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By New_Deal_democrat January 4, 2014 9:00 am
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Weekly Indicators: 2013 ends on a positive note, some evidence of longer term weakening edition
The first news for December was that motor vehicle sales declined, and are only up about 2% YoY.  On the other hand, both the Chicago PMI and the ISM manufacturing index, while down slightly from November, were still very strongly positive.  Consumer confidence continued its post-government shutdown rebound.   November construction spending was up; however, pending home sales declined from their initial previous month's reading, and actually turned negative YoY. 

If my weekly reports on the high frequency weekly indicators seem boringly repetitive, that's because they are designed that way.  I want you to have raw access to the data so you can make up your own mind.  I keep the commentary separate, and try to minimize it except to provide context.  My purpose is to provide an up-to-this-week snapshot of the economy. 

As I've done recently, let's start with the long leading indicators, then we'll turn to shorter leading indicators and then coincident indicators:

Interest rates and credit spreads

  • 5.35% BAA corporate bonds unchanged
  • 2.99% 10 year treasury bonds up 0.10%
  • 2.36% credit spread between corporates and treasuries down -0.10%

Interest rates for corporate bonds had been falling since being just above 6% in January 2011, hitting a low of 4.46% in November 2012. Treasuries fell to a possible once-in-a-lifetime low of 1.47% in July 2012, but have decisively risen over 1.6% above that mark.  Spreads, however, declined to another new 3 year low.  Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

  • No Report w/w purchase applications
  • No Report YoY purchase applications
  • No Report w/w refinance applications

The MBA took a one week hiatus this week.  The report will resume next week. 

Housing prices

  • YoY this week +11.1%

Housing prices bottomed at the end of November 2011 on Housing Tracker, and averaged an increase of +2.0% to +2.5% YoY during 2012. This weeks's YoY comparison rebounded closer to the new 7 year record set just over a month ago.

Real estate loans, from the FRB H8 report:

  • +0.4% w/w
  • -0.9% YoY
  • +1.4% from its bottom

Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  Since April, with higher interest rates, the comparisons stalled and are now quite negative, retreating back to near their post recession lows.

Money supply

M1 

  • +0.2% w/w
  • +1.3% m/m
  • +7.0% YoY Real M1

 M2 

  • +0.2% w/w
  • +0.6% m/m
  • +4.2% YoY Real M2

Real M1 made a YoY high of about 20% in January 2012 and decelerated since then.  Real M2 also made a YoY high of about 10.5% in January 2012.  This week real M2 made a new low of 4.2%. At the same time, neither is close to turning negative.

Consumer spending

Gallup's 14 day average of consumer spending rose sharply in November 2012, and so now has very difficult YoY comparisons.  In 2012 the ICSC varied between +1.5% and +4.5% YoY, while Johnson Redbook was generally below +3%.  Gallup was slightly below its typical range, and the ICSC and Johnson Redbook are in closer to the upper end of their respective ranges. 

Steel production from the American Iron and Steel Institute 

  • +2.3% w/w
  • -0.7% YoY

 Steel production over the last several years has generally been in a decelerating uptrend.  After a strongly positive move for several months, in the last six weeks YoY comparisons weakened and for the second week in a row turned negative. 

Transport

 Railroad transport from the AAR 

  • +17,300 carloads up 8.1% YoY
  • +10,800 carloads up 8.6% ex-coal
  • +16,900 or +10.8% intermodal units
  • +34,000 or +9.2% YoY total loads

Shipping transport

Rail transport had been very mixed YoY during midyear, but almost continuously improved since then, ending 2013 on a very positive note.  The Harpex index had been improving slowly from its January 1 low of 352, but flattened out in the last half a year, and has recently declined slightly. The Baltic Dry Index retreated from near its new 3 year high it set two weeks ago.  Both the Baltic Dry Index and the Harpex declined sharply since the onset of the recession, and have been in a range near their bottom for about 2 years, but stopped falling earlier this year, and now are in uptrends

Employment metrics

 Initial jobless claims

  • 339,000 up +1,000
  • 4 week average 357,250 up +9,250

The American Staffing Association Index was unchanged at 103. It is up +9.6% YoY

Tax Withholding 

  • $195.0 B for the month of December vs. $185.8 last year, up +$9.2 B or +5.0%
  • $195.0 B for the last 20 reporting days vs. $ 185.8 B last year, up +$9.2 B or +5.0%

Temporary staffing had been flat to negative YoY in spring, but broke out positively for the last four months. It is on the cusp of its traditional end of year swoon, but the YoY comparisons remain excellent.  Tax withholding was awful in October, presumably due to the federal government shutdown, rebounded fully in November, and then softened again in December.   Initial claims are gyrating with seasonality, although there does seem to be some slight comparative weakness.

Oil prices and usage

  • Oil down -$4.88 to $95.44 w/w
  • Gas up +.06 to $3.33 w/w
  • Usage 4 week average YoY up +3.5%

The price of Oil made its yearly seasonal low one month ago, but declined this week. The 4 week average for gas usage remains positive. In the larger picture, it looks like in 2013  the Oil choke collar finally loosened its hold on the economy slightly.

Bank lending rates

The TED spread remains close to the bottom of its 3 year range. LIBOR declined close to its 3 year low.

JoC ECRI Commodity prices

  • Down -0.57 to 126.48 w/w
  • +0.33 YoY

The coincident data of consumer spending, rail transport, and shipping ended 2013 in excellent shape.  December tax withholding set an all-time record, although its YoY change is fading. House prices were still strongly positive.  Bank lending rates remain near their record lows.  Only steel production was a negative.

Shorter leading indicators remain mainly positive. Temporary employment again had its best YoY comparison all year.  The oil choke collar is still disengaged. Commodities were slightly positive, and also remain slightly higher than one year ago.  Only initial jobless claims look a little weak, but this is obscured and may just be seasonal noise.  The monthly manufacturing reports were very positive, but motor vehicle sales looked comparatively weak.

 

The longer leading indicators continue to decelerate or to turn outright negative.  Interest rates were largely unchanged this week, but corporate yields increased. Housing has taken a big hit, although this has yet to show up in permits or starts.  Money supply is still a positive, but has continued its deceleration.

 

Although the second half of 2013 looks like it will turn out very positive, whether interest rates remain elevated from their likely generational lows, and if so, whether that elevation is enough to cause the housing market to actually turn negative is shaping up as one of the big economic stories for 2014.  Whether Q4 corporate earnings stall is also an important data point.  There is some evidence as we close out the year that the deceleration in the long leading indicators is beginning to spread to the shorter term indicators (e.g., motor vehicle sales), although at this point the general tone is still positive. 

Have a nice weekend!

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