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By New_Deal_democrat September 24, 2016 9:33 am
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Weekly Indicators: new and different wobbles edition

August data included a decline in the index of Leading Indicators, due to the poor ISM manufacturing index and manufacturing work hours. Housing starts increased, but permits and existing home sales decreased.


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. 


Interest rates and credit spreads

  • 4.36% BAA corporate bonds up +.16%
  • 1.66% 10 year treasury bonds down -.04%
  • 2.70% credit spread between corporates and treasuries up +.20%
Yield curve, 10 year minus 2 year:
  • 0.86%, down -0.6% w/w
30 year conventional mortgage rate:
  • 3.42%, down -.05% w/w

Yields on corporate bonds and treasuries made new lows after the Brexit vote, strongly suggesting that the expansion will continue through mid-2017.  On the other hand, mortgages have failed to make a new low for over 3 years, thus turning yellow (caution or neutral vs. positive) as a recession indicator.  Yields are also still positive, but spreads went back to neutral -- in the worst way, with an increase in corporate yields despite a downturn in treasury yields.




Mortgage applications


  • purchase applications down -7% w/w
  • purchase applications up +3% YoY
  • refinance applications down -8% w/w
Real Estate loans
  • Unchanged w/w
  • Up +7.5% YoY

Mortgage applications turned up early in 2015 in response to very low rates.  They briefly  spiked in response to low rates following the Brexit vote.  Purchase applications improved just enough last week to turn positive, but went back to neutral this week.

Real estate loans have been firmly positive for 3 years.


Money supply


  • +1.2% w/w
  • +0.3% m/m
  • +8.0% YoY Real M1 
  • -0.3% w/w    
  • +0.4% m/m
  • +6.7% YoY Real M2

Both real M1 and real M2 decelerated markedly in January to the point where they were very weak positives, but both have been more firmly positive since.


Trade weighted US$


  • Up +1.18 to 122.62 w/w, up +2.8% YoY (one week ago) (Broad)
  • Down -0.55 to 95.49 w/w, down -0.8% YoY (yesterday) (major currencies)


The US$ appreciated about 20% between mid-2014 and mid-2015.  It has gone mainly sideways since then, and for the last 7 months has generally been neutral or a positive. This week the major currencies measure moved back from neutral to positive.


Commodiy prices


  • Up +1.81 to 95.97 w/w
  • Up +7.89 YoY
BBG Industrial metals ETF
  • 100.50 up +3.58 w/w, up +3.8% YoY
Commodity prices as measured by industrial metals bottomed last November. ECRI subsequently turned up as well, enough so that both turned positive.  After briefly turning down enough to be negative, industrial metals turned back positive this week.


Stock prices S&P 500


  • Up +1.2% w/w
Stock prices became a positive having made new all-time highs during the last few months.

Regional Fed New Orders Indexes

(*indicates report this week)

  • Empire State down -8 to -7.5
  • Philly up +8.6 to +1.4
  • Richmond down -35 to -20
  • *Kansas City up +19 to +12
  • Dallas up +13.3 to +5.3
  • Month over month rolling average: up +4 to -2
In March and April, the turning up of these indexes forecast the positive readings in the ISM.  Then in May and June there was a serious divergence between the two, but in July the regional indexes became on balance positive, again forecasting the positive ISM.  In August there was a serious downdraft which again forecast the poor ISM. September is looking a little better.


Employment metrics

 Initial jobless claims

  • 252,000 down -8,000
  • 4 week average 258,500 down -2,250


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 95 w/w
  • Down -0.91 YoY

This index turned negative in May 2015, getting as bad as -4.30% late last autumn.  Since the beginning of the year it became progressively "less bad" and for the last few months has been so close to positive YoY as to be a neutral.


Tax Withholding

  • $134.2 B for the first 15 days of September vs. $128.9 B one year ago, up +$5.3 B or +4.1%
  • $170.7 B for the last 20 reporting days vs. $163.3 B one year ago, up +$7.4 B or +4.3%

Beginning with the last half of 2014, virtually all readings were positive, but turned more mixed and choppy, and occasionally even negative, since August 2015.  The last few months have shown a marked improvement, until last week's negative 20 day reading, which looks like a one-off aberration.


Oil prices and usage 

  • Oil up +$1.40 to  $44.59 w/w
  • Gas prices up +$.02 to $2.22 w/w 
  • Usage 4 week average up +4.1% YoY


The price of gas bottomed last winter at $1.69.  Usage has been almost uniformly positive. Gas prices are off their summer seasonal high.


Bank lending rates


Both TED and LIBOR were already rising 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.  Both have now reached that level, and this week, TED spiked further into negative territory.


Consumer spending 


Both the Goldman Sachs and Johnson Redbook Indexes progressively weakened in pulses during 2015, before improving somewhat since the beginning of last November.  Redbook has recently turned very weak.  Goldman turned more positive, but was weaker this week.  Gallup has been very positive for the vast majority of this year -- but not this week.



Railroad transport

  • Carloads down -5.3% YoY
  • loads ex-coal down -1.7% YoY
  • Intermodal units down -4.9% YoY
  • Total loads down -5.1% YoY

Shipping transport

Rail traffic turned negative and then progressively worse in pulses throughout 2015. Rail loads became "less worse" in January and showed continued improvement until going over the proverbial cliff all spring (typically down -10% or more) in spring.  It trended incrementally less awful since June, even scoring neutral twice in the last 6 weeks.  This week it was again slightly negative.

Harpex has recently resumed its decline again to repeated multi-year lows. On the other hand, BDI has improved to a 12 month high, and higher then 20 of the last 24 months, and so has become positive. 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 +0.4% w/w
  • Down -3.3% 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. This year it started out as "less worse" and turned positive a few months ago, but recently turned negative again.




The wobbling in the recent paradigm of good leading, poor coincident indicators continues.


Among long leading indicators, interest rates for corporate bonds, treasuries, the yield curve, real money supply, real estate loans, mortgage rates, and refinance mortgage applications are positive. Purchase mortgage applications flipped back to negative this week. Another negative is that mortgage rates have not made new lows for over 3 years.


Among short leading indicators, stock prices, jobless claims, oil and gas prices, gas usage, and once again the US$ against major currencies, and industrial commodities, are all positive. The broad US$ remains neutral.  The volatile regional Fed average is still negative.


The coincident indicators remain mixed. Consumer spending turned neutral to negative.  The BDI is now strongly positive.  Rail, steel, the Harpex shipping index, and bank rates remain negative, with the TED spread spiking more. After one week in the mixed column, tax withholding returned to being unambiguously positive.


The recent decline in commodities reversed last week, as did some of the strength of the US$.  On the other hand, the continued spiking of the TED spread, and the increase in spreads despite lower treasury bond yields is a source of concern.  While US monthly data for August has continued to be poor, the initial indication in the September regional Fed indexes is one of improvement.


Have a nice weekend

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