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By New_Deal_democrat November 2, 2013 9:26 am
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Weekly Indicators: bounceback from government shutdown almost complete

 - by New Deal democrat


Monthly reports in the last week featured September industrial production and capacity utilization, both up significantly. Two manufacturing indexes, the ISM index and the Chicago PMI, both came in very strong. New Orders, a sub-index of the ISM and a component of the index of Leading Indicators, was positive. Consumer confidence, however, which is also a component of the LEI, continued its government-shutdown-related decline. Motor vehicle sales also declined slightly for October.


To reiterate, I follow these high frequency weekly indicators precisely because they 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. Two years ago, during the debt ceiling debacle, it was consumer spening holding up that told me that we were not going into recession. Consumers were more cautious this year, but let's see how they are doing now that the shutdown is over:


Consumer spending

Gallup's 14 day average of consumer spending has completely rebounded from its poor showing a few weeks ago. Last year the ICSC varied between +1.5% and +4.5% YoY in, while Johnson Redbook was generally below +3%. The ICSC had one of its best weeks all year this week. Johnson Redbook pulled back from its recent readings at the high end of its range.


Steel production from the American Iron and Steel Institute

  • -1.0% w/w
  • +7.4% YoY


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




Railroad transport from the AAR

  • +10,400 carloads up +3.6% YoY
  • +16,000 carloads up +8.1% ex-coal
  • +8,100 or +3.2% intermodal units
  • +18,400 or +3.4% YoY total loads

Shipping transport

Rail transport had been very mixed YoY during midyear, but has strenghtened considerably since then. The Harpex index had been improving slowly from its January 1 low of 352, but has generally flattened out for the last few months. The Baltic Dry Index hit a 3 year high a few weeks 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

  • 340.000 down -10,000
  • 4 week average 356,250 up +8,000


The American Staffing Association Index rose back up 1 to 101. It is up +5.1% YoY


Tax Withholding

  • $156.8 B for the month of October vs. $152.5 B last year, up +4.3 B or +2.8%
  • $131.6 B for the last 20 reporting days vs. $130.1 B last year, up +0.5 B or +1.2%


We can now estimate that after adjusting for state reporting glitches, the 4 week average of initial jobless claims one week ago was approximately 323,500. With that adjustment, and understanding that claims by federal government workers haee presumably ended, jobless claims remain firmly in a normal expansionary mode. Like each of the last three years that this same, a good, downside breakout has occurred.


Temporary staffing had been flat to negative YoY in spring, but broke out positively for the last three months. Tax withholding, after a strong September, has been awful this month, also presumably due to the federal government shutdown.


Oil prices and usage

  • Oil down -$3.24 to $97.85 w/w
  • Gas down -$0.07 at $3.29 w/w
  • Usage 4 week average YoY up +3.2%

The price of Oil has fallen to near a 52 week low. The 4 week average for gas usage has slightly positive for over a month. In the larger picture, it looks like the Oil choke collar may finally be loosening its hold on the economy.


Interest rates and credit spreads

  • 5.21% BAA corporate bonds down -0.11%
  • 2.55% 10 year treasury bonds -0.11%
  • 2.66% credit spread between corporates and treasuries unchanged

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. They have declined somewhat since then. Spreads have also declined back to being close to their recent 2 year low. Their recent high was over 3.4% in June 2011.


Housing metrics


Mortgage applications from the Mortgage Bankers Association:

  • +1% w/w purchase applications
  • -0.1% YoY purchase applications
  • +9% w/w refinance applications

Refinancing applications decreased sharply since April due to higher interest rates. Purchase applications have also declined from their multiyear highs in April, and for the last few weeks have also turned negative YoY. Applications have generally been flat for the last several weeks.


Housing prices

  • YoY this week +11.0%

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:

  • +0.1% w/w
  • -0.3% YoY
  • +1.6% from its bottom

Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  Over the last half year, the comparisons stalled and more recently have turned negative.


Money supply



  • +1.2% w/w
  • +4.1 m/m
  • +8.7% YoY Real M1



  • +0.5% w/w
  • +1.4% m/m
  • +5.8% YoY Real M2

Real M1 made a YoY high of about 20% in January 2012 and decelerated since then. Earlier this year it increased again but has moderated since then, although it is still positive.  Real M2 also made a YoY high of about 10.5% in January 2012.  Its subsequent low was 4.5% in August 2012. It increased slightly in the first few months of this year, then stabilized and also decelerated, but in the last month has increased again.


Bank lending rates

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


JoC ECRI Commodity prices

  • up +0.308 to 121.09 w/w
  • +2.44 YoY


In general this was another positive week. Interest rates have retraced about 40% of their spike since April. As a result, mortgage applications have at least stabilized. Money supply has also accelerated in the last month. Finally, although not a high frequency indicator, it is worth noting that the final long leading indicator, corporate profits, also rose slightly in the third quarter.


The shorter leading indicators of temporary employment has turned strongly positive in the last two months. The oil choke collar has disengaged. Commodities are neutral. Only initial jobless claims seems to have taken a hit from the federal government shutdown.


Coincident indicators are mixed. Rail traffic was its most positive in months, while shipping has turned neutral. Steel production is positive. Bank lending rates remain at or near or at record lows. House prices remain strongly positive. Only tax withholding, probably greatly influenced by the government shutdown, concluded an awful October. Consumer spending is mixed, as Gallup spending is not nearly so positive as before, ICSC is more mutedly positive, but Johnson Redbook remains strong.


The next few weeks of consumer spending and tax withholding should tell us if the bounceback from the shutdown induced slump has been completed. If Washington can manage to leave the economy alone for awhile, we still look positive. Have a nice weekend.

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