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By New_Deal_democrat February 1, 2014 11:08 am
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Weekly Indicators: Interest rate and money supply improvement offset other mixed signals eidtion
In the rear view mirror, GdP for the 4th quarter of 2013 increased 3.2%.  Median wages rose.  In monthly news for December, new home sales and pending home sales declined sharply, and were negative YoY.  The private residential investment component of 4th quarter GDP also declined sharply.  Case-Shiller house prices, however, continued to rise.  Durable goods orders fell, but January's Chicago PMI rose. Consumer sentiment was mixed.  Personal income was flat, but spending rose.
 

The purpose of my weekly reports on the high frequency weekly indicators is to provide an up-to-this-week snapshot of the economy, a way to "mark to market" my own opinions and a vehicle for you to do so with yours as well.

 

Last week I highlighted several coincident indicators that had suddenly gone cold. so let's see how they did this week:

Consumer spending

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.  This week Gallup went negative for the first time in many months.  In 2013 the YoY range for the ICSC declined to between +1.5% and +3.0%, while Johnson Redbook YoY rallied from +2% to a high over +4%.  While the Johnson Redbook was back in that range, and the ICSC survey rebounded slightly as well.

Steel production from the American Iron and Steel Institute 

  • -0.7% w/w
  • -0.4% 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 weakened and briefly turned negative, and was negative again this week.

Transport

 Railroad transport from the AAR 

  • +14,900 carloads up +5.6% YoY
  • +8,300 carloads up +5.1% ex-coal
  • +6,800 or +3.0% intermodal units
  • +22,200 or +4.4% YoY total loads

Shipping transport

Rail transport had been very mixed YoY during midyear, but almost continuously improved after that, ending 2013 on a very positive note.  Two weeks ago rail traffic was completely derailed, but last week rebounded.  The Harpex index slowly rose, then stabilized, then fell slightly in 2013, ending at a low of 390, but has risen slightly since. The Baltic Dry Index made a new 3 year high in December 2013, and seasonally has retreated sharply since then.  Both the Baltic Dry Index and the Harpex Index were in a range near their bottom for about 2 years, but rose significantly above those ranges in 2013.

Interest rates and credit spreads

  • 5.13% BAA corporate bonds down -0.06%
  • 2.82% 10 year treasury bonds down -0.04%
  • 2.31% credit spread between corporates and treasuries down -0.02%

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 over 1.6% above that mark.  Yields have declined ever since the relatively poor December employment report almost one month ago, and the decline accelerated after the weekly report from Monday shown above.  Spreads declined to a new 3 year low.  Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

  • w/w purchase applications up +2%
  • YoY purchase applications down -12%
  • w/w refinance applications down -2%

Refinance applications are back at their post-recession low set several weeks ago.  Purchase applications continued to improve slightly but are still near their post-recession low set in 2011. 

Housing prices

  • YoY this week +11.4%

Housing prices bottomed in November 2011 on Housing Tracker, and YoY comparisons rose to just shy of +12% in late 2013. This weeks's YoY comparison continued slightly below that comparison.

Real estate loans, from the FRB H8 report:

  • +0.5% w/w
  • -0.6% YoY
  • +1.8% from their bottom

Loans turned up at the end of 2011, but since April 2013, with higher interest rates, the comparisons rolled over and are now consistently negative, retreating back to near their post recession lows.  It appeared that the only thing maintaining the housing recovery was cash purchases, but these too seem now to be declining, as shown in the poor monthly housing reports.

Money supply

M1 

  • +0.7% w/w
  • +0.3% m/m
  • +6.6% YoY Real M1

 M2 

  • +0.9% w/w
  • +0.4% m/m
  • +4.0% YoY Real M2

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 has decelerated since then.  Real M2 reading made a new 2 year low two weeks ago, but has improved since, as has Real M1.

 

Employment metrics

 Initial jobless claims

  • 348,000 up +22,000
  • 4 week average 333,000 up +1,500

Initial claims seem to have stabilized at their autumn levels, although there does seem to be some slight comparative weakness.

The American Staffing Association Index rose seasonally by 1 to 91. It is up +2.83% YoY.

Seasonality has now dissipated. Only late 2007 and early 2008 were better than 2013

Tax Withholding 

  • $174.8 B for the first 20 days of January vs. $167.1 last year, up +$7.7 B or +4.6%
  • $174.8 B for the last 20 days ending Thursday vs. $146.8 B for 20 days ending Thursday 1 year ago, up +28.1 B +19.1%.

YoY Tax withholding comparisons are now clean.  The difference between the two above measures is that last year there was an extra reporting day in January.  Both show improvement YoY.

Oil prices and usage

  • Oil up +$0.67 to $97.49 w/w
  • Gas unchanged at $3.30 w/w
  • Usage 4 week average YoY down -1.0%

The price of Oil made its yearly seasonal low over two months ago, but has been generally holding steady. The 4 week average for gas usage was negative this week for the second week in a long time, and is probably the result of the particularly nasty winter weather.  In the larger picture, it looks like in 2013 the Oil choke collar finally loosened its hold on the economy slightly.

Bank lending rates

The TED spread rose sharply this week from near the bottom of its 3 year range set a month ago. LIBOR, however, made a new 3 year low this week.

JoC ECRI Commodity prices

  • Down -1.36 to 126.59 w/w
  • -2.54 YoY

The longer leading indicators had another positive to mixed week.  Money supply also rebounded from recent lows.  Mortgage applications, however, remained at or near post-recession lows.

 

Shorter leading indicators were also mixed. Temporary employment was up.  The oil choke collar is still disengaged.  Initial jobless claims, however, jumped, although they are still in last autumn low range.  Commodities declined.

 

Mixed also describes the coincident reports.  Rail traffic and consumer spending reports took big hits two weeks ago, probably due to the coldest January weather in years. Rail traffic has completely rebounded. ICSC and Johnson Redbook consumer spending also have rebounded somewhat.  Gallup daily spending, however, actually turned negative YoY.  January tax withholding was positive. Steel production is slightly negative.  House prices remain very positive.  Bank lending rates were sharply mixed due to the emerging markets turmoil.

 

The positive turn in several of the long leading indicators in the last couple of weeks is a welcome positive, offsetting the more mixed signals in housing and in the shorter leading and coincident data.  In the next couple of weeks, we should have a good handle on 4Q corporate profits (the last 2013 long leading indicator).

 

Have a nice weekend!

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