In the rear view mirror, 2nd quarter GDP was revised up to 1.7%. With the exception of consumer sentiment, which continued to sour, all of the other monthly data from July came in positive. Personal income and spending were up significantly both nominally and in real terms. The savings rate declined slightly. Factory orders were up more than expected. The Chicago PMI slowed but still showed expansion.
The high frequency weekly indicators are as close as we can reasonably get to observing economic trends in real time, as turns will show up here before they show up in monthly or quarterly data.
The energy choke collar has now re-engaged, and gasoline usage may be slightly weak.
Gasoline prices rose yet again last week, up $.04 from $3.74 to $3.78, and are now higher than a year ago. Oil prices per barrel also rose slightly, up $0.45 for the week at $96.47. Gasoline usage looks a little weak. On a one week basis, it was 9064 M gallons vs. 9227 M a year ago, down -1.8%. The 4 week average at 9073 M vs. 9169 M one year ago, was off -1.1%. This is actually slightly weak compared with a year ago, when gasoline usage had already plummeted on a YoY basis.
Employment related indicators were again mixed this week.
The Department of Labor reported that Initial jobless claims rose 2000 to 374,000 from the prior week’s unrevised figure. The four week average rose 2,250 to 370,250, about 2.5% above its post-recession low. If higher oil prices are again acting as a governor preventing fast economic growth, then this number, unfortunately, should continue to rise in coming weeks.
The Daily Treasury Statement showed that for the first 22 days of August 2012, $137.6 B was collected vs. $135.2 B a year ago, a slight $2.4 B or 1.8% increase. For the last 20 days ending on August 30, $115.8 B was collected vs. $110.5 B for the same period in 2011, a solid gain of $5.3 B or +4.8%.
The American Staffing Association Index remained stalled at 93. This index was generally flat during the second quarter at 93 +/-1, and for it to be positive should have continued to rise from that level after its July 4 seasonal decline. That it has not done so is a real concern, as it is now performing worse than it did in 2007 and 2011.
The ICSC reported that same store sales for the week ending August 18 gained +0.5% w/w, and rose +3.4% YoY. Johnson Redbook reported a 1.5% YoY gain. The 14 day average of Gallup daily consumer spending as of August 30 was $75, up $7 over last year’s $68 for this period. This is the fifth straight week of real strength after six weeks in a row of weakness. This is very encouraging.
Bond yields fell as did credit spreads:
Weekly BAA commercial bond rates declined .06% to 4.96%. Yields on 10 year treasury bonds only .02% to 1.74%. The credit spread between the two narrowed to 3.22%, which is about halfway between its 52 week maximum than minimum, and a significant improvement from several monthsa ago.
Housing reports were modestly positive:
The Mortgage Bankers’ Association reported that the seasonally adjusted Purchase Index rose 1.4% from the prior week, and were also up about +2.2% YoY. Generally these are in the middle part of their 2+ year range. The Refinance Index fell -5.7% for the week due to higher mortgage rates, to a 4 month low.
The Federal Reserve Bank’s weekly H8 report of real estate loans this week fell 3 to 3512. The YoY comparison rose to +0.9%, which is also the seasonally adjusted bottom.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up + 2.0% from a year ago. YoY asking prices have been positive for 9 months now.
Money supply remains generally positive despite now being fully compared with the inflow tsunami of one year ago:
M1 was off a -0.9% last week, and was up a slight +0.2% month over month. Its YoY growth rate declined slightly to +10.0%, as comparisons with last year’s tsunami of incoming cash are in full progress. As a result, Real M1 fell to +8.6%. YoY. M2 also fell -0.3% for the week, and was up 0.2% month/month. Its YoY growth rate declined slightly to +6.3%, so Real M2 grew at +5.0%. The growth rate for real money supply has slowed, but is still quite positive as the tsunami of cash arriving from Europe last summer disappears from the comparisons.
Rail traffic was positive while its diffusion index remained steady:
The American Association of Railroads reported a 1.8% increase in total traffic YoY, or +9,900 cars. Non-intermodal rail carloads was off a slight -0.8% YoY or -2,300, once again entirely due to coal hauling which was off -9,000. Negative comparisons remained at 10 types of carloads. Intermodal traffic was up 12,300 or +5.2% YoY.
Turning now to high frequency indicators for the global economy:
The TED spread remained at its 52 week low of 0.33. The one month LIBOR declined to 0.230, setting a new 52 week low. It remains well below its 2010 peak and is lower than at all time during the last 3 years with the exception of about 5 months. Even with the recent scandal surrounding LIBOR, it is probably still useful in terms of whether it is rising or falling.
The Baltic Dry Index fell from 717 to 703. It is now only 33 points above its February 52 week low of 670. The Harpex Shipping Index fell 2 from 398 to 396, and remains only 21 above its February low.
Finally, the JoC ECRI industrial commodities index rose slightly from 120.51 to 120.61. While it remains a strong sign that the globe taken as a whole has slumped, the suggestion albeit from one week’s data only is that the slump may be bottoming, and so bears watching to see if the new uptrend continues.
Several recent themes remain dominant. While global shipping rates suggest weakness, the US data remains generally positive. The long leading indicators of bond rates and housing are slightly to signficantly positive. Consumers have rebounded from their early summer slump, despite higher gasoline prices. But those same higher gasoline prices may be impacting new staffing and initial jobless claims for the worse, and gasoline usage is slightly down. Given the positive YoY and growth rate reading for the ECRI Weekly Leading Index, recession concerns are abating, but the Oil choke collar remains a threat for near term weakness.
The last summertime beers and brats await me. You have a nice long Labor Day weekend too!