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By New_Deal_democrat January 25, 2014 9:00 am
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Weekly Indicators: rail rebounds, consumer spending doesn't edition
In monthly news for December, existing home sales rose slightly over a revised lower November number, but are down YoY for the second month in a row.  Leading indicators rose slightly, and November's were revised slightly higher, indicating continued economic growth into summer.
 

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 highlighted several coincident indicators that had suddenly gone cold. so let's see how they did 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 was even worse than last week.  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%.  While the Johnson Redbook survey rebounded nicely, the ICSC survey again had a very poor week.

 

Steel production from the American Iron and Steel Institute 

  • +0.3% w/w
  • +0.2% 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 weakened and briefly turned negative.  This week the comparison turned slightly positive.

 

Transport

 Railroad transport from the AAR 

  • +12,500 carloads up +4.5% YoY
  • +9,700 carloads up +5.8% ex-coal
  • +19,900 or +7.2% intermodal units
  • -30,500 or +5.8% 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.  Last week rail traffic was completely derailed, but this week almost completely rebounded.  The Harpex index slowly rose, then stabilized, then fell slightly in 2013, ending at a low of 390. The Baltic Dry Index made a new 3 year high in December 2013, and seasonally has retreated sharply since then.  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

  • 5.19% BAA corporate bonds down -0.09%
  • 2.86% 10 year treasury bonds down -0.10%
  • 2.33% credit spread between corporates and treasuries up +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 over 1.6% above that mark.  Yields have declined since the relatively poor December employment report several weeks ago.  Spreads moved slightly above their new 3 year low set last week.  Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

  • w/w purchase applications up 12%
  • YoY purchase applications down -4%
  • w/w refinance applications down -15%

Refinance applications retreated to close to their post-recession low that they set two weeks ago.  Purchase applications continued to rebound but are still near their post-recession low set in 2011. 

Housing prices

  • YoY this week +10.9%

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.

Real estate loans, from the FRB H8 report:

  • +0.2% w/w
  • -1.1% YoY
  • +1.3% 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, retreating back to near their post recession lows.  It appeared that the only thing maintaining the housing recovery was cash purchases, but according to recent data supplied by Tom Lawler, it appears that has declined also as of December.

Money supply

M1 

  • +0.6% w/w
  • +0.2% m/m
  • +7.0% YoY Real M1

 M2 

  • -0.2% w/w
  • +0.3% m/m
  • +3.6% 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 has decelerated since then.  This week's Real M2 reading increased from its lowest since then set last week. 

 

Employment metrics

 Initial jobless claims

  • 326,000 unchanged
  • 4 week average 331,500 down -3500

Initial claims continue are returning to their autumn levels, although there does seem to be some slight comparative weakness since their lows.

 

The American Staffing Association Index rose seasonally by 4 to 90. It is up +0.92% YoY.

 Seasonality should dissipate starting next week. Only late 2007 and early 2008 were better than 2013.

 

Tax Withholding 

  • $142.2 B for the first 15 days of January vs. $133.2 last year, up +$9.0 B or +6.8%
  • Reporting for the last 20 days omitted.

In January 2013, tax withholding increased 2%.  The last 2012 weeks will go out of the comparison period next week, making YoY Tax withholding comparisons clean.

Oil prices and usage

  • Oil up +$4.10 to $96.82 w/w
  • Gas down -$0.03 $3.30 w/w
  • Usage 4 week average YoY down -0.1%

The price of Oil made its yearly seasonal low two months ago, but has been generally holding steady. The 4 week average for gas usage was negative this week for the first time in a long time, and is probably the result of the particularly nasty winter weather.  In the larger picture, it looks like in 2013 the Oil choke collar finally loosened its hold on the economy slightly.

Bank lending rates

The TED spread has risen somewhat from near the bottom of its 3 year range in the last few weeks. LIBOR also rose from its 3 year low set last week.

JoC ECRI Commodity prices

  • Up +0.99 to 127.95 w/w
  • -1.22 YoY

Rail traffic and consumer spending reports really took a hit one week ago.  I blamed it on the "polar vortex."  Rail traffic almost completely rebounded, but consumer spending continued to stink.  January tax withholding is reasonably positive so far. Steel production was neutral.  House prices remain very positive.  Bank lending rates remain near record lows.

 

The longer leading indicators had a rare positive or neutral week.  Interest rates improved, as did mortgage applications.  Money supply is still a positive, but has been decelerating.  This week it rebounded as well.

 

Shorter leading indicators were positive, with seasonality exiting. Temporary employment was up.  The oil choke collar is still disengaged.  Initial jobless claims are returned to near their autumnal strength.  Commodities are also up.

 

With the exception of consumer spending, this was a pretty good week.  In the next couple of weeks, we should have a good handle on 4Q corporate profits (the last 2013 long leading indicator).  Of course I am continuing to closely watch housing.

 

Have a nice weekend!

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