- XE Contributor
I report on the high frequency weekly indicators 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.
This week let's start with the long leading indicators again:
Interest rates and credit spreads
- 5.44% BAA corporate bonds up 0.07%
- 2.86% 10 year treasury bonds up 0.05%
- 2.58% 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 rose this week. After declining to near 2 year lows, spreads increased slightly in the last month. Their recent high was over 3.4% in June 2011.
Mortgage applications from the Mortgage Bankers Association:
- +1% w/w purchase applications
- -10% YoY purchase applications
- +1% 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 also turned negative YoY eight weeks ago. This week both types of applications
were once agaiin at or near their worst levels since the absolute bottom in 2009.
- YoY this week +11.3%
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 comparison remained below the new 7 year record set several weeks ago.
Real estate loans, from the FRB H8 report:
- -0.2% w/w
- -0.5% YoY
- +1.1% 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, retreating back to near their post recession lows.
- +0.7% w/w
- -0.3% m/m
- +7.8% YoY Real M1
- +0.2% w/w
- -0.2% 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 firmed a little, but have softened again in the last month.
- ICSC -1.6% w/w. +1.5%YoY
- Johnson Redbook +2.6% YoY
- Gallup daily consumer spending 14 day average at $99 up $17 YoY
Gallup's 14 day average of consumer spending rose sharply in November 2012, and so now has very difficult YoY comparisons. Nevertheless, this week was still strongly positive. Last year the ICSC varied between +1.5% and +4.5% YoY in, while Johnson Redbook was generally below +3%. The ICSC this week was at the bottom of its 2013 range, while Johnson Redbook was in the middle of its range.
Steel production from the American Iron and Steel Institute
- +0.9% w/w
- +2.5% YoY
Steel production over the last several years has generally been in a decelerating uptrend. After a strongly positive move in the last several months, in the last couple of weeks YoY comparisons have softened.
Railroad transport from the AAR
- -12,300 carloads down -4.4% YoY
- +1,700 carloads up 1.0% ex-coal
- +22,600 or +9.4% intermodal units
- +9,600 or +1.8% YoY total loads
Rail transport had been very mixed YoY during midyear, but has almost continuously improved since then. With Thanksgiving Day quirks out of the way, this week remained positive. The Harpex index had been improving slowly from its January 1 low of 352, but flattened out in the last half a year, and has recently declined slightly. The Baltic Dry Index hit a new 3 year high this week. 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.
Initial jobless claims
- 368,000 up +70,000
- 4 week average 328,750 up +6500
The American Staffing Association Index was down -4 to 99. It is up +6.9% YoY
- $66.9 B for the first 9 days of December vs. $68.1 B last year, down -$1.5 B or -1.8%
- $157.0 B for the last 20 reporting days vs. $145.4 B last year, up $11.6 B or +8.0%
Temporary staffing had been flat to negative YoY in spring, but broke out positively for the last four months. It is now starting its traditional end of year swoon, but the YoY comparisons remain excellent. Tax withholding was awful in October, presumably due to the federal government shutdown, rebounded fully in November, and now has softened slightly. Initial claims have also returned to their overall positive trend.
- Oil down -$1.05 to $96.60 w/w
- Gas unchanged at $3.27 w/w
- Usage 4 week average YoY up +2.6%
The price of Oil appears to have made its yearly seasonal low several weeks ago, but remained near that low this week. The 4 week average for gas usage remains positive. In the larger picture, it looks like in 2013 the Oil choke collar finally loosened its hold on the economy slightly.
Bank lending rates
The TED spread remains close to the bottom of its 3 year range. LIBOR tied its 3 year low.
JoC ECRI Commodity prices
- Up +1.52 to 124.90 w/w
- +1.38 YoY
This week was a reinforcement of the trends I have noted over the last 6 months. The long leading indicator of interest rates were largely unchanged, but they remain a full 1% higher than they were in April. Interest rates have knocked the stuffing out of all of the housing metrics, as real estate loans remain poor, and mortgage applications were absolutely awful, just barely above their recession lows. Money supply is positive and steady, but relatively soft compared with the last several years.
On the other hand, with one exception the shorter leading indicators were all positive. Temporary employment began its seasonal swoon this week, but on a YoY basis is still strongly positive as it has been for the last four months. The oil choke collar has disengaged, as gas prices, and are back near three year lows, and usage has increased, although Oil prices look like they have made their annual low. Initial jobless claims tanked, but this is probably an artifact of the week of Thanksgiving Day. Commodities turned slightly positive, are also remain slightly higher than one year ago.
Coincident indicators were generally positive, but less strongly so. Steel production is positive albeit more muted. Bank lending rates remain at or near record lows. House prices remain strongly positive. Tax withholding retreated after an excellent November. Gallup consumer spending remained quite positive, despite challenging YoY comparisons, Johnson Redbook was moderately positive, but the ICSC index less so.
My mantra remains the same. The economy has bounced back in the second half of this year, and all looks well for the next 3 to 6 months. Housing and especially interest rates must be watched carefully, however, as to the end of 2014 and 2015.
Have a nice weekend.