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By New_Deal_democrat February 15, 2014 9:09 am
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Weekly Indicators: long leading indicators to the rescue edition
In January data reported this past week, industrial production, capacity utilization, and retail sales all fell. Wholesale inventories rose.  Consumer confidence was unchanged.
 

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 cited "The Big Chill" that spread throughout the indicators.  Let's see how they changed 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 was negative for the third straight week 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%.  Both the Johnson Redbook and ICSC are now back in that normal range.

 

Steel production from the American Iron and Steel Institute 

  • +1.9% w/w
  • -1.9% 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 have turned negative again.

 

Transport

 Railroad transport from the AAR 

  • -11,300 carloads down -4.3% YoY
  • -8,500 carloads down -1.7% ex-coal
  • +1,500 or +0.6% intermodal units
  • -10,100 or -2.0% 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.  After rebounding from January's polar vortex, rail traffic was negative again for the second week in a row.  The Harpex index slowly rose, then stabilized, but has slowly declined since July 2013. The Baltic Dry Index made a new 3 year high in December 2013, and seasonally retreated sharply since then, although it stabilized this week.  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

  • 5.09% BAA corporate bonds down -0.01%
  • 2.68% 10 year treasury bonds down -0.05%
  • 2.41% 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 over 1.6% above that mark in late 2013.  Yields have declined significantly ever since the relatively poor December employment report over one month ago.  Spreads increased slightly from a new 3 year low set two weeks ago.  Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

  • w/w purchase applications down -5%
  • YoY purchase applications down -13%
  • w/w refinance applications down -0.2%%

Refinance applications are still near their post-recession low set several weeks ago.  Purchase applications are just barely above near their post-recession low set a few weeks ago. 

Housing prices

  • YoY this week +11.2%

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.  The continuation of the sharp YoY increase in prices might actually be a negative, given the pasting that housing has taken due to higher mortgage rates.

Real estate loans, from the FRB H8 report:

  • +0.5% w/w
  • -0.7% YoY
  • +2.2% 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, having retreated back to near their post recession lows.

Money supply

M1 

  • +4.1% w/w
  • +4.2% m/m
  • +9.3% YoY Real M1

 M2 

  • +0.1% w/w
  • +0.8% m/m
  • +4.3% 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 decelerated since then.  Real M2 reading made a new 2 year low one month ago, but has improved substantially since, as has Real M1.

 

Employment metrics

 Initial jobless claims

  • 339,000 up +8,000
  • 4 week average 336,750 up +2,750

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

 

The American Staffing Association Index was unchanged at 91. It is up +2.52% YoY.

 

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

 

Tax Withholding 

  • $80.1 B for the first 9 days of February 2014  vs. $78.7 last year, up +$1.4 B or +1.8%
  • $167.8 B for the last 20 days ending Thursday vs. $149.6 B for 20 days ending Thursday 1 year ago, up +18.2 B +12.2%.

YoY Tax withholding comparisons are now clean.  Both measures show improvement YoY.

 

Oil prices and usage

  • Oil up +$0.42 to $100.30 w/w
  • Gas up $0.02 to $3.31 w/w
  • Usage 4 week average YoY down -1.0%

The price of Oil made its yearly seasonal low almost three months ago, but held nearly steady until beginning its seasonal climb in the last week. The 4 week average for gas usage was negative this week for the third consecutive week, and is probably the result of the particularly nasty winter weather.  In the larger picture, it continues to look like in 2013 the Oil choke collar finally loosened its hold on the economy slightly.

Bank lending rates

The TED spread had another upward spike this week.  LIBOR made yet another new 3 year low this week.

 

JoC ECRI Commodity prices

  • Down -2.55 to 125.74 w/w
  • -2.55 YoY 

Three of the four long leading indicators have turned positive, or more positive. Interest rates (which fell with recent coincident economic weakness) have clearly eased. Money supply also has rebounded significantly in the last several weeks.  One of the two bank lending rates I track also made another new low.  With earnings season almost completely over, corporate earnings improved significantly and are now up about 9% YoY.  Only mortgage applications and real estate loans have remained poor.

 

Last year's weakness in the long leading indicators, however, appears to have now shown up in the short leading indicators.  Temporary jobs were neutral this week.  Initial jobless claims rose slightly, and have stalled out at last autumn's levels. Gas and oil are nuetral.  Commodities have turned negative.

 

The coincident reports were also very mixed.  Gallup consumer spending was negative, but the other two measures improved.  Rail traffic was also negative again.  Shipping was mixed.  Steel production was negative.  YoY comparisons of gas usage are negative again. Once again the bright spot is that YoY tax withholding was positive.

 

Weakness has spread throughout the short leading and coincident indicators with few exceptions. This was also evident in the downturn in monthly retail sales and industrial production.  I do believe this has been exacerbated by the *unusually* cold winter that has also hit the southeast particularly hard.

 

Because neither the long nor short leading indicators turned unambiguously negative last year, I believe his weakness is transient.  If it continues after the winter weather breaks, then I will have to do some serious re-evaluation.

 

Have a nice weekend!

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