Home > XE Currency Blog > Weekly Indicators: improvement from horrible to merely bad edition

AD

XE Currency Blog

Topics6741 Posts6786
By New_Deal_democrat December 12, 2015 9:47 am
  • XE Contributor
New_Deal_democrat's picture
New_Deal_democrat Posts: 547
Weekly Indicators: improvement from horrible to merely bad edition
Monthly data for November included positive retail sales, continued deflation in import, export, and producer prices, and flat inventories and sales at the wholesale and overall business level.  There was a decline in October job openings with slight increases in hires and quits.
 

My usual note: I look at the high frequency weekly indicators because while they can be very noisy, they provide a good Now-cast of the economy.  The indicators will confirm a trend or indicate a switch in trend well before monthly and quarterly reports.

In general I go in order of long leading indicators, then short leading indicators, then coincident indicators.

 

Interest rates and credit spreads

  • 5.43% BAA corporate bonds down -.08%
  • 2.24% 10 year treasury bonds down -.09%
  • 3.19% credit spread between corporates and treasuries up +.01%
30 year conventional mortgage rate:
  • 4.02%, down -.05%

 

With the exception of BAA corporate bonds yields, which made a new 50+ year low in January,  yields for corporate bonds, treasuries, and mortgages have all failed to make new lows in 3 years, thus turning yellow (caution or neutral vs. positive) as a recession indicator.

 

Housing

 

Mortgage applications

 

  • +.04% w/w Purchase applications
  • +29% YoY Purchase applications
  • +4% w/w Refinance applications
Real Estate loans
  • Up +0.1% w/w
  • Up +6.5% YoY 

Mortgage applications had been awful for several years, before turning up early this year in response to very low rates.  These remain slightly positive, but very close to their lows.

Real estate loans have been firmly positive for close to two years.

 

Money supply

M1

  • +0.4% w/w
  • +1.6% m/m 
  • +7.6% YoY Real M1
M2
  • +0.3% w/w
  • +0.2% m/m
  • +5.8% YoY Real M2 

Real YoY money supply remains firmly positive.

 

Trade weighted US$ (Broad)

  • Down -0,63 to 121.07 (FRED)
  • Down -0.9 to 97.5 (Bloomberg)

 

Because the FRED's daily measure is delayed a week, I have added Bloomberg which is accurate as of yesterday (although I believe it does not measure the broad US$).  The US$ appreciated about 20% against the Euro in particular late last year.  It made yet another new high several weeks ago.  As a result the US is importing deflation strongly, and exports have declined. This has intensified since the beginning of October. 

 

Commodity prices

JoC ECRI

  • Down -2.14 to 79.87 w/w 
  • Down -28.90 YoY
BBG Industrial metals ETF
  • 89.06 down -0.18 w/w
Commodity prices as measured by ECRI as well as industrial metals made still more new multi-year lows.  After a period of stabilization for a few months, the commodity bust has intensified.

 

Employment metrics

 Initial jobless claims

  • 282,000 up +13,000 
  • 4 week average 270,750 up +1,500

 

Initial claims remain well within the range of a normal economic expansion, as does the 4 week average, although there was a little jump this week.

 

The American Staffing Association Index 

 

  • Down -4 to 98
  • Down -3.74 YoY

The YoY comparison in the last six months this turned neutral and then increasingly negative. The YoY comparison was its worst since the Great Recession last week, and improved to less awful this week.

 

Tax Withholding

  • $66.9 B for the first 8 days of December vs. $68.2 B one year ago, down -$1.3 B or -1.3%
  • $175.0 B for the last 20 reporting days ending Thursday vs. $167.8 B one year ago, up $7.2 B or +4.3%

Beginning with the last half of 2014, virtually all readings were positive, but turned more mixed and choppy from July through September. October started off negative but ended positive, and November was also positive. December has started off negative, but the less noisy 20 day average is quite positive.

 

Oil prices and usage

  • Oil down -$4.68 to $35.46 w/w
  • Gas down -$.01 to $2.05 w/w 
  • Usage 4 week average up` +0.7% YoY

 

The 2010-13 Oil choke collar remains broken.  The price of gas and oil bottomed at the end of January at $2.02. It finally went below that this week, although it is hovering above $2.  Usage is a positive.

 

Bank lending rates

  • 0.272 TED spread up +0.018 w/w
  • 0.317 LIBOR up +0.048 w/w (near 6 year high)

 

Both TED and LIBOR have risen since the beginning of this year to the point where both have usually been negatives, although there have been some wild fluctuations, and particularly so this week, as LIBOR spiked nearly .5% to a 5 year high!

 

Consumer spending

Both the Goldman Sachs and Johnson Redbook Indexes weakened after last Christmas, weakened further YoY beginning in May, and then weakened yet further in September, probably as YoY gas price comparisons turn flatter.  In the last month, however, the YoY comparisons have gotten notably better except for Gallup, which includes gas purchases, and turned negative again two weeks ago.

 

Transport

Railroad transport

  • Carloads down -12.9% YoY
  • loads ex-coal down -7.7% YoY
  • Intermodal units up +0.8% YoY
  • Total loads down -6.6% YoY

Shipping transport

Rail traffic fell off a cliff in mid-February. Intermodal traffic quickly turned positive again, but domestic carloads, led by coal (for export) declined further in May and June (off -8% to -10% YoY), and then were at consistent, less negative YoY comparisons through summer.  Since the beginning of October, comparisons have turned more negative than even earlier this year. They did improve from horrible to very bad this week due to the reversal of Thanksgiving Day  seasonality.

After declining sharply for several months, making a 3-year low in mid-February, the BDI surged higher, and then declined again.  Meanwhile, Harpex (container shipping) turned up sharply for 3 months, peaking at 646 in July, before turning down again to a new post-recession low this week.

Steel production

 

  • Down -4.4% w/w
  • Down -14.3% YoY (huge downturn)

Over the last several years steel production had generally been in a decelerating uptrend.  It begain to turn in spring 2014, turned negative beginning in February, and more intensely negative in the last two months.  It fell into a black hole last week, and bounced partway back this week.

 
 

SUMMARY: 

 

Among long leading indicators, interest rates for treasuries, corporate bonds, and mortgages all are neutral.  Money supply, mortgage applications, and real estate loans are still positive.

 

Among short leading indicators, the interest rate spread between corporates and treasuries remains quite negative, and the US$ even more.  Commodities remain a big global negative, hitting new multi-year lows yet again.  Temporary staffing remains very negative. Jobless claims are still very positive despite a little jump this week, as are oil and gas prices, and gas usage.

 

Among coincident indicators, steel production, shipping, and rail transport all remain very negative.  The TED spread and LIBOR both rose, in the case of LIBOR a huge jump to 5 year highs (I have no idea why).  Tax withholding on a 20 day average and two measures of consumer spending are both still positive, while Gallup's measure of consumer turned even more negative, probably due to a decline in gas prices.

 

As anticipated due to Thanksgiving Day seasonality, coincident readings improved from absolutely horrible to merely bad.  The US economy continues to be buoyed up by housing and cars, with a continued though smaller than anticipated boost in consumer spending.  I continue to anticipate further near term weakness in the US economy, although the growing service/consumer sector continues to overbalance the deepening industrial recession brought on most of all by the further strengthening in the US$.

 

Have a nice weekend!

Paste link in email or IM