- XE Contributor
I report on the high frequency weekly indicators because they are an almost simultaneous "nowcast" of the economy, and although they can be noisy, taken together they will show a continuation or turning of a trend before it shows up in the monthly data.
As I've done recently, let's start with the long leading indicators, then we'll turn to shorter leading indicators and then coincident indicators:
Interest rates and credit spreads
- 5.35% BAA corporate bonds down -0.05%
- 2.89% 10 year treasury bonds up 0.03%
- 2.46% credit spread between corporates and treasuries down -0.08%
Interest rates for corporate bonds had been falling since being just above 6% in January 2011, hitting 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 have decisively risen over 1.6% above that mark. Spreads, however, declined back to a new 3 year low. Their recent high was over 3.4% in June 2011.
Mortgage applications from the Mortgage Bankers Association:
- -4% w/w purchase applications
- -11% YoY purchase applications
- -8% w/w refinance applications
Refinancing applications decreased sharply since April due to higher interest rates, and have now made a new post-recession lows. Purchase applications also declined from their multiyear highs in April, turned negative YoY ten weeks ago, and have also just made a multiyear low.
- YoY this week +5.8%
Housing prices bottomed at the end of November 2011 on Housing Tracker, and averaged an increase of +2.0% to +2.5% YoY during 2012. This weeks's YoY comparison backed off sharply from the new 7 year record set just over a month ago.
Real estate loans, from the FRB H8 report:
- +0.4% w/w
- -0.9% YoY
- +1.4% from its bottom
Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012. Since April, with higher interest rates, the comparisons stalled and are now quite negative, retreating back to near their post recession lows.
- +0.2% w/w
- +1.7% m/m
- +7.1% YoY Real M1
- unchanged w/w
- +0.5% m/m
- +4.5% YoY Real M2
Real M1 made a YoY high of about 20% in January 2012 and decelerated since then. Real M2 also made a YoY high of about 10.5% in January 2012. This week it tied its low of 4.5% set in August 2012. At the same time, neither is close to turning negative.
- ICSC +1.4% w/w. +2.7%YoY
- Johnson Redbook +3.9% YoY
- Gallup daily consumer spending 14 day average at $95 up $10 YoY
Gallup's 14 day average of consumer spending rose sharply in November 2012, and so now has very difficult YoY comparisons. Last year the ICSC varied between +1.5% and +4.5% YoY in, while Johnson Redbook was generally below +3%. Gallup was slightly below its typical range, and the ICSC and Johnson Redbook are in the middle of their respective ranges.
Steel production from the American Iron and Steel Institute
- -4.7% w/w
- -2.9% YoY
Steel production over the last several years has generally been in a decelerating uptrend. After a strongly positive move for several months, in the last month YoY comparisons weakened and this week turned negative.
Railroad transport from the AAR
- -8,700 carloads down -0.3% YoY
- -3,300 carloads down -3.0% ex-coal
- +14,400 or +6.4% intermodal units
- +14,800 or +2.8% YoY total loads
Rail transport had been very mixed YoY during midyear, but almost continuously improved since then. This week remained positive. The Harpex index had been improving slowly from its January 1 low of 352, but flattened out in the last half a year, and has recently declined slightly. The Baltic Dry Index rebounded to near its new 3 year high it set last week. Both the Baltic Dry Index and the Harpex declined sharply since the onset of the recession, and have been in a range near their bottom for about 2 years, but stopped falling earlier this year, and now are in uptrends
Initial jobless claims
- 338,000 down -41,000
- 4 week average 348,000 up +4,500
The American Staffing Association Index was unchanged at 103. It is up +9.6% YoY
- $160.8 B for the first 18 days of December vs. $156.5 B last year, up +$4.3 B or +2.7%
- $182.2 B for the last 20 reporting days vs. $165.5 B last year, up $16.7 B or +10.1%
Temporary staffing had been flat to negative YoY in spring, but broke out positively for the last four months. It is on the cusp of its traditional end of year swoon, but the YoY comparisons remain excellent. Tax withholding was awful in October, presumably due to the federal government shutdown, rebounded fully in November, and then softened slightly this month. Initial claims are a total question mark at this point, but my guess is that we are mainly dealing with seasonality playing havoc with the numbers, although there does seem to be some slight comparative weakness.
- Oil up +$1.00 to $100.32 w/w
- Gas up +.03 to $3.27 w/w
- Usage 4 week average YoY up +3.9%
The price of Oil appears to have made its yearly seasonal low several weeks ago, and increased further this week. The 4 week average for gas usage remains positive. 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 remains close to the bottom of its 3 year range. LIBOR rose from its 3 year low.
JoC ECRI Commodity prices
- Up +1.57 to 127.06 w/w
- +1.12 YoY
This week continued reinforcement of the trends I have noted ever since the bond market reacted strongly to the Fed's taper talk in April. The long leading indicator of interest rates was mixed, with corporates slightly lower, but treasuries making a new highs, more than 1.6% higher than they were at their July 2012 lows. Interest rates have knocked the stuffing out of all of the housing metrics, as real estate loans remain poor, and mortgage applications were absolutely awful, with purchase applications at a two year low, and only slightly above their 5 year low, and refinancing making a new 5+ year low. Money supply remains positive, but relatively soft and continuing its slow deceleration compared with the last several years, and M2 tying a multiyear low in growth.
The shorter leading indicators remain mainly positive. Temporary employment again had its best YoY comparison all year. The oil choke collar is on the cusp of seasonally re-engaging. Initial jobless claims improved considerably, but as per my analysis last week, were mainly seasonal noise, although the 4 week average suggests weakening signal buried in that noise. Commodities were slightly positive, and also remain slightly higher than one year ago.
Coincident indicators faded to weakly positive. Steel production turned negative. Bank lending rates remain near record lows. YoY House prices, while positive, faded considerably from their best comparisons. Tax withholding is having a moderately positive December. Gallup consumer spending, with challenging YoY comparisons, was not nearly as strongly positive as it has been for most of this year, although it remains a solid positive. Both the Johnson Redbook and the ICSC indexes were also in the middle of their positive range.
Although the second half of 2013 looks like it will turn out very positive, whether interest rates remain elevated from their likely generational lows, and if so, whether that elevation is enough to cause the housing market to actually turn negative is shaping up as one of the big economic stories for 2014. There is some evidence as we close out the year that the deceleration in the long leading indicators is beginning to spread to the shorter term indicators, although at this point the general tone is still positive.
Have a nice weekend and best wishes for a healthy, happy, and prosperous New Year!