Happy New Year! In 2012 I am making some additions and improvements to this weekly recap of high frequency indicators designed to capture an up to the moment snapshot of the economy. First of all, many of the data series have seasonality and so must be tracked YoY. But one problem reporting simple YoY data is that it will lag turning points. To capture those turning points better, I am reporting new 4 month high or low YoY comparisons where applicable. Secondly, because of the concern that global weakness may itself cause a US recession, I am adding several indicators of global strength or weakness: two credit stress indexes, and two shipping indexes. Finally, I hope shortly to introduce a Shadow Weekly Leading Index, designed to replicate that ECRI series as much as possible from public data.
Before turning to the high frequency weekly indicators, let’s as usual briefly check out the monthly reports. All of the monthly data reported this week was positive, although a few came in lighter than expectations. Construction spending, ISM manufacturing, ISM services, factory orders, vehicle sales, and most importantly of all, payrolls, all were positive month over month. Further, all of the leading indicator components of the ISM, factory order, and payroll numbers, also showed improvement. These numbers show an ongoing solid, if not stellar, recovery.
There are still a couple of weeks left where holiday seasonality can strongly influence the high frequency weekly indicators.
Weekly employment-related data continued positive:
The BLS reported that Initial jobless claims fell by 9,000 to 372,000. The four week average declined by 1750 to 373,250. This is the lowest level since mid-2008. Seasonality will remain significant for a couple of more weeks, so caution is still warranted in reading too much into these extremely good numbers.
The American Staffing Association Index fell by 7 to 86 last week. This is entirely due to seasonality, and in fact, the index is back above year ago levels, after stagnating in mid-2011.
Adjusting +1.07% due to the 2011 tax compromise, the Daily Treasury Statement showed that withholding for the full month of December was $164.0 B vs. $169.9 B a year ago. Since there were two more reporting days for December 2010 vs. 2011, however, this is not a concern. For the last 20 reporting days, $150.3 B was collected vs. $142.4 B a year ago, a gain of +5.5%.
Housing data was mixed:
The Mortgage Bankers’ Association reported that seasonally adjusted purchase mortgage applications decreased -9.7% from two weeks ago. While they did not report a YoY figure, it is nevertheless clear that YoY purchase applications were down, continuing a decline that began about a month ago. The overall trend remains flat since over 18 months ago. Refinancing also fell -1.9% from two weeks ago.
For the sixth week in a row, YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were positive, up +2.1% YoY. This is the best reading in close to 5 years. An absolute majority of metro areas — 29 — had YoY price increases. Since the issue in 2012 will be whether the sales price trend catches up with asking prices, or whether asking prices will “catch down” with YoY Case-Shiller data, my downside metric is changing from -10% YoY to -5% YoY. While I believe asking prices are leading sales prices, if I am wrong sellers should start to capitulate and the number of areas with -5% or greater declines should increase. In the meantime, Chicago remained the only area with a 10% YoY price decrease.
Sales and transportation continued strong:
Retail same store sales continued to perform well. The ICSC reported that same store sales for the week ending December 31 increased strong +5.3% YoY, and were also up 1.2% week over week. Shoppertrak, did not report, however, Johnson Redbook also reported a strong 4.9% YoY gain.
The American Association of Railroads reported that total carloads increased 4.7% YoY, up about 19,100 carloads YoY to 426,900. Intermodal traffic (a proxy for imports and exports) was up 14,400 carloads, or 8.6% YoY. The remaining baseline plus cyclical traffic increased 4,600 carloads or 1.9% YoY. Total rail traffic has staged an impressive rebound in the last 4 months. This made a YoY high one week ago.
Money supply and credit spreads were tepid:
Money supply has been flat or down since its Euro crisis induced tsunami of late summer. M1 increased +1.5% last week, but only +0.5% month over month. It is still up 17.3% YoY, so Real M1 remains up 13.9%. This is about 8% under its peak YoY gain at the end of summer. M2 was flat week over week, but also up +0.5% month over month. It remains up 9.6% YoY, so Real M2 was up 6.2%. This is about 4% less than its YoY reading at the crest of the tsunami.
Weekly BAA commercial bond rates declined .03% to 5.21%. Yields on 10 year treasury bonds fell .01% 1.94%. Spreads in the last couple of months have generally widened slightly, representing increasing weakness. This spread had a 52 week maximum difference in August and tied that within the last month.
With the positive news, the Oil choke collar tightened again:
Oil closed at $101.81 a barrel on Thursday. This is above the recession-trigger level calculated by analyst Steve Kopits. Gas at the pump rose $.04 a gallon to $3.30. Measured this way, we are just about at the 2008 recession trigger level. Gasoline usage, at 8556 M gallons vs. 8853 M a year ago, was off -3.4%. The 4 week moving average is off -4.9%. Since March the YoY comparisons have been almost uniformly negative, and substantially so since July.
Now let’s turn to new high frequency indicators designed to track the global slowdown/recession:
The TED spread is at 0.5723 down from 0.5800 week over week. This index is slightly above its 2010 peak, and has been increasing since summer. The one month LIBOR is at 0.295, even with one week ago. While it too has been increasing since summer, it remains below its 2010 peak.
The Baltic Dry Index at 1426 continues to decline from its October 52 week high of 2173. The Harpex Shipping Index has been declining for a full year, and at 389 is at a 52 week low. Please note that these two indexes are influenced by supply as well as demand, and have generally been in a secular decline due to oversupply of ships for over half a decade. The Harpex index concentrates on container ships, and has been leading at recent tops and lagging at troughs. The BDI concentrates on bulk shipments such as coal and grain, and has been more lagging at the top but has turned up first at the 2009 trough.
While global worries generally continue to increase, in the US with the sole exception of mortgage applications there is no hint of any present or imminent downturn in any of the data as we begin 2012.
Have a good weekend.