing and employment indicators continue to falter, as measured by increasing first time jobless claims and a stalled temporary staffing index (although treasury deposits have turned quite positive again). Gasoline usage is negative again. Rail traffic looks poor, with no YoY growth and 12 of 20 carload groups negative. Shipping rates remain poor.
So long as housing, cars, and consumer spending hold up I remain very cautiously optimistic. At the same time it is apparent that the global slowdown or contraction is dragging down US manufacturing, and that plus the Oil choke collar have begun to affect employment. As usual, I will continue to focus on gasoline prices and the consumer.
Have a good weekend.
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