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By New_Deal_democrat April 15, 2017 8:48 am
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Weekly Indicators: the Amazon.com effect edition
Preliminary U. Michigan consumer sentiment for April was positive, almost exclusively as to the present rather than expectations for the future.
March data included deflation in both producer and consumer prices. Nominal retail sales declined, but in real terms rose slightly, while February was revised to a negative. 
February JOLTs jobs data was essentially neutral while February business inventories and sales both increased, such that the inventory to sales ratio was unchanged.
My usual note: I look at the high frequency weekly indicators because while they can be very noisy, they provide a good Now-cast of the economy, and will telegraph the maintenance or change in the economy well before monthly or quarterly data is available.  They are also an excellent way to "mark your beliefs to market." 
In general I go in order of long leading indicators, then short leading indicators, then coincident indicators.


Interest rates and credit spreads

  • Dow Jones corporate bond index 368.87 up +2.72 w/w (2016 high was 395.36, 2016 low was 341.41)
  • 2.23% 10 year treasury bonds down -0.15%
  • BofA/ML B Credit spread up +0.13% to 4.02%
Yield curve, 10 year minus 2 year:
  • 1.04%, down -0.06% w/w
30 year conventional mortgage rate
  • 4.04%, down -0.11% w/w (1 year high was 4.39%)

Yields on treasuries and mortgage rates made new 12 month highs in December, but subsequently retreated, turning negative for two weeks before turning neutral again.  Corporate bonds remain neutral. Spreads are very positive, and the yield curve, while narrowing slightly also remains positive.




Mortgage applications 


  • purchase applications +3% w/w
  • purchase applications +3% YoY
  • refinance applications unchanged w/w
Real Estate loans
  • Down -0.1% w/w
  • Up +5.3% YoY

Mortgage applications turned outright negative for three weeks before tipping back to neutral and then surprisingly positive again. Refi applications remain at multi-year lows.


Real estate loans had been firmly positive for over 3 1/2 years, but the rate of growth (of this cumulative measure) declined sufficiently for the last two months for loans to become a neutral.


Money supply


  • +2.4% w/w
  • +2.2% m/m
  • +7.3% YoY Real M1 
  • -0.3% w/w  
  • +0.4% m/m 
  • +4.0% YoY Real M2 

Both real M1 and real M2 were firmly positive almost all last year, although generally less so in the last several months, with real M2 showing substantial deceleration beginning last August. although nominal M2 weakened again this week, March's deflation brought Real M2 back up and so it remains positive.


Trade weighted US$

  • Up +0.03 to 124.38 w/w, up +3.8% YoY (one week ago) (Broad)
  • Down -0.60 to 100.50 w/w, up +6.1% YoY (yesterday) (major currencies)


The US$ appreciated about 20% between mid-2014 and mid-2015.  It went mainly sideways since then until spiking higher after the US presidential election. It has been generally neutral for about 4 months, but this week against major currencies it scores negative again.


Commodiy prices


  • Down -2.06 to 106.24 w/w 
  • Up +19.52 YoY
BBG Industrial metals ETF
  • 112.21 down -3.42 w/w, up +20.0% YoY
Commodity prices bottomed near the end of 2015. After briefly turning negative, metals surged higher since the election, but have backed off in the last few weeks.


Stock prices S&P 500


  • Down -1.1% w/w to 2328.95
Stock prices are positive, having made a string of new all-time highs beginning last summer. I won't change this to neutral unless they continue to back off for several more weeks at least.

Regional Fed New Orders Indexes

(*indicates report this week)(No reports this week)

  • Empire State  +7.8 to +21.3
  • Philly up +1 to +39
  • Richmond up +2 to +26
  • Kansas City up +12 to +38
  • Dallas down -2.1 to +9.5
  • Month over month rolling average: unchanged at +27 (2+ year high)
The regional average has been more volatile than the ISM manufacturing index, but has accurately forecast its month over month direction. These continue to scream positive.


Employment metrics

 Initial jobless claims

  • 234,000 unchanged
  • 4 week average 247,250 down -2,750


Initial claims remain well within the range of a normal economic expansion, as does the 4 week average.


The American Staffing Association Index


  • Up +1 to 94 w/w
  • Up +2.37 YoY

This index turned negative in May 2015, getting as bad as -4.30% late that year. In 2016 it became progressively "less bad," turning generally neutral since last May, and has now been positive for over the last three months.


