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By New_Deal_democrat May 31, 2014 9:56 am
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Weekly Indicators: Spring spring especially strong this week edition
Monthly data for May started with a positive Chicago PMI, and April data included positive durable goods.  House prices continued to rise.  Pending home sales rose slightly.  Conference Board and Michigan sentiment were both neutral.  Personal income rose, but personal spending declined, meaning that the personal savings rate rose.  In the rear view mirror, Q1 GDP was revised lower to -1%.  First quarter gross national income and corporate profits were also reported negative.  This was completely shrugged off by markets.
 

A reminder that my weekly report on the high frequency weekly indicators is meant to provide an up-to-this-week snapshot of the economy.  They will confirm a trend or indicate a switch in trend well before monthly reports, and are a way for you and me to mark our opinions to market on a regular basis.  In the last few days, it has been ruefully amusing to watch Doomers come out the woodwork to suddenly discover a story in the first quarter GDP, when we were watching the actual story happen in this data in real time three and four months ago.

 

There was no big new data point this week, so let's start with employment again:

 

Employment metrics

 Initial jobless claims

  • 300,000 down -26,000
  • 4 week average 311,500 down -11,000

Initial claims and the 4 week average both declined to near post-recession lows.

 

The American Staffing Association Index was unchanged at 97.It is up +3.40% YoY.

 

This Index tied its all-time high for this week. The YoY comparison faded in February but since then has stabilized and then rallied.

 

Tax Withholding 

  • $155.0 B for the first 20 days of May vs. $148.5 B last year, up +6.5 B or +4.3%
  • $155.1 B for the last 20 days ending Thursday vs. $134.0 B for 20 days ending Thursday 1 year ago, up -$21.1 B or +15.7%.

 

April was relatively poor and spilled over into May, but rallied in the last several weeks.  The big difference between the two measures this week shows you the difference that happens when the payments for the first day of the month are included vs. not included.  The last twenty reporting days YoY include May 1 this year but not for 2013.

 

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.  In 2013 the YoY range for the ICSC declined to between +1.5% and +3.0%, while Johnson Redbook YoY was between from +2% to a high over +4%.  This week was again very positive. Gallup's trend, for the first time, has returned to where it was before Lehman Brothers, and has broken out above $100.

 

Steel production from the American Iron and Steel Institute 

  • +2.0% w/w
  • +2.3% 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 in January and have been mixed to negative since, especially since the beginning of April, but were positive this week.

 

Transport

 Railroad transport from the AAR 

  • +19,100 carloads up 6.8% YoY
  • +14,100 carloads up 8.1% ex-coal
  • +21,300 or +8.6% intermodal units
  • +40,300 or +7.6% YoY total loads

Shipping transport

Rail transport ended 2013 on a very positive note.  After a volatile winter, it has rebounded sharply in spring, with an exceptionally strong week this week.  The Harpex index slowly rose, then stabilized, then slowly declined after July 2013, before recovering in the last month. The Baltic Dry Index made a new 3 year high in December 2013, has more or less fluctuated since.  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 beginning in 2013.

 

Interest rates and credit spreads

  • 4.78% BAA corporate bonds up +0.01%
  • 2.54% 10 year treasury bonds down -0.03%
  • 2.24% credit spread between corporates and treasuries up +0.03%

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 in late 2013.  Yields declined significantly since the beginning of January, and this week were at the bottom of that range, although corporates rose slightly.  As a result, spreads rose again from their recent post-recession low.  Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:

  • w/w purchase applications down -1%
  • YoY purchase applications down -15%
  • w/w refinance applications down -1%

Both refinance applications and purchase applications are still near their recent post-recession lows, but as expected have begun to have less poor YoY comparisons now. With lower interest rates, the refinance index has actually shown a few signs of life.

Housing prices

  • YoY this week +11.4%

Housing prices bottomed in November 2011 on Housing Tracker, and YoY comparisons rose to just shy of +12% in late 2013. In early March the YoY reading has declined silightly since then.  The still sharp YoY increase in prices, which are now roughly halfway between their 2006 peak and 2012 trough, might actually be a negative, given higher mortgage rates. 

Real estate loans, from the FRB H8 report:

  • +0.5% w/w
  • +1.1% YoY
  • +4.7% from their bottom

Loans turned up at the end of 2011, but with higher interest rates, the comparisons rolled over and had been almost consistently negative since April 2013, but have improved since March.

Money supply

M1 

  • -0.4% w/w
  • +0.2% m/m
  • +10.3% YoY Real M1

 M2 

  • unchanged w/w
  • +0.6% m/m
  • +4.5% 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 then decelerated.  Real M2 made a new 2 year low at the beginning of this year.  Both Real M1 and Real M2 improved substantially since and then stabilized. M2 has faded slightly in the last month or so, but remains positive.

 

Oil prices and usage

  • Oil down -$2.64 to $102.71 w/w
  • Gas up $.01 at $3.67 w/w
  • Usage 4 week average YoY up +5.4%

The price of gas began its seasonal climb in February, and may have peaked one month ago.  It is at or below its price of 1, 2, and 3 years ago.  The 4 week average for gas usage was again positive this week.  In the larger picture, it continues to look like in 2013 the Oil choke collar finally loosened its hold on the economy slightly.

Bank lending rates

LIBOR rose slightly off its post-recession low from last week. The TED spread has been trending slightly upward since November of last year, although it is still lower on a YoY basis.

 

JoC ECRI Commodity prices

  • Down -0.08 to 129.46 w/w
  • +3.70 YoY 

This week continued the string of strong spring data.  The only significant negative remains mortgage applications.  I also score interest rates and spreads as a slight negative this week.  Almost everything else was positive.

 

As to the long leading indicators, money supply continued positive.  Bank lending rates remain low.  Real estate loans maintained their recent positive bias. Only mortgage applications remained negative (and housing prices, while positive, may have overshot at this point).  I scored interest rates as a slight negative because declining treasury rates suggest oncoming weakness (although they are a longer term positive), while corporate bond rates increased.  This suggests a little stress - but it's only one week.

 

The short leading indicators were mixed but with a positive bias.  Initial jobless claims once again made near post-recession lows. Credit spreads increased but still remained near their post-recession low. Temporary jobs are tied with their seasonal all-time high.  Commodities were positive.  Gas and oil prices are at neutral points, although usage was a positive.

 

The coincident reports were more mixed.  Consumer spending was uniformly and strongly positive.  Rail transport became even more strongly positive. Steel production turned positive, and shipping was neutral. Tax withholding turned more positive.

 

We remain on track for a strong rebound in economic activity and the GDP in the second quarter, and the rest of 2014 remains intact as well. We did get a small decline in the long leading indicator of corporate profits adjusted by unit labor costs for the first quarter, but on top of the fact that it can easily be reversed this quarter, it isn't of significance until next year, if the negative trend were to continue.

 

Have a nice weekend!

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