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By New_Deal_democrat November 16, 2013 9:01 am
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Weekly Indicators: bounceback complete, but long leading indicators flash caution
Monthly reports in the last week for October were all negative.  Industrial production and capacity utilization decreased.  Wholesale inventories increased.  The Empire Manufacturing index turned negative.  Third quarter unit labor costs also decreased - good for corporate profits but bad for labor/consumers, although the second quarter was revised higher. 

The high frequency weekly indicators precisely are an almost simultaneous "nowcast" of the economy, and although they can be noisy, taken together they will show a continuation or turning of a trend before it shows up in the monthly data.   Because in recent months I have expressed some concern with trends in the long leading indicators, let's start with those this week.


Interest rates and credit spreads



  • 5.36% BAA corporate bonds up +0.13%
  • 2.68% 10 year treasury bonds +0.11%
  • 2.68% credit spread between corporates and treasuries up +0.02

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 decisively rose more than 1.5% above that mark by September, before  declining somewhat. They turned back up this week. Spreads declined back to being close to their recent 2 year low, but also have increased slightly in the last few weeks. Their recent high was over 3.4% in June 2011.


Housing metrics

Mortgage applications from the Mortgage Bankers Association:



  • -1% w/w purchase applications
  • -6% YoY purchase applications
  • -2% w/w refinance applications

Refinancing applications decreased sharply since April due to higher interest rates, and remain near post-recession lows. Purchase applications also declined from their multiyear highs in April, and for the last six weeks also turned negative YoY. Applications have generally been mixed for the last several weeks.


Housing prices

  • YoY this week +11.2%

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 increase remains near a 7 year record.


Real estate loans, from the FRB H8 report:



  • -0.2% w/w
  • -1.7% YoY
  • +1.2% 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.


Money supply




  • -1.2% w/w
  • +2.3% m/m
  • +7.3% YoY Real M1




  • -0.3% w/w
  • -0.3% m/m
  • +5.1% 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.  Its subsequent low was 4.5% in August 2012. Earlier this year both moderated, then in the last month both accelerated again, but were a little more soft this week. 


Consumer spending


Gallup's 14 day average of consumer spending has completely rebounded from its poor showing a few weeks ago.  From here on in, however, the YoY comparisons will get harder.  Last year the ICSC varied between +1.5% and +4.5% YoY in, while Johnson Redbook was generally below +3%.  Johnson Redbook has also bounced back towards the high end of its range.  The ICSC, on the other hand, is only weakly positive.


Steel production from the American Iron and Steel Institute


  • -0.2% w/w
  • +4.9% YoY

 Steel production over the last several years has been, and appears to still be, in a decelerating uptrend,  but has been strongly positive in  the last month.



 Railroad transport from the AAR




  • +13,900 carloads up +4.9% YoY
  • +14,600 carloads up +8.6% ex-coal
  • +15,700 or +6.5% intermodal units
  • +29,800 or +5.6% YoY total loads

Shipping transport


Rail transport had been very mixed YoY during midyear, but has continuously improved since then and is now very strong.  The Harpex index had been improving slowly from its January 1 low of 352, but flattened out for the last half a year. The Baltic Dry Index hit a 3 year high over a month ago, but has backed off signifiantly. In the larger picture, 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


  • 344.000 down +8,000
  • 4 week average 344,0000 down -4,250


The American Staffing Association Index rose 1 to 102. It is up +7.1% YoY


Tax Withholding


  • $75.0 B for the first 9 days of November vs. $63.0 B last year, up +$12.0 B or +19%
  • $142.8 B for the last 20 reporting days vs. $129.1 B last year, up +13.7 B or +10.6%


Temporary staffing had been flat to negative YoY in spring, but broke out positively for the last four months. Tax withholding, after a strong September, was awful in October, also presumably due to the federal government shutdown, but has now come roaring back.  On the other hand, that initial claims remain elevated over their recent lows is a negative.


Oil prices and usage



  • Oil down -$0.76 to $93.84 w/w
  • Gas down -$0.07 at $3.19 w/w
  • Usage 4 week average YoY up +4.7%

The price of Oil again fell to a 52 week low. The 4 week average for gas usage is now strongly positive. In the larger picture, it looks like the Oil choke collar is finally loosening its hold on the economy.


Bank lending rates


The TED spread decreased again this week closer to the bottom of its 3 year range. LIBOR established yet another new 3 year low during this week.


JoC ECRI Commodity prices


  • up +0.32 to 121.19 w/w
  • +0.96 YoY

 We returned to the recent theme in these indicators this week.  Long leading indicators are flashing caution if not outright warning.  Interest rates crept back up to a full 1% higher than they were in April.  Real estate loans were awful, and mortgage applications remain barely above their recent lows.  Money supply is positive, but relatively soft. 


The shorter leading indicators were more mixed. Temporary employment remained strongly positive as it has been in the last three months. The oil choke collar has disengaged, as gas prices are at near three year lows, and usage has increased.  On the other hand, initial jobless claims are elevated from recent lows, with no apparent confounding factors this week. Commodities are also neutral if not negative, being only slightly higher than one year ago.


Coincident indicators are positive or neutral. Rail traffic continues its recent strongly positive performance, while shipping has turned neutral. Steel production is positive. Bank lending rates remain at or near  record lows. House prices remain strongly positive. Tax withholding, after an awful October, is having an excellent November so far. Gallup consumer spending has returned to being  very positive, and Johnson Redbook remains strong, although the ICSC index remains relatively weak.


The pst-shutdown bounce appears complete.  The economy is doing quite well at the moment.  Any further weakness in the long leading indicators will raise serious concerns about late 2014, however.


 Have a nice weekend.

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