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By New_Deal_democrat June 18, 2016 9:00 am
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Weekly Indicators: slight changes edition
Monthly May data included a slight increase in housing permits but a slight decrease in starts. Retail sales, PPI, and CPI were up.  Industrial production and capacity utilization were down.

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

  • 4.47% BAA corporate bonds down -.09% (down -1.02% since Jan 1)
  • 1.57% 10 year treasury bonds down -.14%
  • 2.90% credit spread between corporates and treasuries up +.05%
Yield curve, 10 year minus 2 year:
  • 0.87%, down -.06% w/w
30 year conventional mortgage rate:
  • 3.53%, down -.06% w/w (new 1 year low)

With the exception of BAA corporate bonds yields, which made a new 50+ year low in January 2015, yields for corporate bonds, treasuries, and mortgages have all failed to make new lows in 3 years, thus turning yellow (caution or neutral vs. positive) as a recession indicator -- although treasuries and mortgage rates both came very close to new all-time lows in February and again this past week, and remain low enough to be short-term positives.  Spreads have improved enough this year to go from negative to neutral, although there has been a  little deterioration in the last few weeks.




Mortgage applications


  • purchase applications down -5% w/w
  • purchase applications up +16% YoY
  • refinance applications down -1% w/w
Real Estate loans
  • Unchanged w/w
  • +7.0% YoY

Mortgage applications had been awful for several years, before turning up early last year in response to very low rates. Purchase applications are very positive near 5 year highs, while refinancing has been moving more sideways with a slight positive trend in the last few months.

Real estate loans have been firmly positive for nearly 3 years.


Money supply


  • -0.5% w/w 
  • -1.0% m/m 
  • +6.5% YoY Real M1
  • +0.2% w/w  
  • +0.3% m/m
  • +5.7% YoY Real M2

Real M1 decelerated markedly in January to the point where it was a very weak positive, and has fluctuated since then.   Real M2 also decelerated, but has been more firmly positive.  Both have been very positive for the last month.


Trade weighted US$

  • Down -.50 to 120.70 w/w, up +5.1% YoY (one week ago) (Broad)
  • Down -0.36 to 94.21 w/w, down -0.1% YoY (yesterday) (major currencies)


The US$ appreciated about 20% from July 2014 through spring 2015, and has gone more or less sideways with a slight positive trend since then.  l consider a YoY change of 5% or higher a negative. Against major currencies, the US$ is positive. The broad measure has returned to being negative for 5 of the last 6 weeks.  Against major currencies it is a positive.


Commodity prices


  • Down -0.25 to 90.01 w/w
  • Down -11.19 YoY
BBG Industrial metals ETF
  • 93.28 up +0.36 w/w 
Commodity prices as measured by industrial metals appear to have bottomed in November. ECRI and oil subsequently turned up as well. This is enough to score commodities as neutral.


 Stock prices S&P 500


  • Down -1.2% w/w 
  • Down -3.0% from high over 1 year ago
Stock prices made new 6 month lows in February, but also made a number of 6 month highs since April. For forecasting purposes, I am scoring this as a neutral.

Regional Fed New Orders Indexes

(*indicates report this week)

  • *Empire State up +16.4 to +10.9
  • *Philly down -1 to -2.5
  • Richmond down -18 to 0
  • Kansas City -3  to -3
  • Dallas down -20.9 to -14.9
  • Month over month rolling average: +3 from -5 to -2
I inaugurated coverage of these indexes as an experiment to see if they helped forecast the ISM new orders index, which is an excellent short leading indicator for sales and industrial production roughly by 6 months.   In May there was a serious divergence between the two. In the regional indexes, the positive bounce in March and April has been taken back, but the average is less negative than in the previous year.  There was slight improvement this week.


Employment metrics

 Initial jobless claims

  • 264,000 up +13,000
  • 4 week average 269,250 down -250


Initial claims remain well within the range of a normal economic expansion, as does the 4 week average. After weakening in January, they have since recovered.


