Sunday, February 24, 2013

Weekly Indicators: muddling through under the palm trees edition

 - by New Deal democrat

[Note: Apologies for the last posting. I am on vacation in an Undisclosed Location, but faithful to my nerd-dom, put together this week's compilation, which was assembled near a beach in the company of several pina coladas and tropical martinique.]

Monthly data released last week included producer and consumer prices, both up 0.1%, and housing permits, which made another post-recession high, while starts declined. existing home sales rose slightly. The volatile Philadelphia Fed index contracted to a six month low. The Leading Indicators for January increased 0.2' indicating that expansion should continue for the next few months.

Let's start again this look at the high frequency weekly indicators by checking what is happening with tax withholding:

Employment metrics
Daily Treasury Statement tax withholding
  • 128.3 B unadjusted was withheld this year in the first 14 days of February compared with $116.5 B a year ago, a --% increase

  • $145.3 (adjusted for 2013 payroll tax withholding changes) vs. $151.4 B, -4.0% YoY for the last 20 days.  The unadjusted result was $167.2 B for a 10.4% increase.
Initial jobless claims
  •   362,000 up 20'000

  •   4 week average 360,750 up 8,250
American Staffing Association Index
  • unchanged at 89 w/w up 2.7%YoY
Employment metrics were again mixed this week.  Initial claims appears finally to have established a new lower range of between 330,000 to 375,000.  The ASA is running slighty below 2007, and slightly ahead of last year, although the absolute index was higher.  

For the record again, I am adjusting my YoY tax withholding figures to reflect the increase in personal withholding taxes. While the YoY collections are up substantially, they should be up over 15% to compensate for the tax increase.  Since I can think of no reason why employment itself should have fallen off a cliff in January, it is very possible that there is a lag in the payment of withholding taxes with the new increase.  If this hypothesis is correct, I would expect tax withholding to be much more reliable within the next week or two. So far, that isn't happening.

Consumer spending
  • ICSC +2.7% w/w +1.8% YoY

  • Johnson Redbook +3.1%YoY

  • Gallup daily consumer spending 14 day average at $82 up $14 YoY !
Gallup has been very positive for 3 months, although a little less so in the last week or two.  The ICSC varied between +1.5% and +4.5% YoY in 2012.  This week was again close to the bottom end of that range for the ICSC. The JR report could just be a one week anomaly, we'll see.  Even in the worst case, it still looks like consumer spending has not collapsed due to the  tax withholding increase.  It's worth noting that WalMart is not included in either ICSC or Johnson Redbook.

Housing metrics

Housing prices
  • YoY this week. +3.4%
Housing prices bottomed at the end of November 2011 on Housing Tracker, and have averaged an increase of +2.0% to +2.5% YoY for the last year. For the second week in a row, this week was the best YoY comparison in about 7 years.

Real estate loans, from the FRB H8 report:
  • -0.6% w.w

  •  +0.7% YoY

  • +2.5% from its bottom
Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012, and have recently shown somewhat more YoY strength.  This week was at the bottom  of its recent YoY range.

Mortgage applications
  • -17%% w/w purchase applications

  • +17% YoY purchase applications

  • -1.6% w/w refinance applications
Purchase applications had been going sideways for 2 years, but in recent weeks may have finally broken out of that range to the upside, but the move is not decisive yet.  Refinancing applications were very high for most of last year with record low mortgage rates, but these have recently decreased with the increase of mortgage rates.

Interest rates and credit spreads
  •  4.86% BAA corporate bonds unchanged

  • +0.01% to 2.01% 10 year treasury bonds

  • -0.01 change at 2.85%  credit spread between corporates and treasuries
Interest rates for corporate bonds have generally been falling since being just above 6% two years ago in January 2011, hitting a low of 4.46% in November 2012.  Treasuries have fallen from about 2% in late 2011 to a low of 1.47% in July 2012. Spreads have varied between a high over 3.4% in June 2011 to a low under 2.75% in October 2012.  The  last several months have seen a marked increase in rates.

Money supply

  • +0.5% w/w

  • +2.0% m/m

  • +10.8% YoY Real M1

  • +0.1% w/w

  • -0.4% m/m

  • +5.4% YoY Real M2
Real M1 made a YoY high of about 20% in January 2012 and has generally been easing off since.  This week's YoY reading remained above a new low set several weeks ago.  Real M2 also made a YoY high of about 10.5% in January 2012.  Its subsequent low was 4.5% in August 2012.  It was weak once again this week.  Both are still quite positive in absolute terms.

Oil prices and usage
  •  Oil $93.13 down 2.73w/w

  •   gas $3.75 up $0.13 w/w

  • Usage 4 week average YoY +2.5%
Gas prices are increasing seasonally.  Unusually for the last year plus, the 4 week average for the third week in a row was positive YoY.  This may be due to winter weather being, well, actually winter-like this year.


Railroad transport
  •  -3300 or -1.2% carloads YoY

  • +2700 or +1.6% carloads ex-coal

  • +33,000 or +13.6% intermodal units

  • +27,000 or +5.3% YoY total loads
Shipping transport
  • Harpex up 2 at 372

  • Baltic Dry Index down 13  to 740
Rail transport appears to have returned to its pattern from last year.  Traffic ex-coal has now returned to being positive for the third week in a row.  The Harpex index is gradually improving off its 3 year low of 352, and the Baltic Dry Index remains above its recent low.

Bank lending rates
  • 0.17 TED spread down -0.025 w/w

  • 0.2000 LIBOR unchanged w/w
The TED spread made a new 18 month+ low.  LIBOR remained at its new 52 week low and is close to a 3 year low.

JoC ECRI Commodity prices
  • up 0.12 to 129.03 w/w

  • +3.22% YoY

It remains the case that the most important issue at the moment is whether the 2% increase in withholding tax rates is having an effect on consumers.  The austerity of budget sequestration is now less than a week away. The potential consequences of moving income and spending forward into 2012 from 2013 due to tax increases are also noteworthy.  For the last three weeks it looks like we got some - but by no means an overwhelming amount of - evidence that there has been an effect.

By far the most negative data was tax withholdings. Other employment metrics are neutral.  M2 money supply has declined since the first of the year.  Corporate bond rates have risen and the credit spread has widened, although it is still closer to YoY lows. ICSC consumer spending was weak. Commodity prices fell this weel. Gas prices are higher than last year by $0.16 and at $3.75, the Oil choke collar is beginning to engage.

Continuing positives once again include the housing market, consumer spending as measured by Gallup and this week by the Johnson Redbook survey, and bank lending rates.  Gas usage has turned positive.  Rail traffic is also positive again.

While again there is some evidence of a consumer and employment slowdown, it is not substantial yet. More interesting is that while the majority of the high frequency data continue to be positive, they are less so than in recent months.  

Have a nice weekend.