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By New_Deal_democrat May 24, 2014 9:56 am
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Weekly Indicators: Temporary staffing makes a new springtime high edition
Monthly data for April included was sparse this past week. Most importantly, the index of Leading Indicators rose +0.4%, indicating expansion will continue through the end of this year.  Both new and existing home sales improved from March. but existing home sales are still down by more than -10% from their peak last July, and new home sales have also been down YoY for the last 3 months.  Since January 2013, the housing recovery has been *entirely* about apartment and condo construction; new single family home sales have essentially flatlined.
 

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.

 

Let's start with employment again, where last week's anomaly is more mixed:

 

Employment metrics

 Initial jobless claims

  • 326,000 up +29,000
  • 4 week average 322,500 down -750

Initial claims rose this week, but the 4 week average declined slightly. Together these remain a slight positive.

 

The American Staffing Association Index was up 1 to 97.It is up +3.64% YoY.

 

This Index once again made a new all-time high for this week. The YoY comparison faded in February but since then has stabilized and then rallied.

 

Tax Withholding 

  • $124.0 B for the first 16 days of May vs. $123.1 B last year, up +0.9 B or +0.7%
  • $155.6 B for the last 20 days ending Thursday vs. $149.0 B for 20 days ending Thursday 1 year ago, up -$6.6 B or +4.4%.

 

April was relatively poor, and has spilled over into May, although the 20 day moving average, which was negative last week, has returned to a decently positive reading.

 

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.

 

Steel production from the American Iron and Steel Institute 

  • -0.3% w/w
  • +0.3% 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.

 

Transport

 Railroad transport from the AAR 

  • +14,000 carloads up 4.5% YoY
  • +14,100 carloads up 8.1% ex-coal
  • +17,000 or +6.8% intermodal units
  • +30,000 or +5.6% YoY total loads

Shipping transport

Rail transport ended 2013 on a very positive note.  After a volatile winter, it has rebounded sharply in spring.  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

  • 4.77% BAA corporate bonds down -0.02%
  • 2.57% 10 year treasury bonds down -0.05%
  • 2.20% 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.  Spreads rose slightly 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 -3%
  • YoY purchase applications down -12%
  • w/w refinance applications up +4%

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 +11.6%

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:

  • +0.2% w/w
  • +0.6% YoY
  • +4.2% 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, although they have improved since March.

Money supply

M1 

  • -0.8% w/w
  • +1.0% m/m
  • +9.3% 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, but remains positive.

 

Oil prices and usage

  • Oil up +$2.33 to $104.35 w/w
  • Gas unchanged at $3.67 w/w
  • Usage 4 week average YoY up +1.7%

The price of gas began its seasonal climb in February, and may have peaked one month ago.  It is 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 made yet another post-recession intra-week low at 0.148 this 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

  • Up +0.01 to 129.54 w/w
  • +3.50 YoY 

This was another good week, with the only significant changes being the re-engagement of the Oil choke collar, and tax withholding turning mixed.  The only outright negative remains mortgage applications, although the recent decline in rates has allowed for faint signs of life in mortgage refinancing.

 

As to the long leading indicators, treasury rates declined further below their December highs. Money supply continued positive.  Bank lending rates remain low.  Real estate loans maintained their recent positive bias. Only mortgage applications remained negative.

 

The short leading indicators also were generally positive.  Initial jobless claims increased, but still rate a weaker positive. Credit spreads remained near their post-recession low. Temporary jobs made a new seasonal all-time high.  Commodities were positive.  The only outright negative was that oil prices increased sufficiently to re-engage the oil choke collar, although gas prices remained steady.

 

The coincident reports were more mixed.  Consumer spending was uniformly and strongly positive.  Rail transport remains strongly positive. Shipping and steel production were neutral. Tax withholding was mixed, with May so far a nominal positive but a real negative.  The 20 day average rebounded from its negative reading last week to a positive this week.

 

Not only are we on track for a good second quarter, but positive economic activity for the rest of 2014 is virtually assured, and the economic expansion should continue further into the first part of 2015.  We should get a reading on the long leading indicator of real corporate profits in this week's revised GDP report.

 

Have a nice weekend!

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