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By New_Deal_democrat November 23, 2013 8:42 am
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Weekly Indicators: fully positive now, but interest rates a growning concern for late 2014 edition
In the rear view mirror, 3rd quarter median employment costs rose, and indicated that real median wages have grown about half a percent YoY. Monthly reports in the last week for October were showed outright deflation in both consumer and producer prices, strong retail sales, a decelerating but positive Philadelphia Fed, and a 4 month low in existing home sales.
 

The high frequency weekly indicators 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, as I have expressed concern about their recent weakness:

 

Interest rates and credit spreads

  • 5.43% BAA corporate bonds up +0.07%
  • 2.74% 10 year treasury bonds +0.06%
  • 2.69% credit spread between corporates and treasuries up +0.01%

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 again slightly this week. After declining to near 2 year lows, spreads also have increased in the last month. Their recent high was over 3.4% in June 2011.

 

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

  • +6% w/w purchase applications
  • -3% YoY purchase applications
  • -7% 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 +11.4%

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 set a new 7 year record.

 

Real estate loans, from the FRB H8 report:

 

  • -0.2% w/w
  • -1.1% YoY
  • +1.0% 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

M1 

  • -1.1% w/w
  • +0.1% m/m
  • +7.1% YoY Real M1

 M2 

  • -0.2% w/w
  • +0.1% m/m
  • +5.4% 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 again this week. 

 

Consumer spending

ICSC +0.1% w/w. +2.8% YoY

Gallup's 14 day average of consumer spending is once again very positive.  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 this week also returned to the middle of its 2013 range.

 

Steel production from the American Iron and Steel Institute 

 

  • -2.0% w/w
  • +3.6% 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.

 

Transport

 Railroad transport from the AAR 

 

  • +7,000 carloads up +2.4% YoY
  • +12,700 carloads up +7.5% ex-coal
  • +17,400 or +7.0% intermodal units
  • +24,200 or +4.5% 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 turned back down. 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

  • 323.000 down -21,000
  • 4 week average 338,500 down -5,500

 

The American Staffing Association Index fell 11 to 101. It is up +6.8% YoY

 

Tax Withholding 

 

  • $115.5 B for the first 14 days of November vs. $104.9 B last year, up +$10.6 B or +10.1%
  • $149.9 B for the last 20 reporting days vs. $142.1 B last year, up +7.5 B or +5.3%

 

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 back.  Initial claims have also returned to being positive.

 

Oil prices and usage

 

  • Oil up +$1.00 to $94.84 w/w
  • Gas up +$0.03 at $3.22 w/w
  • Usage 4 week average YoY up +3.9%

The price of Oil rose from its 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 +1.03 to 122.22 w/w
  • +1.74 YoY

 We returned to the recent theme in these indicators this week.  The long leading indicator of  Interest rates crept higher and remain  a full 1% higher than they were in April.  Interest rates have significantly knocked back housing, as real estate loans were even  more awful, and mortgage applications remain barely above their recent lows.  Money supply is positive and steady, but relatively soft compared with the last several years. 

 

The shorter leading indicators were all positive. Temporary employment declined slightly this week but is still strongly positive as it has been in the last three months. The oil choke collar has disengaged, as gas prices, which increased slightly, are still near three year lows, and usage has increased.  Initial jobless claims improved, as the effects of the government shutdown ebbed. Commodities turned slightly positive, are also remain slightly higher than one year ago.

 

Coincident indicators are positive or neutral. Rail traffic continues its recent strongly positive performance, while shipping has turned slightly negative. 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, Johnson Redbook remains strong, and now the ICSC index has also improved to the middle of its range.

 

In the beginning of 2013, based on leading indicators at that time, I thought the economy would bounce back in  the second half, and indeed the economy is doing quite well at the moment.  The continuing weakness in the long leading indicators of housing and especially interest rates must be watched carefully for its message about late 2014.

 

 Have a nice weekend.

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