Tuesday, February 14, 2012
Not Dead, Just Programming
A) Looks waaaay too much like the drop in gas consumption to be dismissed, and
B) Cannot be ignored. Nor is it sudden - except in November, when Christmas lights apparently cut in to bring a marginal month on month increase, power consumption kept moderating.
C) We are not seeing the compensatory effects we should see from the weather explanation. If people are spending less on utilities, they ought to have more to spend on food and gas, but instead we see a sustained drop in the mass market indicators. Howard Davidowitz wins again.
This is part of the rocker effect you see in a skipping recession. If a skipping recession continues too long, it can turn into a deflationary cycle. However shoving prices up probably makes the deflationary cycle worse - you have to look carefully at the economic system and see where the constraints are before you start tinkering. End update.
\One of my brothers called me last night to ask if I were dead due to the fact that I had not posted on this thing since Wednesday. I have been programming, and time flies. I had not realized it was that long. I am deep in the heart of this project, making good progress, and enjoying myself. Let me enjoy my happy nerdish peace.
As for the Europeans, OMG. I think this is a fatal error with Greece. I know that the Greeks did this to themselves, but if you construct a situation in which people are told that even their votes in elections don't make a difference, you have created an extremely unstable society. Perhaps technically things would be better for the Greeks if they followed the deal, but without the ability to form a popular consensus to follow the deal, they will not follow it no matter what the politicians do. So it's a major fail, and this is not going to help the cause of united Europe.
US - most the data has assumed an interesting up-down sequence. That means that a lot of the seeming variance is in the seasonal adjustments, which means real growth is neither brilliant or abysmal. That's probably the explanation for the oddities in the retail report. On an unadjusted basis (NSA), and also non-price adjusted basis, January retail sales total increased 5.6% over the previous January. The previous January probably had more weather impacts, so the actual might be a bit less. Autos increased 8%, which squares much better with the industry reports than the official "adjusted" number. Restaurants and bars are up 7.2% over the year. That's quite good - a real increase even allowing for price increases.
Bad stuff in retail report: Food and beverage sales increased just 3% YoY unadjusted. Since food prices have increased considerably more than that, this means real food sales are still falling. Even allowing for the possibility that Americans have really gone on a major post-Christmas diet, this is not a good economic sign. It points to financial stress for many households. Pharmaceuticals increased only 1% over the year. Probably a lot of this is diversion of sales to Canadian pharmacies. Much higher copays are hurting pharmaceuticals in the US.
I think milder winter weather is really helping. About 30% of households should be gaining an average $200 in real spendable income per month, probably averaging around $500 net. That's a big assist to real incomes. Why don't I see that in food? It ought to be there!
Rail traffic started out the year quite low, but part of that was due to a calendar difference. Through the first week in February, the YoY recovered quite a bit. Carloads are up 1.3% YoY, and intermodal is up 4.5% YoY. If you have time, click on the link and look at the vehicle-related. Much stronger than last year - autos are still helping us. By the third week in February this data will be more comparable, although it is getting an assist from the weather. Carloads would look a lot better if it weren't for the coal - enough of those plants have been shut down that it is affecting this series.
Business inventories - no sign of a lump developing there.
NFIB - kind of flat, but at least we have recovered from the summer doldrums last year. Maybe small businesses are getting some of the fuel money. If we are seeing any startups, this series should be biased a bit downward right now. Outlook was -3 in January, which is depressingly low compared to the prior January's +10, but one heck of a recovery from the summer low of -26. Employment gains really aren't showing up in this survey very well. Yet. If sales recover than they will.
The Best: January Treasury wage receipts finally showed that pop. It seems to have taken forever, but AT LAST we got the nominal jump I was looking for. Therefore I would say that the January employment report gains were real.
HI Receipts January 2011:Finally!!! A REAL gain. Not only that, but we have the participation of smaller businesses. Looking at NFIB, I'd say a good hunk of that is construction.
