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By New_Deal_democrat October 19, 2013 11:37 am
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Weekly Indicators: heaving a sigh of relief edition

  - by New Deal democrat

The government shutdown prevented the reporting of housing permits and starts. Due to the missing data, the Conference Board did not report the Leading Indicators for September. The Empire Manufacturing index decelerated but was still positive, and the Philly Fed index accelerated and remained positive.

Fortunately, none of the high frequency weekly indicators I report on were affected by the shutdown, except for the need to estimate YoY inflation for one series. Further, two years ago, during the debt ceiling debacle, it was consumer spening holding up that told me that the economy would not tip back into recession. Here's this week's update:

Consumer spending

    ICSC -0.7% w/w 1.0% YoY
    Johnson Redbook +3.2% YoY
    Gallup daily consumer spending 14 day average at $90 up $20 YoY

This week, Gallup's 14 day average of consumer spending rebounded very strongly this week, even before the US crisis was temporaily solved late Wednesday. On the other hand, last year the ICSC varied between +1.5% and +4.5% YoY in, while Johnson Redbook was generally below +3%. This week the ICSC had its worst YoY showing in 4 years, and in real, inflation adjusted terms was negative. Johnson Redbook, however, remains closer to the high end of its range.

Steel production from the American Iron and Steel Institute

    -1.4% w/w
    +9.2% 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

    +300 carloads up +0.1% YoY
    +5600 carloads or 3.2% ex-coal
    +10,000 or +4.0% intermodal units
    +10,200 or +1.9% YoY total loads

Shipping transport

    Harpex unchanged at 399
    Baltic Dry Index down -183 to 2084

Rail transport had been very mixed YoY during midyear, but this week was the ninth straight positive week since then. The Harpex index had been improving slowly from its January 1 low of 352, but flattened out for a few months and has declined slightly in the last month. The Baltic Dry Index fell from last week's 3 year high. 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

    358,000 down -16,000
    4 week average 336,500 up +11,500

The American Staffing Association Index was up 1 to 101. It is up +5.9% YoY

Tax Withholding

    $95.4 B for the first 12 days of October vs. $95.4 B last year, unchanged
    $146.4 B for the last 20 reporting days vs. $132.8 B last year, up +13.6 B or +10.2%

We can now estimate that after adjusting for state reporting glitches, the 4 week average one week ago was approximately 320,750. Jobless claims remain firmly in a normal expansionary mode. Like each of the last three years, an autumn downside breakout has occurred.

Temporary staffing had been flat to negative YoY in spring, but broke out positively for the last two months. The only time it has ever been higher was one week in 2006 and in the second half of 2007. Tax withholding, after an average September, has had a very poor first half of October.

Oil prices and usage

    Oil down -$3.03 to $100.81 w/w
    Gas down -$0.06 at $3.37 w/w
    Usage 4 week average YoY up +1.8%

The price of Oil continues to fall sharply from its recent 2 year high. The 4 week average for gas usage is slightly positive again.

Interest rates and credit spreads

    5.38% BAA corporate bonds down -0.03%
    2.68% 10 year treasury bonds up +04%
    2.70% credit spread between corporates and treasuries down -0.07%

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, and have decisively risen about 1.5% above that mark. Spreads are slightly above a recent 2 year low. Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

    -5% w/w purchase applications
    -1% YoY purchase applications
    +3% w/w refinance applications

Refinancing applications have decreased sharply in the last 6 months due to higher interest rates. Purchase applications have also declined from their multiyear highs in April, and have also turned negative YoY.

Housing prices

    YoY this week +11.2%

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:

    -0.2% w/w
    -0.8% YoY
    +1.2% from its bottom

Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  Over the last few months, the comparisons stalled and now are negative.

Money supply

M1

    -1.9% w/w
    +0.3% m/m
    +6.7% YoY Real M1*

M2

    +0.2% w/w
    +1.0% m/m
    +5.4% 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, but has declined again in the past several months.

Bank lending rates

    0.216 TED spread up +0.035 w/w
    0.172 LIBOR up +0.002 w/w

The TED spread recovered most of last week's cliff-dive this week. LIBOR established yet another new 3 year low during this week.

JoC ECRI Commodity prices

    down -0.42 to 122.97 w/w
    +1.66 YoY

Despite the looming US debt default on Wednesday, the high frequency data this week generally had a positive bounce. The long leading indicator of interest rates improved, and mortgage refinance applications had a slight rebound, although purchage applications and real estate loans remain negative. Money supply remains positive and seems to have stopped decelerating. Spreads between corporate bonds and treasuries also slightly improved 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 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 turned negative for early October.

In general, the indicators were positive. Gallup has rebounded strongly late in the week, although the ICSC was the weakest YoY comparison since the recovery began, and in real, inflation adjusted terms, was negative. With the shutdown over, the next week should show how consumers are reacting. A looming question is, are longer term plans for spending on pause, given the considerable likelihood that the US government goes back to the brink of default in the next 4 months.

Have a nice weekend.

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