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By New_Deal_democrat January 10, 2015 8:26 am
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Weekly Indicators: a more mixed start to 2015 edition

Monthly December reports included another good number for jobs, and the unemployment rate continued to decline.  Aside from that, all the monthly showed either deceleration - in the ISM services report - or declines, in auto sales, factory orders, and most importantly in average wages.

I look at the high frequency weekly indicators because while they can be very noisy, they provide an up-to-this-week snapshot of the economy.  The indicators will confirm a trend or indicate a switch in trend well before monthly reports, and are a way to mark one's opinions to market on a regular basis.

As I have done recently, I am generally going in order of long leading, then short leading, then coincident indicators:

 Interest rates and credit spreads

  • 4.68% BAA corporate bonds down -0.07%
  • 2.18% 10 year treasury bonds down -0.06%
  • 2.50% credit spread between corporates and treasuries down -0.01%

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 to over 3% in late 2013.  In 2014, Treasuries started at just over 3% and declined over 0.8%, or more than 50% of that increase, at their lowest point, while corporate bonds have trended generally sideways since May 2014.  Spreads remain above their expansion lows of a few months ago, a slight sign of weakness.

Housing metrics

Home Sales and Prices from DataQuick:

  •  +3.1% sales YoY, up +0.3% (1 month rolling average) 
  •  +2.3% prices YoY, down -0.6% (1 month rolling average) 

YoY sales were positive for the eighth week in a row, while YoY median price comparison has declined slightly in the last five weeks. Since prices typically follow sales with a lag, and sales had been down, it is possible that we will see prices turn negative YoY in the next month or so.

Mortgage applications from the Mortgage Bankers Association:

  • -5% w/w
  • -8% YoY

The big news of the last few months has been that YoY purchase applications have established a "less awful" trend, and almost turned positive YoY several weeks ago. This week they resumed being "more awful."

Real estate loans, from the FRB H8 report:

  • Unchanged w/w
  • Up +3.3% YoY

Loans turned up at the end of 2011, but with higher interest rates, the comparisons rolled over and had been negative since April 2013.  They turned positive YoY in March 2014, and have remained positive to sharply positive since.

Money supply
M1

  • +0.4% w/w
  • +2.0% m/m
  • +8.3% YoY Real M1

M2

  • +0.1% w/w
  • +0.6% m/m
  • +4.3% YoY Real M2

At the time of the last flight to safety (from Europe) 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 then decelerated.  Real M2 made a new 2 year low at the beginning of 2014.  Both Real M1 and Real M2 improved substantially since, and both remain firmly in positive territory.

Employment metrics
 Initial jobless claims

  • 294,000 down -4,000
  • 4 week average 290,500 unchanged

Initial claims remain well within the range of a normal economic expansion. The 4 week average remains very positive.

The American Staffing Association Index 

  •  Down seasonably-13 to 93.  
  •   Up +11% YoY.

This Index declined this week per its usual year-end seasonality. The YoY comparison has generally been positive to strongly positive since early spring.

Tax Withholding

  • $63.6 B for The first 5 days of January vs. $63.9 B one year ago, down +$0.3 B or -0.5%
  • $203.5 B for the last 20 reporting days ending Thursday vs. $204.3 B one year ago, down -$0.8 B or -0.4%

Since July all readings had been positive, except for one week.  This week was also negative.  Until demonstrated otherwise, I am simply treating this as a year-end quirk.

Oil prices and usage

  • Oil down -$4.33 to $48.36 w/w
  • Gas down -$0.09 to $2.21 w/w
  • Usage 4 week average YoY +5.5%

The price of gas is now well past a 5 year low, and with the exception of a few months, near a 10 year low.  The 2010-2013 Oil choke collar has been broken.

Consumer spending

  • Johnson Redbook +4,3% YoY
  • Gallup daily consumer spending 14 day average at $88, down -$1 YoY

The ICSC index has inexplicably been discontinued. This is a real loss. In 2013 the Johnson Redbook YoY was between from +2% to a high over +4%.  It remained strongly positive this week, but Gallup declined sharply over the last week. A particularly strong post-holiday-bingeing hangover, perhaps?

Production  

Steel production from the American Iron and Steel Institute 

  • +6.4% w/w
  • +3.9% 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 turned negative again from January through early May, but then turned increasingly positive through August.  They then deteriorated and alternated between slightly positive and slightly negative.  They have been positive for 4 of the last 5 weeks.

Transport
 Railroad transport from the AAR

  • +12,400 carloads up +5.4% YoY
  • -1,300 intermodal units down -0.7% YoY
  • +12,200 total loads up +2.8% YoY

Shipping transport

  • Harpex unchanged at 423
  • Baltic Dry Index down -62 to 709

Rail traffic remained positive, after making a new all time high three weeks ago.  The BDI declined substantially since the end of 2013, made an 8 month high, and for the last month has declined again. Harpex has been generally flat for the last few months.  In the longer term, shipping rates bottomed about 2 years ago and have been in a slow and variable uptrend since.

Bank lending rates

  • 0.234 TED spread up +0.015 w/w
  • 0.166 LIBOR down -0.05 w/w

LIBOR has risen sharply from its post-recession low set in May to another one-year high. The TED spread has also moved generally sideways with a slight upward trend in the last 6 months after rising from its low of November of last year, it made a 1 year high this week. These need to be kept in perspective - compared to, e.g., 3 years ago, the needle has barely moved.
 

Commodity prices
JoC ECRI

  • Down -1.08 to 105.07 w/w
  • Down -15.87 YoY

BBG Industrial metals ETF

  • 121.58 down -1.47 to another 9 year low

Commodity prices continued cliff-diving for the sixth week in a row.  This is probably due to international weakness, and mainly about oil.  Because of that, I have started to include an industrial metals index.  Industrial metals were a component of ECRI's original short leading weekly index, and so can confirm or contrast with oil prices. Industrial metals had been declining for the last 3 years, then bottomed in March of 2014.  They rose through July, but then started to decline again, and in the last five weeks metals have fallen near their March low.

SUMMARY:

For the third week in a row, bond spreads, shipping, and commodities were negative, joined this week by mixed shipping and steel reports. LIBOR also spiked, although it remained well below its levels of even 2 years ago.

Long leading indicators were mixed this week.  Yields on corporate bonds and treasuries declined, reflecting deflationary concerns, but a long positive.  Spreads between them declined, also a positive.  Overall, however, spreads are still as slight negative. Money supply remains quite positive.  House sales as reported by DataQuick were positive, while the MBA index was negative.

The short leading indicators continue to look strong, including jobless claims and temporary staffing, as well as gas prices and usage.  The exception is commodities, especially oil, but also including industrial metals, which continued to fall.

Coincident readings were very mixed. The two measures of consumer spending gave opposite results. Tax withholding also went negative.  Shipping was weak, while steel and rail were positive. There is also a slight new amount of stress reflected in overnight bank rates.

The recent story remains one of continuing global weakness, but continuing positives in the US economy. US indicators have, however, become more mixed compared with most of 2015.  This isn't really a negative at this point, just a backing off from signs of strong growth. This year I expect the late 2013-14 near-stall in housing to show up in coincident weakness. In 2014 this was offset by a return of federal, state, and local government spending. Of course, for now we also have a big tailwind from low gas prices. 

Have a nice weekend!

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