HI Receipts January 2012:
Wages: 16,601 (+6.9%)
Self: 2,377 (+6.4%)
The Fed would be foolish to do much given this result, and for now they won't. ECB is throwing enough money for both of them, and after the next money toss at the end of this month, we should see the pace of inflation pick up again. Not only is the ECB throwing a lot of money, but it is throwing it desperately and in huge gobs. In a lot of ways this has stabilized sovereign finance for Europe in the near term, but it is doomed to cause inflation. I'm guessing the inflection point on that is around June, when things should get pretty incendiary.
The interesting thing about the ECB measure is how uncontrollable it is. European banks are still withdrawing money from ex-Euro lending areas directly, but the European banks are clearly using large fractions of the Dragon's Breath Infusion to pay off creditors, and European banks had extensive investment from foreign investors. Those extra Euros are going to show up all over the place.
Going forward, US bank ratios are very good. If you read the NFIB report, the only problems these businesses don't have is credit. We are near the series low on that. And from looking at H.8 2012 Jan SA numbers, we can see why:
This is other deposits (top line at right side of graph) against all loans and leases in bank credit. Good - oh. Mind you, this is short term money so you don't want to buy long term Treasuries with it!
Other deposits are shooting up again. This is particularly interesting given the rapid payoff on the CCs, and it hints at a real improvement in jobs in January, because tax refunds haven't hit yet.
No, Virginia, US consumers did not suddenly go hog wild and charge up their credit cards again. The trajectory is still down.
Americans are building up more credit on car loans and tuition loans, both of which show up poorly in banks. The government (taxpayer) gets the unpayable student loans, and the garbage credit industry, which is mostly ex-banks, gets the bad auto loans.
I was worried that we'd run out of garbage credit too soon, and that it would hurt autos, but I don't think so now. The used car market is so strong that it really cuts losses on garbage car loans, and it also cuts net borrowing needs for those who have a vehicle to trade in that's not too old. That's good news for auto manufacturers, and good news for consumers who have a viable car to trade in.
This is all loans and leases in bank credit and C&I loans in bank credit. We are still improving, and most of the improvement is in C&I. Some of this may be due to inflation, but there appears to be a real improvement.
So the Fed has no need to join the current Money Toss Olympics.
It is possible that even the Chinese will refrain, because they are going to be feeling the effects of the Euro Hurl.
Not sure how the timing tracks with your data, but gasoline has been going up. The radio news station has been issuing predictions of higher gas since even before prices actually increased.
Or maybe so many people are stretched so thin that they are just thinking, "Oh, maybe if I live tight for another few months I can afford to buy new tires."
The economic news is just baffling to me. Glad you see some upside happening. Maybe Mr. Market is right.
You may be interested to know that ShrinkWrapped has started posting again.
The fact is that you only need so many calories no matter how wealthy or poor you are, so food consumption changes can point up problems that may not appear in consumption in other commodities.
Gas is the same; pharmaceuticals have similar weighting. Looking at those three, I think it's clear that a good proportion of American consumers are truly struggling.
Numbers this year will be hard to compare to last year, as I have pointed out before. There is some distortion in seasonal weightings, and then all of last year is pretty much one big oddity. So three months of numbers add up to the certainty you'd get normally from one.
The wage component of the Treasuries grew more than the self employment component. The impressive agreement between the January employment report and the observed Treasury result implies that employers retained a lot of seasonal hires. That theory is strongly supported by lower claims.
It's true that ND pushes rail up - but coal is pushing rail carloads down quite significantly.
Gas prices are going to hurt most consumers. This is an uncertain picture with data that is less than normally indicative.
I think the outcome for this year is going to depend on how how prices go, and I think additional waves of inflation are certain. The only thing that will stop those waves of inflation will be plausibility shocks, because it looks like we have a substantial stream of extra funds going into commodities that continues for months.
Singapore posted a mild quarterly contraction, just -2.5%. But the net of the last three quarters has been negative, although only mildly so.
There's not much in the way of real strength anywhere I look these days.
Less natural disasters in 2012 would help, I suppose.
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