This week Americans got both something good and something bad in their stockings. Personal income and spending both continued to rise smartly, showing more evidence that the consumer has more cash, and the consumer is willing to spend it. The savings rate remained basically steady. I'll have an update on this next week. Durable goods orders fell, but if you exclude Boeing, they did rather well. New and existing home sales remained in the tank, but if you do a YoY comparison with 2008 instead of 2009 (which was distorted by the $8000 housing credit), there was actually a small increase. Consumer sentiment including expectations were at the highest level since June.
But there was coal, too - well, at least a different hydrocarbon in the form of Oil, which hit $90 this week, triggering renewed concern about how robust consumer spending can be with this "tax" on consumption. There was also a big lump of coal in the mortgage rate stocking. More below.
Here is this week's high frequency data:
The BLS reported 420,000 new jobless claims for the second week in a row. The 4 week moving average rose slightly to 426,000. Eight of the last nine weeks have now been reported under 440,000. The issue now becomes, are we in a new range of 410,000 to 440,000, or will the average continue to fall to under 400,000?
Gas at the pump reamined at $2.98 a gallon last week. As reported above, Oil breached the $90 a barrel mark. Despite this, gasoline usage was once again about 2% above last year, Gasoline stocks are towards the high end of their normal range for this time of year.
The Mortgage Bankers' Association reported that its seasonally adjusted Purchase Index decreased 2.5% last week, but generally has remained stable for the last couple of months, at a rate slightly below the comparable year-ago levels excluding those periods when home buyers rushed to beat the expiring $8000 tax credit. Contrarily, the Refinance Index fell off a cliff, declining for the sixth straight week, by 24.6%! Rapidly increasing mortgage interest rates have just about killed refinancing, and this is likely to have an effect on consumer spending next year.
The ICSC reported same store sales for the week ending December 18 increased 4.2% YoY, and increased 1.7% week over week. Likewise, Shoppertrak reported that sales increased 5.5% YoY in the last weekend before Christmas. Most of the retailing reports are indicating that this will end up being a strong holiday shopping season.
Railfax remained steady in its comparison with last year. Shipments of waste and scrap metal continue to improve, but auto shipments are significantly below last year. I have no idea why.
The American Staffing Association remained at 101 for the week ending December 11. This index will decline significantly over the next several weeks for seasonal reasons, and won't give much reliable information again until January.
M1 was down -0.5% for the week and vs. last month, and +7.5% YoY, meaning "real M1" is up 6.5%. M2 was up +0.2% for the week, up +0.3% vs. last month, and 3.1% YoY, meaning "real M2" is up 2.1%. Real M2 remains stalled without being able to break out of the "red zone" below +2.5% YoY.
Weekly BAA commercial bond rates increased from 6.09% last week to 6.18%. All bonds have come under stress recently, but this suggests investors are "reaching for yield." It's once again worth noting also that bond yields and stocks continue to move in opposite directions, indicating zero fear of a deflationary pulse.
The Daily Treasury Statement showed receipts in the first 11 reporting days of December of $119.5 B vs. $105.2 B a year ago, for a gain of close to 14%! For the last 20 days, $146.2 B has been received vs. $131.5 B a year ago, another strong gain of 12%.
The economy seems to be gaining momentum, which may also explain the steepening yield curve in the bond market. Indeed, so much so that Oil and other commodity prices, and mortgage rates, are once again becoming a "choke collar" on growth.
Have a wonderful holiday!