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By New_Deal_democrat October 26, 2013 11:44 am
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Weekly Indicators: continuing their post-shutdown bounce edition

- by New Deal democrat

Monthly government data reporting resumed this week.   Most importantly, 148,000 jobs were added in September.  The unemployment rate declined to 7.2%. Hourly earnings increased 0.1%.

In other reports, construction spending of all types increased.  Durable goods orders increased, although ex-transportation they declined slightly. Existing home sales decreased.  The trade balance got less bad. Consumer sentiment about both the present and future plunged during the government shutdown, just as it did in 2011.

During the shutdown, the weekly indicators I report on were uninterrupted.  Via <a href="http://www.econbrowser.com/archives/2013/10/better_to_light.html?utm_source=twitterfeed&utm_medium=twitter">Menzie Chinn of Econbrowser</a>, it develops that the <a href ="http://www.whitehouse.govhttps://xecommunityassets.s3.amazonaws.com/docs/weekly_indicators_report_final.pdf">Council of Economic Advisors to the President</a> made use of this data to create an index that tracked economic activity during the shutdown, also titled "Weekly Indicators" and finding that they showed that "[t]he government shutdown and debt limit brinksmanship had a substantial negative impact on the economy."  It's nice to know I apparently have a prominent following.

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

  ICSC +1.4% w/w 3.2% YoY
  Johnson Redbook +2.9% YoY
  Gallup daily consumer spending</a> 14 day average at $90 up $22 YoY

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

   - 0.6% w/w
  +8.5 YoY

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

Railroad transport from the AAR

 +600 carloads up +0.2% YoY
 +7100 carloads up +4.1% ex-coal
 +10,900 or +4.3% intermodal units
 +11,400 or +2.3% YoY total loads

Shipping transport

  Harpex up +1 to 400
  Baltic Dry Index</a> down -376  to 1708

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
  350.000 down -8,000
  4 week average 348,250 up +11,750

The American Staffing Association</a> Index declined -1 to 100.  It is up +4.9% YoY

Tax Withholding
    $1124.3 B for the first 17 days of October vs. $122.5 B last year, up +1.8 B or +1.5%
    $148.9 B for the last 20 reporting days vs. $140.0 B last year, up +8.9 B or +6.4%

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 -$2.96 to $97.85 w/w
 Gas up +$0.01 at $3.36 w/w
 Usage 4 week average YoY up +2.3%

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

 5.32% BAA corporate bonds down -0.06%
 2.66% 10 year treasury bonds -0.02%
 2.66% credit spread between corporates and treasuries down -0.04%

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 <a href="http://www.mbaa.org/default.htm">Mortgage Bankers Association:
  +1% w/w purchase applications
  -2% YoY purchase applications
  -1% 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
    -0.4% YoY</li>
    +1.5% from its bottom

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

Money supply

M1
  +3.9% w/w
 +1.8 m/m
 +6.6% YoY Real M1*

M2
  +0.2% w/w</li>
  +1.2% m/m</li>
  +5.7% YoY Real M2*

(*NOTE: I am estimating YoY inflation for September is +1.1% based on the change in gas prices). 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

   0.216 TED spread down -0.009 w/w
   0.1686 LIBOR down -0.0034 w/w

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
    down -2.18 to 120.79 w/w
   +2.06 YoY

The high frequency data this week generally continuted its positive bounce from the last week of the government shutdown. The long leading indicator of interest rates improved, and mortgage refinancing and purchage applications at least have stopped their decline.  Money supply remains positive and has stopped decelerating. Spreads between corporate bonds and treasuries also improved again this week.

The shorter leading indicators of initial jobless claims also remain positive after adjusting for California's computer glitches. Temporary employment has turned strongly positive in the last two months. The oil choke collar has disengaged. Commodities are neutral.

The coincident indicator of rail traffic remains very positive while shipping has turned neutral. Steel production is positive. Bank lending rates are again at or near or at record lows. House prices remain strongly positive. Only tax withholding, probably greatly influenced by the government shutdown, has had an awful October.  Most importantly, the consumer is back.

While early signs are enouraging, the question remains open at this point whether plans for spending in the next few months on pause, given the considerable likelihood that the US government goes back to the brink of default in the next 4 months.

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