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By New_Deal_democrat March 15, 2014 11:22 am
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Weekly Indicators: Consumers could use a St. Patrick's Day libation edition
Monthly news for February included increased retail sales, but with January's number revised downward.  Producer prices declined.  Consumer sentiment declined, and wholesale inventories increased to the highest level since the end of the last recession.

 

As always, a reminder that the purpose of my weekly reports on the high frequency weekly indicators is to provide an up-to-this-week snapshot of the economy, a way to "mark to market" my own opinions and a vehicle for you to do so with yours as well.

 

Let's start with consumer spending again:

 

Consumer spending

Gallup's 14 day average of consumer spending averaged between $80 and $100 for most of 2013, with frequent YoY comparisons over $20, and few less than +$10.  In 2013 the YoY range for the ICSC declined to between +1.5% and +3.0%, while Johnson Redbook YoY was between from +2% to a high over +4%.  Both the ICSC and Redbook are at the low end of their recent ranges, but Gallup's repeated negative reading is very unusual and a definite cause for concern.

 

Steel production from the American Iron and Steel Institute 

  • -1.1% w/w
  • +0.7% YoY

Steel production over the last several years has generally been in a decelerating uptrend.  After a strongly positive move late in 2013, YoY comparisons turned negative again in January and have been mixed ever since.

 

Transport

 Railroad transport from the AAR 

  • -2,700 carloads down -1.0% YoY
  • -2,300 carloads down -0.3% ex-coal
  • +8,700 or +3.7% intermodal units
  • +6,100 or +1.2% YoY total loads

Shipping transport

Rail transport had been very mixed YoY at midyear 2013, but almost continuously improved after that, ending 2013 on a very positive note.  Rail traffic was very volatile in February and is mixed now.  The Harpex index slowly rose, then stabilized, but has slowly declined since July 2013. The Baltic Dry Index made a new 3 year high in December 2013, and has been fluctuating since.  Both the Baltic Dry Index and the Harpex Index were in a range near their bottom for about 2 years, but rose significantly above those ranges in 2013.

 

Interest rates and credit spreads

  • 5.07% BAA corporate bonds up +0.01%
  • 2.71% 10 year treasury bonds up +0.02%
  • 2.36% credit spread between corporates and treasuries down -0.01%

Interest rates for corporate bonds made 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 rose over 1.6% above that mark in late 2013.  Yields declined significantly ever since the relatively poor December employment report over two months ago.  Spreads are near their 3 year low set one month ago.  Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

  • w/w purchase applications down -1%
  • YoY purchase applications down -17%
  • w/w refinance applications down -3%

Both refinance applications and purchase applications are near their post-recession lows set a short time ago.

Housing prices

  • YoY this week +10.2%

Housing prices bottomed in November 2011 on Housing Tracker, and YoY comparisons rose to just shy of +12% in late 2013. In the last few weeks the YoY reading has declined from this range.  The continuation of the sharp YoY increase in prices might actually be a negative, given the pasting that housing has taken due to higher mortgage rates.

Real estate loans, from the FRB H8 report:

  • unchanged w/w
  • -0.4% YoY
  • +3.1% from their bottom

Loans turned up at the end of 2011, but with higher interest rates, the comparisons rolled over and have been almost consistently negative since April 2013.

Money supply

M1 

  • +3.8% w/w
  • +0.7% m/m
  • +10.4% YoY Real M1

 M2 

  • -0.1% w/w
  • +0.6% m/m
  • +4.7% YoY Real M2

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 decelerated since then.  Real M2 made a new 2 year low two months ago, but both Real M1 and Real M2 have improved substantially since.

 

Employment metrics

 Initial jobless claims

  • 315,000 down -8,000
  • 4 week average 330,500 down -6,000

Initial claims seem to have stabilized at their autumn levels, and finally had a very good reading this week.

 

The American Staffing Association Index was up 1 to 92. It is up +1.77% YoY.

 

Only late 2007 and early 2008 were better than 2013. The YoY comparison faded in February but has stabilized in the last few weeks.

 

Tax Withholding 

  • $90.6 B for the first 9 days of March vs. $87.8 last year, up +$2.8 B or +3.2%
  • $189.9 B for the last 20 days ending Thursday vs. $176.1 B for 20 days ending Thursday 1 year ago, up +13.8 B +7.8%.

Both measures show substantial improvement YoY.

 

Oil prices and usage

  • Oil down -$3.73 to $98.89 w/w
  • Gas up $0.03 to $3.51 w/w
  • Usage 4 week average YoY down -0.3%

The price of Oil made its yearly seasonal low in November, but held nearly steady until beginning its seasonal climb in February. The 4 week average for gas usage was negative this week for the seventh consecutive week, and its continued weakness is problematic.  In the larger picture, it continues to look like in 2013 the Oil choke collar finally loosened its hold on the economy slightly.

Bank lending rates

The TED spread and LIBOR are both somnolent, and both near 3 year lows.

 

JoC ECRI Commodity prices

  • Down -3.80 to 124.87 w/w
  • -2.51 YoY 

Among the long leading indicators, treasury rates are significantly below their December highs. Money supply continued its rebound.  Bank lending rates remain low.  On the other hand, mortgage applications remain near post-recession lows.

 

The short leading indicators improved this week.  Temporary jobs, initial jobless claims, credit spreads, gas, and oil were positive.  Commodity prices however declined sharply, indicating weakness.

 

The coincident reports were also mixed.  Consumer spending was weakly positive to negative, but tax withholding was positive.  Steel production, shipping and rail transport were mixed and steel production was neutral.  YoY comparisons of gas usage are negative again.

 

This week is a continuation of the last few week's trends.   Last year's weakness in the long leading indicators has fed through into the short leading and coincident indicators, although there was improvement in many this week.  Because the recent weak consumer spending leads jobs,  I expect that job reports in the next several months may be weak.  At the same time, the long leading indicators did not roll over and have recently rebounded somewhat and suggest this will not lead to actual contraction. 

 

Have a nice weekend!

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