Weekly Indicators: Purchase Mortgage Application, Silver Lining Edition

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 |  Includes: DIA, IEF, OIL, QQQ, SPY
by: Hale Stewart

by New Deal Democrat

This past week was a sparse week for new data, but what data there was finally put the fear of double-dip recession on people's minds. This fear is something I predicted back in January would come to pass about now, due to Oil and austerian idiocy. As it turned out, there was a big assist from Japan as well.

The rear view mirror showed first quarter GDP unchanged at +1.8%. In monthly numbers, new home sales were up, but still bouncing along the bottom they established two years ago. Durable goods orders declined more than expected, but keep in mind that those surprised strongly to the upside a month ago. Averaging the two months together gives us +0.4% a month which is probably the better view. Real income and spending were flat for the second month in a row. Consumer confidenced bounced back from it March - April levels ... to its January - February levels.

Turning to the high frequency weekly indicators:

Oil finished slightly above $100 a barrel on Thursday. It still remains slightly above 4% of GDP. Gas at the pump finally fell, declining $.11 to $3.85 a gallon. Gasoline usage at 9025 M gallons was 0.8% lower than last year's 9099. This YoY comparison has been negative for the last eleven weeks in a row, but the YoY comparisons are not so negative as they were a few weeks ago.

The BLS reported that Initial jobless claims last week were 424,000. The four week average is now 438,500. I expect it to abate next week when the 478,000 weekly number rotates out of the average. In the meantime, don't be surprised if we get a sub- +50,000 May nonfarm payrolls next week.

Railfax was up 5.0% YoY for the week, or 20,000 carloads. This is the best weekly YoY gain in a while, but it reflects more weakness at this time last year than strength this year. The Baseline traffic 4 week moving average is up 3.13% from a year ago. Cyclical traffic is up 2.40%. Intermodal traffic (a proxy for imports and exports) is 3.45% compared with a year ago.

The Mortgage Bankers' Association reported an increase of 1.5% in seasonally adjusted mortgage applications last week. It was 0.8% higher than this week last year. With the exception of the onset and ending of the $8000 mortgage tax credit, this is the first time since 2007 that the YoY mortgage applications number was positive. Refinancing increased 1.9% to a 5 month high, reflecting the continued decline in mortgage rates. The purchase series has now been generally flat for one full year - compared with its previous relentless decline, a good thing.

The American Staffing Association Index remained at 94 for the second week. This advance looks very much like the first half of 2007 - slow growth, but not stalled.

The ICSC reported that same store sales for the week of May 21 increased 3.1% YoY, but declined -1.0% week over week. Shoppertrak reported a very strong 7.7% YoY increase for the week ending May 21 (after a similarly strong 8.3% YoY increase the week before) and a WoW decrease of 0.3%. Weekly retail sales numbers have been a bright spot all year, generally showing the consumer not rolling over due to gas prices.

Weekly BAA commercial bond rates dencreased .07% to 5.76%. This yields of 10 year Treasury bond decreased .05% to 3.15%. The decline in treasury rates over the last few months does show fear of deflation due to an economic slowdown, but the decrease in corporate rates does not reflect any relative distress in the corporate market.

Adjusting +1.07% due to the 2011 tax compromise, the Daily Treasury Statement showed that for the first 18 days of May 2011, $119.5 B was collected vs. $116.6 B a year ago, for an increase of $2.9 B YoY. For the last 20 days, $130.0 B was collected vs. $116.4 B a year ago, for an increase of $15.6 B, or 11%. Use this series with extra caution because the adjustment for the withholding tax compromise is only a best guess, and may be significantly incorrect. Like Railfax, this week this number more reflects unusual weekness last year than strength this year.

M1 was up 0.4% w/w, up 1.8% m/m, and up 12.2% YoY, so Real M1 was up 9.1%.
M2 was up 0.1% w/w, up 0.7% m/m, and up 4.9% YoY, so Real M2 was up 1.8%.
Real M1 remains very bullish, while Real M2 has sunk slightly further into the caution zone under 2.5%

Finally, R.I.P. Mark Haines. The irascible, hilarious CNBC anchor made financial news entertaining. And he didn't suffer BS from anybody. There are no more like him. He will be missed.

There is NOT going to be a double-dip recession, although a further slowdown or even a stall this quarter and/or next cannot be ruled out. The fear will serve to help Oil prices reverse, just as they did last year. When that choke collar loosens, the economy will accelerate once again.