There was little monthly data reported in this past week. New and existing housing sales both rose, as did several housing indexes, adding to the evidence that the recovery in housing sales is real, albeit from record low levels. Consumer confidence rose to the highest levels since before the great recession, including the expectations index, which is a component of the Leading Indicators.
The high frequency weekly indicators were mixed this week, but generally neutral to positive as the Oil choke collar continues to disengage. One indicator stands out as negative.
Let's start again with the negative indicator. Rail traffic was mixed again this week. The American Association of Railroads reported a -1.6% decrease in total traffic YoY, or -8,400 cars. Non-intermodal traffic was down by -14,700 cars, or -5.0% YoY. Excluding coal, this traffic was up 11,400 cars. A total of 8 of 20 subgroups were negative, including ethanol-related grain shipments were also off, as were chemicals, metals, and scrap. Intermodal traffic was up 7,300 carloads, or +3.1%.
Housing was mixed:
The Mortgage Bankers' Association reported that the seasonally adjusted Purchase Index fell -3.0% from the prior week, and also fell -3.8% YoY. The Refinance Index jumped another +5.6% with record low mortgage rates. This index remains in the upper part of its 2 year generally flat range.
The Federal Reserve Bank's weekly H8 report of real estate loans, which turned positive YoY for the first time in 4 years two months ago, rose 0.1% this week, and its YoY comparison rose +0.7% to +1.6%. On a seasonally adjusted basis, these bottomed in September and are up +1.7%.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up +2.7% from a year ago. YoY asking prices have been positive now for 6 months, and median current list prices remain higher than at any point last year. The Case-Shiller repeat sales index for January-March will be reported this week and of course will be closely watched.
Employment related indicators were also neutral to positive:
The Department of Labor reported that Initial jobless claims remained the same at 370,000 last week. The four week average fell 5000 to 370,000. This measure has been essentially flat for 4 weeks after its April spike.
The Daily Treasury Statement for the first 18 days of May showed $114.2 vs. $118.2B for May 2011. This has everything to do with the month starting on a Tuesday rather than a Monday. For the last 20 reporting days (4 x each day of the week), $133.7B was collected vs. $128.0B a year ago, an increase of $5.1B, or +4.0%.
The American Staffing Association Index remained at 93 for the fourth week in a row. It remains two to three points below the all time records from 2006 and 2007 for this week of the year. It would have to remain flat or worse for another 2 to 3 weeks for me to be concerned at all about its trajectory.
Same Store Sales continue to be solidly positive:
The ICSC reported that same store sales for the week ending May 19 fell -1.7% w/w, but were up +3.8% YoY. Johnson Redbook reported a 2.7% YoY gain. Shoppertrak did not report. The 14 day average of Gallup daily consumer spending was strongly positive at $74 vs. $65 in the equivalent period last year. The continued strength in consumer spending completely undercuts the meme that flat consumer income is dragging us back into recession.
Money supply was positive:
M1 rose +1.8% last week, and also rose +0.3% month over month. Its YoY level increased to +16.6%, so Real M1 is up 14.3%. YoY. M2 rose +0.1% for the week, and was up +0.3% month over month. Its YoY advance rose slightly to +9.6%, so Real M2 increased to +7.3%. Real money supply indicators continue to be strong positives on a YoY basis, although they have had a far more subdued advance since September of last year.
Bond prices rose and credit spreads fell. This is also a yellow flag:
Weekly BAA commercial bond yields fell -.10% to 4.98%. Yields on 10 year treasury bonds also fell even more, -.14% to 1.74%. The credit spread between the two remained even at 3.24%. Strongly falling bond yields mean that fear of deflation is strong. Spreads have been widening for the 6 weeks.
The energy choke collar continues to disengage:
Gasoline prices fell for the fifth straight week, down another .04 to $3.71. Oil fell slightly again this week, to $90.86. Oil prices are now below the point where they can be expected to exert a constricting influence on the economy. Since gasoline prices follow with a lag, we can expect gasoline to fall to that point in about a month as well. The 4 week average of Gasoline usage, at 8790 M gallons vs. 8961 M a year ago, was off -1.9%. For the week, 8633 M gallons were used vs. 9025 M a year ago, for a decline of -4.3%. Gasoline usage is generally moving towards parity with the reduced levels that began to be established one year ago.
Turning now to high frequency indicators for the global economy:
The TED spread remained at 0.390, near the bottom of its recent 3 month range. This index remains slightly below its 2010 peak. The one month LIBOR fell slightly to 0.239. It is well below its 12 month peak set 3 months ago, remains below its 2010 peak, and has returned to its typical background reading of the last 3 years.
The Baltic Dry Index fell sharply from 1140 to 1034. The Harpex Shipping Index, on the other hand, rose from 445 to 457 in the last week, and is up 82 from its February low of 375. Finally, the JoC ECRI industrial commodities index fell again, from to 120.25 to 119.64. This indicator appears to have more value as a measure of the global economy as a whole than the U.S. economy.
Due to global weakness, the Oil choke collar is loosening. Bond yields of all sorts are falling. Rail shipments are also signalling caution. Internal signs of the U.S. economy generally remain positive, as they have all year. Several months ago, I identified consumer spending and gasoline usage as key areas to watch. They are holding up well. Aside from the big payrolls report next Friday, watch personal income to see if declining inflation helps alleviate the downturn in real income. Also, with the revision to 1st quarter GDP this week will come the report on Gross Domestic Income. Since there is evidence that GDP is revised in the direction of GDI over time, this will be an important landmark for the direction of the U.S. economy.