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By New_Deal_democrat November 22, 2014 12:01 pm
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Weekly Indicators: a good week for US Thanksgiving edition

The economic news this week included a sharp rise in the October leading indicators. This forecasts strong growth in the second quarter of next year.  Housing permits made a new post-recession high, although the more volatile housing starts came in a little soft.  Existing home sales were up YoY for the first time in over a year.  The Empire Manufacturing Index improved.  Both producer and consumer prices came in a little higher than expect (although consumer prices were flat.  They simply did not decline.)  Industrial production declined slightly. 

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

  • 4.80% BAA corporate bonds up +0.04% 
  • 2.36% 10 year treasury bonds unchanged
  • 2.44% credit spread between corporates and treasuries up +0.04%

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 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.  Spreads rose significantly since their expansion lows of a few months ago, but have stabilized in the last few weeks.

Housing metrics

Home Sales and Prices from DataQuick:

  •  +0.8% sales YoY, up +0.5% (1 month rolling average) 
  •  +3.4% prices YoY, down -0.2% (1 month rolling average) 

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

Mortgage applications from the Mortgage Bankers Association:

  • w/w purchase applications up +12%
  • YoY purchase applications down -6%
  • w/w refinance applications up +1%

Refinance applications have bounced off their recent multi-year lows,while purchase applications also improved slightly.

Real estate loans, from the FRB H8 report:

  • +0.2% w/w
  • +3.3% 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

  • -0.2% w/w
  • -0.1% m/m
  • +9.3% YoY Real M1


  • +0.6% w/w
  • +0.2% m/m
  • +4.0% 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, however, growth in especially M2 has declined somewhat, although both remain firmly in positive territory.

Employment metrics
 Initial jobless claims

  • 291,000 up +1,000
  • 4 week average 287,500 up +2.500

These have been in the normal range for an economic expansion for 8 months.

The American Staffing Association Index was unchanged at 105.  It is up +3.6% YoY.

This Index again made a new seasonal all-time high for this week. The YoY comparison has generally been positive to strongly positive since early spring.

Tax Withholding

  • $117.3 B for the first 13 days of November vs. $113.1 B one year ago, up +$4.2 B or +3.6%
  • $158.7 B for the last 20 days ending Thursday vs. $149.9 B one year ago, up +$8.8 B or +5.9%

When July's tax withholding turned negative, it was beginning to be a significant ground for concern.  With the exception of one week, however, since then all readings have been positive.

Oil prices and usage

  • Oil up +$0.69 to $76.51 w/w
  • Gas down -$0.05 to $2.89 w/w
  • Usage 4 week average YoY +0.8%

The price of gas has declined seasonally in the last 3 months, and is now at a 4 year low.  The Oil choke collar has disengaged.

Consumer spending

  • ICSC up +0.2% w/w.  +2.2% YoY
  • Johnson Redbook +3.9% YoY
  • Gallup daily consumer spending 14 day average at $92 up +$6 YoY

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%. After two weeks of mediocre numbers, there was some improvement this week.

Steel production from the American Iron and Steel Institute 

  • +0.8% w/w
  • +1.5% 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.

 Railroad transport from the AAR

  • +900 carloads up +0.3% YoY
  • +5,000 intermodal units +2.6% YoY
  • +7,900 total loads +1.4% YoY

Shipping transport

  • Harpex up +1 to 422
  • Baltic Dry Index up +68 to 1324

Rail traffic, rarely, was soft this week, for the second week in a row.  The BDI declined substantially since the end of last year, but is now back near an 8 month high. Harpex has been generally flat for the last few months up until a month ago, before making a 2 year high. It is 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

  • 0.2179 TED spread down -0.0092 w/w
  • 0.155 LIBOR unchanged 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 prices

  • Down -1.96 to 116.15 w/w
  • -4.97 YoY

Commodity prices continued to decline this week, partly due to oil, and partly due to international weakness.


I can keep this week's summary short.  Basically, with the perennial exception of mortgage applications, all of the other indicators, whether long or short leading, or coincident, were positive this week.

Commodities are a big negative for the global economy, but if anything they are a big positive for the US consumer economy.

There were a few pockets of relatively weak positives, including credit spreads, and the big coincident indicators of steel production, rail transport, and shipping.

As I concluded last week, the immediate present looks weak, although still positive.  Out a few months looks much stronger.  Out about a year is positive, albeit not so much as before.

Have a nice weekend!

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