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By New_Deal_democrat April 11, 2015 10:59 am
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Weekly Indicators: a tale of two economies edition

Monthly reports for March was sparse this week, but included job openings up sharply, while hires were flat. Wholesale sales declined slightly, while inventories increased slightly.  Consumer credit increased. Export prices rose.  Import prices continued to fall.

My usual note: I look at the high frequency weekly indicators because while they can be very noisy, they provide an up-to-this-week snapshot of the economy.  The indicators will confirm a trend or indicate a switch in trend well before monthly reports. It is important to note that this compendium is intended as a *Now*-cast, not a forecast.

Transport
 Railroad transport from the AAR

  • -17,200 carloads down -6.2% YoY 
  • +9,900 intermodal units up +3.8% YoY
  • -8,200 total loads down -1.5% YoY

Shipping transport

  • Harpex up +34 to 596 (4 year high)
  • Baltic Dry Index down -8 to 580

Rail traffic fell off a cliff five weeks ago. Intermodal traffic quickly turned positive again, but domestic carloads have remained generally negative.  After declining sharply for several months, making a 3 year low in mid-February, the BDI rebounded in the last seven weeks. Meanwhile, Harpex (container shipping) has turned up sharply for the last 3 months in a row, making continual new 4 year highs.  In the longer term, shipping rates bottomed about 3 years ago and have been in a slow and variable uptrend since, although the Baltic index did break that to the downside in the recent skid.

Consumer spending

  • Johnson Redbook +3.4% YoY (close to a 3 month high)
  • Gallup daily consumer spending 14 day average at $85, down -$1 YoY

The Gallup report, which has been barely positive to outright negative since the beginning of this year, probably primarily reflects consumers saving the money they are saving on gasoline.  When Gallup turns positive again YoY, that will be the signal that consumers are starting to spend their gas savings. After two weeks of doing so, it has turned negative again for the last 3 weeks, but YoY readings have stabilized, suggesting month over month improvement.

In the second half of 2014, Johnson Redbook was between +3.5% to +5%.  It has fallen out of that range in 10 of the last 12 weeks.  This is in accord with the poor YoY nominal retail sales numbers, but since it has improved in the last month, this also suggests positive m/m retail sales have returned.

Steel production from the American Iron and Steel Institute 

  • -1.7%  w/w
  • -13.7% YoY

Steel production over the last several years had generally been in a decelerating uptrend.  Since  spring 2014, it turned mixed, and then cliff-dived in the two months. This may be the shipping and rail downturns feeding through the system, due to weak foreign economies and a strong dollar.

Commodity prices
JoC ECRI

  • Up +1.39 to 102.18 w/w
  • Down -19.96 YoY

BBG Industrial metals ETF

  • 117.82 down -0.19

Commodity prices as measured by ECRI remain close to their recent new low.  This is still probably due to international weakness, and mainly about oil.  Industrial metals have generally been declining for the last 3 years, made and retested a low in the last two months, have rebounded slightly and are bouncing sideways along that bottom.

 Interest rates and credit spreads

  • 4.50% BAA corporate bonds down -0.06%
  • 1.97% 10 year treasury bonds up +0.05%
  • 2.47% credit spread between corporates and treasuries down -0.11%

Interest rates for BAA corporate bonds made a 50+ year low 9 weeks ago. This was not confirmed by AAA corporate bonds.  After a possible once-in-a-lifetime low of 1.47% in July 2012, Treasuries rose to over 3% in late 2013, then fell through 2014 and into 2015 to back below 2%, rose back above 2%, and have now backed off again.  Spreads have widened in recent months, a warning of near-term weakness, but declined enough to be scored a slight positive this week.

Housing metrics

Home Sales and Prices from DataQuick:
CoreLogic, which acquired DataQuick, has discontinued this valuable data series.

