There was almost no monthly data released this past week. Producer prices increased sharply, almost entirely due to gasoline. Consumer confidence for the second half of September reached a new post-recession high. The expectations component of consumer confidence also made a new post-recession high, and this is a component of the LEI.
A reminder: I watch high frequency weekly indicators not because they lead the economy, but because they are a snapshot of the virtual present, as opposed to looking in the rear view mirror. While there is plenty of noise, they should show turns or continuations in a trend before they show up in monthly or quarterly data.
Let’s start this week with Employment related indicators, which featured the biggest surprise of the week.
The Department of labour reported that Initial jobless claims at 339,000 declined 28,000 from the prior week’s unrevised figure. The four week average fell 8,000 to 367,000, only 1% above its post-recession low. Although the huge drop is suspect, it is likely that there was a significant decline even leaving aside California. We’ll see next Thursday.
The American Staffing Association Index was again level at 95. The index is equal to its high reading for the year. The red flag from this indicator which was in place a few weeks ago remains off.
The Daily Treasury Statement showed that 8 days into Ocotber, $61.5 B was collected vs. $ 58.8 B a year ago, a $2.5 B increase. For the last 20 days ending on Thursday, $136.5 B was collected vs. $130.1 B for the comparable period in 2011, a gain of $6.4 B or 4.9%. The YoY comparison in tax collections has improved markedly since midyear.
Same Store Sales and Gallup consumer spending varied from weakly to solidly positive:
The ICSC reported that same store sales for the week ending October 5 were up 0.2% w/w but were up +2.8% YoY. Johnson Redbook reported a weak 1.6% YoY gain. The 14 day average of Gallup daily consumer spending as of October 11 was $78, compared with $67 last year for this period. Gallup’s YoY comparison has been strongly positive for 10 of the last 12 weeks. This contrasts with the yellow flag in the Johnson Redbook number.
Bond yields declined and credit spreads narrowed:
Weekly BAA commercial bond rates fell .03% to 4.69%. Yields on 10 year treasury bonds fell .01% to 1.67%. The credit spread between the two decreased at 3.02%, which matches its 14 month low. This continues an excellent trend.
Housing reports were all positive:
The Mortgage Bankers’ Association reported that the seasonally adjusted Purchase Index rose about 2% from the prior week, and is up 12% YoY. These are now back in the upper part of their 2+ year range. The Refinance Index fell -2% for the week, retreating slightly from a new 3 1/2 year high set last week.
The Federal Reserve Bank’s weekly H8 report of real estate loans this week rose 5 to 3534. The YoY comparison increased to +1.6%, which is also the comparison from the seasonally adjusted bottom.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were again up +2.2% from a year ago. YoY asking prices have been positive for over 10 months.
Money supply has been mixed in the last few weeks but remains quite positive on a yearly basis:
M1 gained +0.1% for the week, but was off -0.8% month over month. Its YoY growth rate fell to 10.1%. As a result, Real M1 also fell to +8.4% YoY. This is the least YoY gain in well over a year, but is still very positive. M2 gained +0.7% for the week, and was up 0.9% month over month. Its YoY growth rate stayed even at 6.9%, so Real M2 remained at 5.2%. The growth rate for real money supply is still quite positive.
Rail traffic was very negative YoY, but still due primarily to coal, while the diffusion index improved considerably:
The American Association of Railroads reported that total rail traffic was down -1.9% YoY. Non-intermodal rail carloads were again off a huge -6.3% YoY or -18,100, once again entirely due to coal hauling which was off -24,700! Negative comparisons rose back from 6 to 10 types of carloads. Intermodal traffic was up 8,100 or +3.8% YoY.
Finally, the price of oil rose last week, and gasoline prices and usage still show the choke collar engaged:
Gasoline prices rose $.05 last week to $3.85. This is extremely unusual and bodes ill for the impact of energy prices on the economy next spring. Oil prices per barrel also rose from $89.88 to $91.66. Gasoline usage remained negative on a YoY basis. For one week, it was 8587 M gallons vs. 9010 M a year ago, down -4.7%. The 4 week average at 8656 M vs. 8948 M one year ago, was down -3.3%. This YoY decline is on top of the YoY decline last autumn. For example, the 4 week average is -4.8% compared with two years ago and is a yellow flag suggesting more weakness.
Turning now to the high frequency indicators for the global economy:
The TED spread continued to fall to year another new 52 week low of 0.234. The one month LIBOR also fell to a new 52 week low of 0.2140. Both are well below their 2010 peaks and in the middle (TED) or low end (LIBOR) of their respective 3 year ranges.
The Baltic Dry Index rose sharply again from 875 to 926, well above its recent 52 week low of 662. The declining trend in shipping rates for the last 3 years remains fully intact. The Harpex Shipping Index fell 4 to 374, however, establishing a new 52 week low.
Finally, the JoC ECRI industrial commodities index fell sharply from 125.24 to 121.63. It is once again slightly negative YoY.
Once again there is a divergence between transportation and other measures of the economy. Total rail traffic is down the most it has been in close to 3 years. Gasoline usage is also down significantly YoY, which is a further decline from last year’s big YoY declines. Prices are close to choke collar range when they should be close to annual lows. The Harpex shipping index set a new low.
Outside of that, however, a large majority of the high frequency data is positive. Housing continues to be positive. Money supply, and especially M2, which is not under the control of the central bank, remains quite expansionary. Credit prices and spreads are positive, spreads the best in over a year. Bank lending rates are at new 52 week lows. Tax withholding continues its recent strong streak. Rail shipping ex-coal is actually quite positive. Most measures of consumer spending still show strength, although one is in yellow flag territory, at least this week. Only commodity prices, more a measure of the global vs. US economy, were down sharply this week. I’ll set aside jobless claims till I see what happens next Thursday.
Have a nice weekend.
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