Commodity prices bottomed near the end of 2015. After briefly turning negative, metals surged higher since the election. At some point commodities may have surged enough to act as a "choke collar" on growth. For gas that is +40% YoY. I have not yet examined commodities in general.
Stock prices S&P 500
Stock prices are positive, having made a string of new all-time highs beginning last summer.
Regional Fed New Orders Indexes
(*indicates report this week) (no reports this week)
- Empire State -8.3 to +3.1
- Philly up +11 to +25
- Richmond up +4 to +15
- Kansas City up +13 to +20
- Dallas up +8.4 to +15.7
- Month over month rolling average: up +2 to +16 (2 year high)
The regional average has been more volatile than the ISM manufacturing index, but has accurately forecast its month over month direction. These are now screaming positive.
Initial jobless claims
- 234,000 down -12,000
- 4 week average 244,250 down -3,750
Initial claims remain well within the range of a normal economic expansion, as does the 4 week average.
The American Staffing Association Index
- Unchanged at 93 w/w
- Up +2.34 YoY
This index turned negative in May 2015, getting as bad as -4.30% late that year. In 2016 it became progressively "less bad," turning generally neutral since last May, and has now been positive for the last six weeks.
- $71.2 B for the first 7 days of February vs. $76,2 B one year ago, down -$5.0 B or -6.6%
- $197.8 B for the last 20 reporting days ending Thursday vs. $188.1 B one year ago, up +$9.7 B or +5.2%
Beginning with the last half of 2014, virtually all readings were positive, but turned more mixed and choppy, and occasionally even negative, in last 2015 through the first part of 2016. The last few months have with brief exceptions shown a marked improvement. I am discounting the last 7 days as noise, given the far more healthy rolling 20 day total.
Oil prices and usage
- Oil up +$0.02 to $53.85 w/w, up +$13.95 YoY
- Gas prices down -.01 to $2.29 w/w, up +$0.54 YoY
- Usage 4 week average down -6.0% YoY
The price of gas bottomed one year ago at $1.69. Prices have gone sideways since late last summer, and moved higher in the last month, making them, and oil prices, neutrals. Usage faltered and has now turned negative for over two months. Oil hasn't quite turned into a headwind yet, although it is getting closer.
Bank lending rates
Both TED and LIBOR rose since the beginning of last year to the point where both have usually been negatives, although there were some wild fluctuations. Of importance is that TED was above 0.50 before both the 2001 and 2008 recessions. While the TED spread turned positive for five weeks recently, this week both were again negatives.
Both the Goldman Sachs and Johnson Redbook Indexes progressively weakened in pulses during 2015, before improving somewhat in 2016. This week both were weakly positive. Gallup showed weaker holiday spending in December vs. one year ago, then rebounded sharply for two weeks before turning negative for two weeks, but for the past week absolutely screamed higher. This is a very mixed reading.
- Carloads up +11.7% YoY
- loads ex-coal up +5.5% YoY
- Intermodal units up +3.3% YoY
- Total loads up +7.3% YoY
Rail turned negative in 2015. It improved for a couple of months at the beginning of 2016 before falling sharply during the spring. Since last June, rail was neutral and then positive for most weeks beginning in November.
Harpex recently declined to repeated multi-year lows. BDI recently turned very positive before declining over a month ago, and was negative again this week. I am wary of reading too much into price indexes like this, since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as well as demand.
- Down -0.7% w/w
- Up +3.5% YoY
Until spring 2014, steel production had generally been in a decelerating uptrend. It then gradually rolled over and got progressively worse in pulses through the end of 2015. It improved from negative to "less bad" to positive in 2016 and has remained positive since.
The interest rate components of the long leading indicators have improved enough to be neutral. The yield curve and money supply remain positive (but with the positivity in real M2 decelerating). Purchase mortgage applications are neutral. Refinance mortgage applications remain quite negative. The important change this week is that growth in real estate loans has decelerated enough to turn from positive to neutral.
Short leading indicators, including stock prices, jobless claims, industrial commodities, the regional Fed new orders indexes, spreads, and temp staffing are all positive. Oil and gas prices, and the broad US$ are neutral. Gas usage turned more negative this week, and this week the US$ against major currencies turned negative.
The coincident indicators remain mixed. Steel, rail, and tax withholding are positive. Gallup consumer spending is screamingly positive, while Redbook and Goldman Sachs are very weakly positive. Shipping, the TED spread and LIBOR remain negative.
While the shorter term 6 month forecast remains strongly positive (barring a trade war), The 12 month + forecast is shading even more neutral to negative, with money supply, the yield curve, and spreads being the remaining positives.
This week I'll be especially watching the interplay between consumer inflation and spending, as both have been changing recently.
Have a nice weekend!