Mortgage applications from the Mortgage Bankers Association:

  • +7% w/w purchase applications 
  • +12% YoY purchase applications
  • -3% w/w refinance applications

30 year conventional mortgage rate from Mortgage News Daily

  • 3.70%, up +0.08% w/w (low was 3.35% in December 2012)

YoY purchase applications established a "less awful" trend in the latter part of 2014.  They have turned positive for 7 of the last 8 weeks.  Mortgage rates are close to the bottom of their 12 month range, but have not made a new low in over two years.  As a result, mortgage refinancing remains relatively somnolent, although off its bottom.

Real estate loans, from the FRB H8 report:

  • unchanged w/w
  • up +4.2% YoY

Loans turned up at the end of 2011, turned down in late 2013, but have remained positive to sharply positive since April 2014.

Money supply
M1

  • +0.1% w/w
  • -0.5% m/m
  • +8.8% YoY Real M1

M2

  • +0.1% w/w
  • -0.1% m/m
  • +6.1% YoY Real M2

Between actual deflation and possibly a mild European flight to safety, real YoY money supply is firmly positive.  At the time of the last flight to safety (from Europe) 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 2014.  Both Real M1 and Real M2 improved substantially since.

Employment metrics
 Initial jobless claims

  • 281,000 up +13,000
  • 4 week average 282,250 down -3,250

Initial claims remain well within the range of a normal economic expansion, as does the 4 week average, and this week established a new 15 year low.

The American Staffing Association Index 

  • Up 1 to 98
  • Up +3.2% YoY.

The YoY comparison has generally been positive to strongly positive since last spring.  After the YoY comparisons, while still positive, declined significantly one month ago, but this week continued the subsequent rebound.

Tax Withholding

  • $63.0 B for the first 7 days of April vs. $58.4 B one year ago, up +4.6 B or +7.9%
  • $185.5 B for the last 20 reporting days ending Thursday vs. $174.3 B one year ago, up +$11.2 B or +6.4%

Beginning with the last half of 2014, virtually all readings have been positive.

Oil prices and usage

  • Oil up +$2.63 to $51.77 w/w
  • Gas down -$0.04 to $2.41 w/w
  • Usage 4 week average YoY +2.0%

The price of gas probably bottomed 9 weeks ago. Oil briefly made a new low two weeks ago.  The 2010-2013 Oil choke collar has been broken.

Bank lending rates

  • 0.256 TED spread up +0.019 w/w
  • 0.1800 LIBOR up +0.024 w/w

LIBOR has risen sharply from its post-recession low set in May and recently made a one-year high. The TED spread moved generally sideways with a slight upward trend in the last 6 months of 2014, rising off its November 2013 low.  It made an 18 month high four weeks ago. The move in the last months (probably mainly due to the latest Euro-crisis), while a negative, still pales in comparison with the moves before the Great Recession.

SUMMARY:

Among long leading indicators, yields on corporate bonds and treasuries, money supply, and real estate loans were all positive.  Purchase mortgage applications were positive for the third straight week, while refinancing turned negative and is still very close to its multi-year bottom. 

The short leading indicators were generally positive.  Oil prices remain near their bottom.   Temporary staffing was positive.  Gas prices and usage remained positive, and initial jobless claims were very positive. Spreads between corporate bonds and treasuries narrowed enough to be a slight positive. The only negative is that industrial metal prices declined slightly and also remain near their bottom.

Coincident indicators were again mainly negative.  Steel production is still over 10% down from a year ago and worsened this week.  Rail was again mixed but turned more negative again.  Consumer spending as measured by Gallup is also negative again.  The TED spread and LIBOR remain barely negative. Shipping was mixed.  There were only two real positives: Tax withholding was very positive, and Johnson Redbook had its best YoY showing, save for one week, since the beginning of the year.

This week repeated the dominant theme of the last several months:  poor coincident indicators with positive long and short leading indicators. In general, those aspects of the US economy most intertwined with the global economy have suffered recessionary declines. As a result, I suspect Wednesday's industrial production report for March will be poor.   By contrast, almost all strictly domestic indicators with the exception of Gallup consumer spending remain quite positive, and Gallup's stabilization probably foretells a positive month over month retail sales report on Tuesday. 

Have a nice weekend!

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