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By New_Deal_democrat December 13, 2014 8:57 am
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Weekly Indicators: global weakness vs. US strength edition

Monthly November reports were few but strongly positive, including retail sales, consumer sentiment, and the JOLTS jobs report.  PPI showed outright deflation.

My usual reminder that the high frequency weekly indicators provide an up-to-this-week snapshot of the economy.  The indicators will confirm a trend or indicate a switch in trend well before monthly reports, and are a way to mark one's opinions to market on a regular basis.

I am generally going in order of long leading, then short leading, then coincident indicators:

 Interest rates and credit spreads

  • 4.79% BAA corporate bonds up +0.05% 
  • 2.27% 10 year treasury bonds up +0.02%
  • 2.52% credit spread between corporates and treasuries up +0.03%

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 to over 3% in late 2013.  This year interest rates started at just over 3% have declined over 0.8%, or more than 50% of that increase, at their lowest point.  Bond yields are now moving in the direction of stocks again, after moving in the opposite direction in the first half of this year. The decline in both this week points to deflationary concerns.  Spreads rose further above their expansion lows of a few months ago, a sign of weakness meriting extra attention. I suspect Treasuries' downdrift are a measure of global weakness.

Housing metrics

Home Sales and Prices from DataQuick:

  •  +3.2% sales YoY, unchanged (1 month rolling average) 
  •  +2.3% prices YoY, down -0.9% (1 month rolling average) 

YoY sales were positive for the fourth week in a row, while YoY median price comparison has been stable.

Mortgage applications from the Mortgage Bankers Association:

  • w/w purchase applications up +1%
  • YoY purchase applications down -4%
  • w/w refinance applications up +13%

Refinance applications rebounded this week by the same percentage as their decline last week, while purchase applications resumed their "less awful" YoY trend.

Real estate loans, from the FRB H8 report:

  • unchanged w/w
  • +3.2% YoY
  • +5.7% from their bottom

Loans turned up at the end of 2011, but with higher interest rates, the comparisons rolled over and had been negative since April 2013.  They turned positive YoY in March 2014, and have remained positive to sharply positive since.

Money supply

  • +0.7% w/w
  • -1.0% m/m
  • +7.2% YoY Real M1


  • +0.3% w/w
  • +0.5% m/m
  • +4.2% YoY Real M2

At the time of the last flight to safety (from Europe) 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 then decelerated.  Real M2 made a new 2 year low at the beginning of this year.  Both Real M1 and Real M2 improved substantially since.  In the last month or so, however, growth in especially M2 has declined somewhat, although both remain firmly in positive territory.

Employment metrics
 Initial jobless claims

  • 294,000 down -3,000
  • 4 week average 299,250 up +250

Initial claims remain well within the range of a normal economic expansion. The 4 week average remains very positive.



The American Staffing Association Index was seasonably down 5 to 102.  It is up +2.7% YoY.

This Index declined seasonably. The YoY comparison has generally been positive to strongly positive since early spring.

Tax Withholding

  • $71.9 B for the first 9 days of December vs. $66.9 B one year ago, up +$5.0 B or +7.5%
  • $167.8 B for the last 20 days ending Thursday vs. $154.0 B one year ago, up +$13.8 B or +9.0%
  • With the exception of one week, since July all readings have been positive.

Oil prices and usage

  • Oil down -$8.03 to $57.81 w/w
  • Gas down -$0.10 to $2.68 w/w
  • Usage 4 week average YoY +3.9%

The price of gas is close to a 5 year low.  The 2010-2013 Oil choke collar has been broken.

Consumer spending

  • ICSC -1.5% w/w.  +2.9% YoY
  • Johnson Redbook +3.9% YoY
  • Gallup daily consumer spending 14 day average at $80 ($98) down -$19 (-$1) YoY*

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%.  These numbers show continued positivity.

*This week I included two numbers for Gallup.  I strongly suspect they have a data entry error.  In the last two weeks the 14 day average has suddenly become much more volatile than the 3 day average, and with the 3 day average varying between $95 and $105 for the last 16 days, a reading of $80 for the 14 day average appears mathematically impossible.  I think whoever is entering this data for Gallup on their web site is transposing the entries.  In any case, 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. Even if there was a transposition error, Gallup was still negative this week.

Steel production from the American Iron and Steel Institute 

  • +2.3% w/w
  • +5.0% 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 from January through early May, but then turned increasingly positive through August.  They then deteriorated and have alternated between slightly positive and slightly negative.  This week continued the strong YoY reading from last week.

 Railroad transport from the AAR 

  • +32,300 carloads up +11.7% YoY
  • +5,500 intermodal units up +2.1% YoY
  • +38,000 total loads up +7.0% YoY

Shipping transport

  • Harpex unchanged at 422
  • Baltic Dry Index down -156 to 863

Rail traffic is strongly positive again.  The BDI declined substantially since the end of last year, made an 8 month high, and for the last few weeks has been declining again. Harpex has been generally flat for the last few months up until 6 weeks ago, before making a 2 year high. It remains slightly below that this week.  In the longer term, shipping rates bottomed about 2 years ago and have been in a slow and variable uptrend since.

Bank lending rates

  • 0.2186 TED spread down -0.0038 w/w
  • 0.161 LIBOR up +0.004 w/w

LIBOR has risen slightly from its post-recession low set in May. The TED spread has also moved generally sideways in the last 6 months after rising from its low of November of last year,

JoC ECRI Commodity price

  • Down -2.82 to 112.34 w/w
  • Down -10.06 YoY

Commodity prices continued cliff-diving for the second week in a row.  This is probably due to international weakness, and almost all about oil, since industrial metals indexes are neutral, and generally have slightly risen this year.


Like two weeks ago, in the long leading indicators this week we saw weakness appear in interest rates.  Treasury rates are falling, and the spread between treasuries and corporate bonds is widening.  This is a pretty strong indicator of global weakness.  Money supply and housing sales remain positive, and even mortgage applications were much "less worse" than they have been in the last year.

The short leading indicators continue to look strong, including jobless claims and temporary staffing, as well as gas prices and usage.  Commodities, however, plunged - but this is almost all about oil.  Industrial metals are neutral to positive.

Coincident readings are mixed. Two measures of consumer spending remain very positive, while Gallup turned negative. Tax withholding was positive.  Steel and rail were both strongly positive.  Shipping, however, was slightly negative.

With one exception, the significant negatives mainly tell s story of global weakness - a flight to treasury bonds vs. corporate bonds, shipping, and commodities.  US data, with the sole exception of Gallup daily spending, continues to tell a story of strength.

Have a nice weekend!

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