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By New_Deal_democrat April 28, 2018 10:11 am
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Weekly Indicators: more slight deterioration edition
March data was again all positive, including both new and existing home sales, the FHFA and Case-Shiller house price indexes, and durable goods orders. First quarter GDP rose, although at a lower rate than Q4 2017, and the most leading components of GDP were mixed. The employment cost index rose at the highest YoY rate in nearly 10 years.
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, and will telegraph the maintenance or change in the economy well before monthly or quarterly data is available.  They are also an excellent way to "mark your beliefs to market."
In general I go in order of long leading indicators, then short leading indicators, then coincident indicators.
NOTE that I include 12 month highs and lows in the data in parentheses to the right.


Interest rates and credit spreads

  • BAA corporate bond index 4.80% up +.11% w/w (1 yr range: 4.15 - 4.83)(intraweek new high)
  • 10 year treasury bonds 2.96% unchanged w/w  (2.05 - 3.03)(intraweek new 4 year high) 
  • Credit spread 1.84% up +.11% w/w (1.56 - 2.30)
Yield curve, 10 year minus 2 year:
  • 0.47%, down -0.03% w/w (.46 - 1.30) (new expansion low)
30 year conventional mortgage rate
  • 4.61%, up +0.03% w/w (3.84 -  4.69) (new 4 year high intraweek)

BAA Corporate bonds rose remained neutral.  Mortgage rates and treasury bonds are still both negatives. The trend for these for most of 2017 was neutral. The yield curve remains positive if more weakly so, and the spread between corporate bonds and treasuries also remains positive.




Mortgage applications  

  • Purchase apps unchanged at 262 w/w 
  • Purchase apps 4 week avg. up +1 to 256 (new expansion high)
  • Purchase apps YoY up +10% , 4 week YoY avg up +6%
  • Refi app down -0.3% w/w
Real Estate loans
  • Unchanged w/w 
  • Up +4.1% YoY( 3.3 - 6.5) (re-benchmarked, adding roughly +0.5% to prior comparisons)

Refi has been dead for some time. Purchase applications were strong almost all last year, but began to falter YoY in late December, frequently turning neutral (under 3%) and even negative for one week. But if momentum faded earlier this year, on an absolute scale they are at expansion highs.


With the re-benchmarking of the last year, the growth rate of real estate loans has changed from neutral to positive.


Money supply


  • -0.2% w/w 
  • -0.6% m/m 
  • ~+0.2% Real M1 last 6 months
  • +4.2% YoY Real M1 (1.9 - 6.9) 
  • +0.1% w/w  
  • +0.2% m/m 
  • +1.4% YoY Real M2 (1.4 - 4.1)

Since 2010, both real M1 and real M2 were resolutely positive.  Both decelerated substantially in 2017. Real M2 growth has fallen below 2.5% and is thus a negative.  If real M1 YoY growth falls  below 3.5%, and also turns negative on a 6 month basis, I will downgrade it to neutral, It's not there yet, but it is now a weak positive.


Credit conditions (from the Chicago Fed) 


  • Financial Conditions Index up -0.03 to -0.79
  • Adjusted Index (removing background economic conditions) down -.05 at -0.52
  • Leverage subindex down -.02 to -0.54
The Chicago Fed's Adjusted Index's real break-even point is roughly -0.25.  In the leverage index, a negative number is good, a positive poor. The historical breakeven point has been -0.5 for the unadjusted Index. All three metrics presently show looseness and so are positives for the economy.

Trade weighted US$

  • Up +0.98 to 118.42 w/w -4.6% YoY (last week) (broad) (116.42 -128.62) 
  • Up +1.23 to 91.53 w/w, -7.59% YoY (yesterday) (major currencies) 

 The US$ appreciated about 20% between mid-2014 and mid-2015.  It went mainly sideways afterward until briefly spiking higher after the US presidential election. It has been a positive since last summer.


Commodity prices


  • Down -1.67 to 110.17 w/w
  • Up +3.88 YoY 
BBG Industrial metals ETF 
  • 133.48 down -7.80 w/w, up +19.47% YoY (108.00 - 149.10)
Commodity prices bottomed near the end of 2015. After briefly turning negative, metals also surged higher after the 2016 presidential election.  ECRI has decelerated enough to become neutral.  On the other hand, industrial metals have been strongly positive and recently made a new high.


Stock prices S&P 500

  • Unchanged w/w at 2669.91 
Stock prices made a string of new all-time highs beginning in summer 2016. But as of yesterday, stock prices have made neither a new 3 month high or low (although they came close!). Their rating therefore changes to neutral.

Regional Fed New Orders Indexes

(*indicates report this week) 

  • Empire State down -7.8 to +9.0
  • Philly down -17.3 to +18.4
  • *Richmond down -26 to -9
  • *Kansas City up +38 to +37
  • Dallas down -17 to +8.3
  • Month over month rolling average: up +3 to +13
The regional average has been more volatile than the ISM manufacturing index, but has accurately forecast its month over month direction, and remains positive. The Kansas City Fed broke the recent string of surveys declining steeply in their last readings, and the reading remains positive.