Tax Withholding

  • $90.9 B for the first 9 days of April vs. $87.3 B one year ago, up +$3.6 B or +4.1%
  • $175.0 B for the last 20 reporting days vs. $163.0 one year ago, up +$12.0 B or +7.4%

Beginning with the last half of 2014, virtually all readings were positive, but turned more mixed and choppy, and occasionally even negative, in last 2015 through the first part of 2016.  The last few months have with brief exceptions showed a marked improvement.


Oil prices and usage

  • Oil up +$0.66 to  $52.91 w/w,  up +$5.75 YoY
  • Gas prices up +$0.06 to $2.42 w/w, up +$0.35 YoY
  • Usage 4 week average down -1.0% YoY


The price of gas bottomed over one year ago at $1.69.  Prices went sideways since late last summer, then briefly moved higher making them neutrals, before easing in the last few weeks.  Usage  faltered and has now turned negative for several months. Historically, it has taken at least a 40% increase YoY for gas to turn into a headwind.  We got close a few weeks ago, but the YoY change in gas prices is back below 20% now.


Bank lending rates


Both TED and LIBOR rose since the beginning of last year to the point where both were usually negatives, although there were some wild fluctuations.  Of importance is that TED was above 0.50 before both the 2001 and 2008 recessions.  The TED spread has turned very positive for the last several months. Meanwhile LIBOR has turned more and more negative.  I am at a loss as to why the two lending measures have diverged so sharply.


Consumer spending

  • Johnson Redbook up +1.6% YoY
  • Goldman Sachs/Retail Economist up +2.0% w/w, up +0.4% YoY
  • Gallup daily consumer spending 14 day average $109, up +$13 YoY


Both the Goldman Sachs and Johnson Redbook Indexes progressively weakened in pulses during 2015, before improving somewhat in 2016.  This week Redbook was again positive, while Goldman was just barely above negative. Meanwhile for nearly three months Gallup has absolutely screamed higher, and remained very positive this week.  I strongly suspect that the weakness in the first two measures is due to the impact of online shopping, whereas Gallup's consumer self-reports are not affected by this at all.



Railroad transport

  • Carloads up +9.8% YoY
  • loads ex-coal up +3.3% YoY
  • Intermodal units up +4.6% YoY
  • Total loads up +7.1% YoY

Shipping transport

Rail turned negative in 2015 and fell even more sharply in spring 2016. Since last June, rail improved to neutral, and then positive almost all weeks since the beginning of November. It was very positive again this week.

Harpex recently declined to repeated multi-year lows, but in the last two months came back all the way to positive. It is now higher than during 4 of the last 5 years. BDI has now also surged back to being a positive.  I am wary of reading too much into price indexes like this, since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as well as demand.

Steel production


  • Up +0.7% w/w
  • Up +0.3% YoY

Until spring 2014, steel production had generally been in a decelerating uptrend.  It then gradually rolled over and got progressively worse in pulses through the end of 2015. It improved from negative to "less bad" to positive in 2016 and except for one recent week remained positive since. This week it was weak enough to again score neutral.




Just as last week, there are only 4 outright negatives: mortgage refinancing, gas usage, LIBOR, and the US$ against major currencies. There were a few more neutrals, chiefly among long leading indicators.  Everything else was positive.


Among long leading indicators, Treasuries, corporate bonds, mortgage rates, and growth in real estate loans remain neutral. The yield curve, money supply, and purchase mortgage applications  remain positive.  Refinance mortgage applications are still dead.


Short leading indicators, including stock prices, jobless claims, industrial commodities, the regional Fed new orders indexes, spreads, temp staffing, and oil and gas prices are all positive.   The US$ is neutral against all currencies and negative against major currencies. Gas usage remains negative.


The coincident indicators are generally positive, including Gallup and Johnson Redbook consumer spending, rail, the TED spread, and both measures of shipping. The only negative is LIBOR, while the Goldman Sachs measure of consumer spending was again just barely above negative.


The negative number in March retail sales was the big number this past week, leading to downgrades in Q1 GDP estimates. But sales depend on whether you ask brick and mortar stores what they are selling, vs. asking consumers how much they are spending.  The large majority of economic numbers remain positive, and so I remain positive as well.


Have a nice weekend!


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