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By New_Deal_democrat June 13, 2015 8:56 am
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Weekly Indicators: amplification of recent trends edition

Monthly data for May included strongly positive retail sales and producer prices, and positive University of Michigan consumer sentiment. Export prices rose. Import prices were flat. The JOLTS report for April showed strongly positive job openings, but relatively weak quits, layoffs, and hires.


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.  The indicators will confirm a trend or indicate a switch in trend well before monthly and quarterly reports.


Let's start with the US$  again:


Trade weighted US$:

  • up +0.63 to 115.57

The US$ appreciated from a low of 101.67 last July 1 to a high of 117.92 on March 13, an increase of 16% in less than 9 months!  Since then, the US$ retreated but remains close to that high.  Last October, just before the November industrial peak, the US$ was weighted at 106, so we have a long way to go before some sort of equilibrium is restored.


 Interest rates and credit spreads

  • 5.10% BAA corporate bonds up +0.07%
  • 2.39% 10 year treasury bonds up +0.08%
  • 2.71% credit spread between corporates and treasuries down -0.01%
30 year conventional mortgage rate:
  • 4.12%, down -0.01% w/w (low was 3.35% in December 2012)


Interest rates for BAA corporate bonds made a 50+ year low in January. This was not confirmed by AAA corporate bonds.  After a possible once-in-a-lifetime low of 1.47% in July 2012, Treasuries rose to over 3% in late 2013, then fell through 2014 and into 2015, where they had hovered at or below 2% before yields broke out to the upside.  Spreads widened in recent months, a warning of near-term weakness, and had wobbled back and forth near the neutral 2.50% range before breaking decisively negative a month ago.

Mortgage rates have risen to close to the top of their 12 month range, and have not made a new low in 2 1/2 years. 


Consumer spending

The former ICSC report has been reborn as the Goldman Sachs index.  both it and the Johnson Redbook Index weakened after last Christmas, and weakened further YoY in May.


 The Gallup report, which had been barely positive to outright negative since the beginning of this year, had three weeks in a row of excellent YoY comparisons in April before turning negative again in May.  This week it was considerably "less bad." All three indexes had been up against very challenging comparisons vs. May 2014.



Railroad transport from the AAR

  • -21,800 carloads down -8.1% YoY 
  • -5,400 carloads ex-coal down -2.9% YoY
  • +11,600 intermodal units up +4.3% YoY
  • -12,100 total loads down -2.2% YoY

Shipping transport

Rail traffic fell off a cliff in mid-February. Intermodal traffic quickly turned positive again, but domestic carloads, led by coal (for export) have remained negative.  After declining sharply for several months, making a 3 year low in mid-February, the BDI rebounded mildly and then has plateaued. Meanwhile, Harpex (container shipping) has turned up sharply for the last 3 months in a row, making almost continual new 4 year highs.  In the longer term, shipping rates bottomed about 3 years ago and have been in a slow and variable uptrend since, although the Baltic index did break that to the downside in the recent skid.


Steel production from the American Iron and Steel Institute 

  • +1.3%  w/w
  • -8.8% YoY

Steel production over the last several years had generally been in a decelerating uptrend.  Since  spring 2014, it turned mixed, and then cliff-dived in February.  It has gotten "less worse" in the last month.


Commodity prices


  • Up +1.09 to 101.90 w/w
  • Down -20.56 YoY
BBG Industrial metals ETF
  • 115.47 down -1.12 w/w
Commodity prices as measured by ECRI remain close to their recent new low.  This is still probably due to international weakness, and mainly about oil.  Industrial metals generally declined in the last 3 years, then made and retested a low in the last three months, and have generally bounced near that bottom since.




Mortgage applications from the Mortgage Bankers Association:+1% w/w purchase applications

  • +10% purchase applications
  • +15% YoY purchase applications 
  • +7% w/w refinance applications

YoY purchase applications established a "less awful" trend in the latter part of 2014.  They have turned positive since the beginning of this year.  Despite this bounce, the longer term comparisons of refinancing applications still shows them near their bottom.