Employment metrics

 Initial jobless claims

  • 209,000 down -23,000 (new 48 year low)
  • 4 week average 229,250 down -2,000 

Initial claims have recently made several 40+ year lows and so are very positive. The YoY% change in these metrics had been decelerating but is now back on its multi-year pace. 


The American Staffing Association Index

  • Up +1 to 95 w/w
  • Up +1.6% YoY

This index was generally neutral from May through December 2016, and then positive with a few exceptions all during 2017. It was negative for over a month at the beginning of this year, but has returned to a positive.


Tax Withholding 

  • $182.8 B for the last 20 reporting days vs. $191.1 B one year ago, down -$8.3 B or -4.3%
  • 20 day rolling average adjusted for tax cut [+$4 B]: down -$4.3 B or -2.3%

With the exception of the month of August and late November, this was positive for almost all of 2017. Except for three of the last four weeks, it has generally been negative since the effects of the recent tax cuts started in February.


I have discontinued the intramonth metric for the remainder of this year, since the kludge to guesstimate the impact of the recent tax cuts makes it too noisy to be of real use.

I have been adjusting based on Treasury Dept. estimates of a decline of roughly $4 Billion over a 20 day period. Matt Trivisonno of the Daily Jobs Update: http://www.dailyjobsupdate.com/public/tax-cut-adjustments has calculated that the recent tax law most likely took about a 7.4% bite out of tax collections. This week the Treasury Dept. also changed the way it accounts for corporate tax repatriations. In any event, until we have YoY comparisons, we have to take this measure with a big grain of salt.


Oil prices and usage 

  • Oil down -$0.13 to $67.97 w/w,  up +38.3% YoY 
  • Gas prices up +$0.05 to $2.80 w/w, up $0.30 YoY 
  • Usage 4 week average up +1.4% YoY 

 The price of gas bottomed over 2 years ago at $1.69.  With the exception of last July, prices generally went sideways with a slight increasing trend in 2017.  Usage turned negative in the first half of 2017, but has almost always been positive since then. I will not score oil prices negative unless they rise more than 40% YoY.


 Bank lending rates

 Both TED and LIBOR rose in 2016 to the point where both were usually negatives, with lots of fluctuation.  Of importance is that TED was above 0.50 before both the 2001 and 2008 recessions.  The TED spread was generally increasingly positive in 2017, while LIBOR was increasingly negative. The TED spread has now also turned negative.


Consumer spending

  • Johnson Redbook up +2.6 YoY
  • Goldman Sachs Retail Economist +0.5% w/w, +3.7% YoY

 Both the Goldman Sachs and Johnson Redbook Indexes generally improved from weak to moderate or strong positives during 2017 and have remained positive this year.



Railroad transport

  • Carloads up +3.5 YoY
  • Intermodal units up +8.9% YoY
  • Total loads up +6.2% YoY

Shipping transport

Rail was generally positive since November 2016 and remained so during all of 2017 with the exception of a period during autumn when it was mixed. This year in January and February, carloads were usually negative, while intermodal (mainly imports) were positive. This resolved to positive.

Harpex made multi-year lows in early 2017, then improved, declined again, and then improved  yet again to recent highs. BDI traced a similar trajectory, and made 3 year highs near the end of 2017. Early this year it declined, but has reversed course again in the last few weeks.  

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.

Steel production 

  • Up +0.2% w/w
  • Up +3.9% YoY

Steel production improved from negative to "less bad" to positive in 2016 and with the exception of early summer, remained generally positive in 2017. It turned negative in January and early February, but has been positive since then.




Among the long leading indicators, purchase mortgage applications are again at a new four week average high for the expansion. The more leading Chicago Fed Financial Conditions Indexes and real estate loans also remain positives. The yield curve and Real M1 Treasuries are weak positives, with the latter on the cusp of turning neutral. Corporate bonds have deteriorated to neutral. Mortgage rates, refinance applications, and real M2 are all negative.


Among the short leading indicators, industrial metals, the regional Fed new orders indexes, spreads, financial leverage, the US$, jobless claims, staffing, and gas usage all remain positive, although gas prices are close to turning neutral. Oil prices and the ECRI commodity index remain neutral. This week stocks also turned from positive to neutral.


Among the coincident indicators, positives include consumer spending, Harpex, rail and steel. The Baltic Dry Index is neutral. LIBOR and the TED spread remain negative. So is tax withholding, although that reading is very suspect.


The nowcast remains positive, as confirmed again by the monthly data. The short term forecast has decelerated from strongly to normally positive.  The long term forecast continues to tiptoe towards neutrality, but as of now remains weakly positive, with housing, as indicated by purchase mortgage applications being the chief reason for continued positivity, although the GDP report suggests housing may be weakening slightly as well.


Have a nice weekend!

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