Weekly Indicators: Dead In The Water Edition

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 |  Includes: DIA, FXE, IYR, IYT, OIL, QQQ, SPY
by: Hale Stewart

by New Deal Democrat

The only significant monthly data reported in the last week was the ISM services index, which rebounded slightly. Its components were mixed, but all were positive. With one exception, the high frequency weekly indicators show an economy completely dead in the water, neither rising nor sinking, but just barely positive or negative.

Let's start with the negatives:

The most negative statistic continued to be gasoline usage. Oil finished at $87.24 a barrel on Friday. Gas at the pump rose $.04 more to $3.67 a gallon. Gasoline usage was -3.4% lower than a year ago, at 8956 M gallons vs. 9263 M a year ago. With the exception of a few weeks, gasoline usage has been negative for months. Because of the divergence between Brent and West Texas crude, it may be better to compare gasoline prices as a recession indicator. While WTIC is about $7 below the historical recession trigger level, gasoline prices compared with hourly earnings may be about $.25 to $.30 above that level.

Initial jobless claims continued their recent range. The BLS reported that Initial jobless claims rose 5000 to 414,000. The four week average increased to 414,750. Jobless claims still remain lower than for all but two months in the last 3 years.

The Mortgage Bankers' Association reported that seasonally adjusted mortgage applications increased 0.2% last week. For the fourth week in a row, the YoY comparison in purchase mortgages was negative, down -13.5% YoY. Refinancing decreased 6.3% w/w despite near record low interest rates. Refinancing is nevertheless relatively higher recently with sharp decline in interest rates. Because of the low rate of housing purchases, the YoY% decline in purchase mortgage applications does not have nearly the impact it would at higher volumes.

Weekly BAA commercial bond rates were flat at 5.40%. Yields on 10 year treasury bonds decreased .02% to 2.17%. This indicates a continuing slight increase in the relative distress in the corporate market, further indicating increased relative fear of rising corporate defaults.

Several series were mixed or negative but showing continued improvement:

The American Association of Railroads reported that total carloads decreased -.5% YoY, down 7500 carloads YoY to 534,100. Intermodal traffic (a proxy for imports and exports) was, unusually, also down 3100 carloads, or- 1.3% YoY. The remaining baseline plus cyclical traffic was down 1300 carloads, or -0.4 YoY%. Rail traffic has been negative YoY for 5 of the last 9 weeks. Using the breakdown of cyclical vs. baseline traffic from Railfax, baseline traffic was down 6900 carloads, or -3.5%YoY, while cyclical traffic was up 5600 carloads, or +5.2% YoY.

YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker showed that the asking prices again declined -2.0% YoY. This is the smallest YoY decline in the 5 year history of this series (YoY measurements were possible beginning in April 2007). The areas with YoY% increases in price also remained at 13. The areas with double-digit YoY% declines declined to only 3 (Boston, Chicago, and Tucson, AZ).

Some series remained positive:

The American Staffing Association Index increased one point to 88. This series has stalled at the 87-88 range for over 2 months.

Adjusting +1.07% due to the 2011 tax compromise, the Daily Treasury Statement showed that for the first 5 days of September 2011, $42.3 B was collected vs. $42.0 B a year ago, for an increase of $0.3 B. For the last 20 days, $127.0 B was collected vs. $125.1 B a year ago, for an increase of 1.5%. This is a weak gain.

Retail same store sales continue to be positive though not as much so as recently. The ICSC reported that same store sales for the week of August 27 increased 2.7% YoY, and decreased -0.7% week over week. Shoppertrak reported a weak 1.7% YoY increase for the week ending August 27 and a WoW decrease of -1.6%.

Finally, let's turn to a strong but controversial positive:

Money supply -a leading indicator - continued to surge. M1 was up 1.0% for the week, and also increased 3,0% m/m, and 20.5% YoY, so Real M1 was up 16.9%. M2 increased 0.3% w/w, and also increased 1.7% m/m, and 10.4% YoY, so Real M2 was up 6.8%. The YoY increase in both M1 and M2 continue near historic high levels. While I believe Scott Grannis and Kash Monsori are correct in identifying European panic as a likely source for this increase, which means it is "hot money" that could decrease just as quickly, nevertheless I do not believe that this means that "this time it's different." Over a very long history an increase in real money supply has been a good thing and in my opinion should be regarded as such now.

Most of the weekly data has turned slightly negative or mixed. Additionally, while I don't have current plans to track it indefinitely, it is worth noting that the daily Gallup consumer confidence report, which first and most strongly showed the collapse of consumer confidence during the last month of the debt ceiling debacle, remained generally flat this week, having improved somewhat from its early August bottom. Consumer spending remains positive YoY in that daily Gallup poll.