Real estate loans, from the FRB H8 report:

  • unchanged w/w
  • up +4.0% YoY

Loans turned up at the end of 2011, turned down in late 2013, but have remained positive to sharply positive since April 2014.


Money supply


  • -0.9% w/w
  • -0.9% m/m
  • +6.9% YoY Real M1
  • -0.1% w/w
  • +0.6% m/m
  • +5.8% YoY Real M2

Between actual deflation and possibly a mild European flight to safety, real YoY money supply is firmly positive.  At the time of the last flight to safety (from Europe) in January 2012, YoY Real M1 made a high of about 20%, and YoY Real M2 made a high of about 10.5%.  Growth in both then decelerated.  Real M2 made a new 2 year low at the beginning of 2014.  Both Real M1 and Real M2 improved substantially since.


Employment metrics

 Initial jobless claims

  • 279,000 up +2,000 
  • 4 week average 278,750 up +2,750

Initial claims remain well within the range of a normal economic expansion, as does the 4 week average, despite weakness in the Oil patch states.


The American Staffing Association Index 


  • Unchanged at 95
  • Down -1.35 YoY

The YoY comparison had generally been positive to strongly positive since last spring. Two months ago, the YoY comparisons deteriorated, turned neutral, and in the last several weeks have turned increasingly negative.


Tax Withholding

  • $78.1 B for the first 9 days of June vs. $74.1 B one year ago, up +$4.0 B or +5.4%
  • $165.4 B for the last 20 reporting days ending Thursday vs. $156.8 B one year ago, up +$8.6 B or +5.5%


Beginning with the last half of 2014, virtually all readings have been positive.


Oil prices and usage

  • Oil up +$1.06 to $59.94 w/w
  • Gas unchanged at $2.78 w/w 
  • Usage 4 week average up +1.1% YoY


The price of gas and oil bottomed at the end of January.  The 2010-2013 Oil choke collar has been broken.  The interesting issue now is when and at what price we get the seasonal peak, as gas prices have risen $0.76 since then.  If they follow past seasonal patterns, their summer peak will be roughly $1 above their winter low.


Bank lending rates

LIBOR has risen sharply from its post-recession low set in one year ago, and the TED spread has been in an uptrend since the last the middle of 2014, rising off its November 2013 low.  LIBOR is also in an uptrend.




This week saw two changes in the underlying story since February:  mortgage applications spiked, most likely as buyers tried to lock in purchases in anticipation of even higher interest rates; and a further deterioration in interest rates. Weakness in temporary staffing also increased.


Among long leading indicators, interest rates for treasuries, corporate bonds, and mortgage applications are now all neutral.  Refinancing, despite a recent boomlet, remains near its multi-year bottom..  Money supply and real estate loans were positive. 


The short leading indicators remain extremely mixed.  The recent upward spike in interest rates with widening spreads has been a classic short leading indicator for recession.  Meanwhile initial jobless claims remain very positive.  Temporary staffing turned more negative for the fourth week in a row.  While oil and gas prices have risen, both remain positives, as is gas usage.  Industrial metal prices turned more negative, and are just a hair above their multi-year bottom.


All but two of the coincident indicators were mixed but with a negative bias.  The positives were tax withholding and  container shipping.  Steel production and rail transport are still negative, although both were "less bad" this week. Intermodal traffic remained a positive. The Baltic Dry Index is a slight negative.  The disturbing uptrend in the TED spread and LIBOR is intact.  Johnson Redbook and Goldman Sachs consumer spending are still in the low end of YoY comparisons, while Gallup's negative reading still negative, although less bad this week.  Consumer spending has been facing very strong readings from last year at this time.


We still have a generally good economy, but with a shallow industrial recession, due primarily to the strong US$ with an assist from the Oil patch. The great May retail sales number was in sharp contrast to the weekly data from last month. This coming week we will see if industrial production has bottomed out.


Have a nice weekend!

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