The American Staffing Association Index


  • Down -1 to 95 w/w
  • Down -1.01 YoY

This index turned negative in May 2015, getting as bad as -4.30% late last autumn.  Since the beginning of the year it has been progressively "less bad" and last week finally turned outright positive. This week it went back to neutral, probably due to the reporting of Memorial Day week.


Tax Withholding

  • $108.3 B for the first 12 days of June vs. $111.0 B one year ago, down -$2.2 B or -2.0%
  • $169.5 B for the last 20 reporting days ending Thursday vs. $163.6 B one year ago, up +$5.9 B or +3.6% 

Beginning with the last half of 2014, virtually all readings were positive, but turned more mixed and choppy, while still positive, since August 2015. In February I said I would need this series on the 20 day basis to decline to less than +2% YoY for me to think it has reached a turning point, and it did so for 3 weeks in a row, briefly becoming a major red flag.  Both April and May collections ran positive again. Early June has been disappointing, but only after an extremely strong end of May. The less volatile 20 day average remains positive.


Oil prices and usage

  • Oil down -$0.66 to  $48.26 w/w
  • Gas prices up +$.02  to $2.40 w/w 
  • Usage 4 week average up +2.9% YoY


The price of gas bottomed this winter at $1.69.  Usage turned briefly negative at the beginning of the year, but has been positive ever since.


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.  Both TED and LIBOR were at or near 5 year highs in the past several months, but both have improved in the last several months, although in the last 5 weeks the TED spread rose back close to that high. Of importance is that TED was above 0.50 before both the 2001 and 2008 recessions, so although it is a negative, it is not a strong one.


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.  Both Goldman Sachs and JR were positive this week.  Gallup has been positive almost every week so far this year, and strongly so in the last 2 weeks.  It is also possible that Gallup, unlike the other two measures, is picking up an increase in online spending.



Railroad transport 

  • Carloads down -8.7% YoY
  • loads ex-coal down -4.5% YoY
  • Intermodal units down -6.3% YoY
  • Total loads down -7.5% YoY

Shipping transport

Rail traffic turned negative and then progressively worse in pulses throughout 2015. While intermodal traffic quickly turned positive, domestic carloads, led by coal (for export) continued to deteriorate.  Rail loads became "less worse" in January and showed continued improvement until going over the proverbial cliff nearly 3 months ago, a big negative. They were a slightly less awful negative this week.

After rising briskly last spring, both the BDI and Harpex recently declined again to new multi-year lows. BDI has improved enough since then to score a neutral, while Harpex has recently resumed a slight decline.

Steel production


  • Up +1.1% w/w
  • Up +2.0% 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 several months ago.




There were slight moves this week.  The broad US$ moved back from neutral to negative, and temp staffing moved back from positive to neutral.  There was slight deterioration in spreads and the yield curve.  The remaining list of negatives, in addition to the broad US$ are: new orders from the regional Fed banks, bank lending rates, and especially transport. 


Among long leading indicators, interest rates for corporate bonds, treasuries, the yield curve, real money supply, real estate loans, purchase mortgage applications, and mortgage rates are positive. Refinance applications are neutral.  Since no interest rates have made new lows in at least a year, and mortgage rates have not made new lows for over 3 years, while the "now-cast" is positive, this remains a big negative in the longer term forecast.


Among short leading indicators, the spread between corporates and treasuries remains neutral.  Commodities across the board, and stocks, are neutral. The US$ against major currencies is positive, and against all currencies is negative. Jobless claims, oil and gas prices, and usage, all remain very positive.


Among coincident indicators, rail transport continues to be awful, and shipping is also negative.  Bank rates remain negative.  Steel is positive.  Consumer spending is positive.  Temp staffing went back from positive to neutral.


There was no fundamental change this week.  In general almost all long and short leading indicators are either positive or neutral. The slight deterioration in spreads and the yield curve aren't enough to change their reading at this point. Likewise the new 1 year lows in mortgage rates didn't break below their 2013 lows, which would have been an important positive.


This coming week will be light, with the main item of interest whether the new high in new home sales from one month ago gets revised away or not.


Have a nice weekend!

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