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By New_Deal_democrat December 5, 2015 8:46 am
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Weekly Indicators: the Thanksgiving turkey lays an egg edition
Monthly data for November started out with a strong jobs number, but no change in the unemployment rate, and lackluster wage growth. Motor vehicle sales made a new post-recession high. Construction spending was positive. Factory orders rose.  ISM services were also positive, but ISM manufacturing showed contraction.

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.  The indicators will confirm a trend or indicate a switch in trend well before monthly and quarterly reports.

In general I go in order of long leading indicators, then short leading indicators, then coincident indicators.


Interest rates and credit spreads

  • 5.51% BAA corporate bonds up +.07%
  • 2.33% 10 year treasury bonds up +.09%
  • 3.18% credit spread between corporates and treasuries down -.02%
30 year conventional mortgage rate:
  • 4.07%, up +.07%


With the exception of BAA corporate bonds yields, which made a new 50+ year low in January,  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.




Mortgage applications


  • +8% w/w Purchase applications
  • +30% YoY Purchase applications
  • -6% w/w Refinance applications
Real Estate loans
  • +0.1% w/w
  • +6.3% YoY

Mortgage applications had been awful for several years, before turning up early this year in response to very low rates.  These remain slightly positive, but very close to their lows.

Real estate loans have been firmly positive for close to two years.


Money supply


  • +0.8% w/w
  • +2.7% m/m 
  • +7.4% YoY Real M1
  • +0.2% w/w
  • +0.8% m/m 
  • +6.1% YoY Real M2 

Real YoY money supply remains firmly positive.


Trade weighted US$ (Broad)

  • Up +0,52 to 121.70 (near record - set last week intra-week)


The US$ appreciated about 20% against the Euro in particular late last year.  It made yet another new high a month ago, and after declining, rose stoutly in the last four weeks.  As a result the US is importing deflation strongly, and exports have declined. This has intensified in the last two months. 


Commodity prices


  • Up +0.51 to 81.01 w/w 
  • Down -29.65 YoY
BBG Industrial metals ETF
  • 89.24 up +1.56 w/w
Commodity prices as measured by ECRI as well as industrial metals bounced off last week's new multi-year lows.  After a period of stabilization for a few months, the commodity bust has intensified.


Employment metrics

 Initial jobless claims

  • 269,000 down -2,000 
  • 4 week average 269,250 down -1,750


Initial claims remain well within the range of a normal economic expansion, as does the 4 week average.


The American Staffing Association Index 


  • Up +1 to 102
  • Down -4.96 YoY

The YoY comparison in the last six months this turned neutral and then increasingly negative. The YoY comparison was its worst since the Great Recession this week.


Tax Withholding

  • $177.0 B for the month of November vs. $163.5 B one year ago, up +$13.5 B or +8.3%
  • $172.8 B for the last 20 reporting days ending Thursday vs. $169.2 B one year ago, up $3.6 B or +2.1%

Beginning with the last half of 2014, virtually all readings were positive, but turned more mixed and choppy from July through September. October started off negative but ended positive, and November was also positive.


Oil prices and usage

  • Oil down -$1.63 to $40.14 w/w
  • Gas down -$.03 to $2.06 w/w 
  • Usage 4 week average up +0.7% YoY


The 2010-13 Oil choke collar remains broken.  The price of gas and oil bottomed at the end of January at $2.02. It has been at $2.03-$2.05 for a week now and may be bottoming seasonally  again. Gas is below $2 in many states. Usage is a positive.


Bank lending rates

  • 0.254 TED spread up +0.022 w/w
  • 0.269 LIBOR up +0.048 w/w (near 6 year high)


Both TED and LIBOR have risen since the beginning of this year to the point where both have usually been negatives, although there have been some wild fluctuations, and particularly so this week.


Consumer spending

Both the Goldman Sachs and Johnson Redbook Indexes weakened after last Christmas, weakened further YoY beginning in May, and then weakened yet further in September, probably as YoY gas price comparisons turn flatter.  In the last month, however, the YoY comparisons have gotten notably better except for Gallup, which includes gas purchases, and turned negative again one week ago.



Railroad transport

  • Carloads down -16.1% YoY
  • loads ex-coal down -10.2% YoY
  • Intermodal units down -0.6% YoY
  • Total loads down -8.6% YoY

Shipping transport

Rail traffic fell off a cliff in mid-February. Intermodal traffic quickly turned positive again, but domestic carloads, led by coal (for export) declined further in May and June (off -8% to -10% YoY), and then were at consistent, less negative YoY comparisons since.  For the last two months, intermodal traffic has turned increasingly negative, intensifying the overall negative number, and this week fell into a black hole due to Thanksgiving seasonality.

After declining sharply for several months, making a 3-year low in mid-February, the BDI surged higher, and then declined again.  Meanwhile, Harpex (container shipping) turned up sharply for 3 months, peaking at 646 in July, before turning down again to a new post-recession low this week.

Steel production


  • Down -4.8% w/w
  • Down -19.9% YoY (huge downturn)

Over the last several years steel production had generally been in a decelerating uptrend.  It begain to turn in spring 2014, turned negative beginning in February, and more intensely negative in the last two months, before also falling into a black hole this week.




I'm going to start this week with the coincident indicators, because in addition to staffing and Gallup consumer spending, most of these had their worst week of the year, and except for seasonality, would clearly signal recession.  Steel production, shipping, and rail transport have all had their most intensely negative week all year.  The TED spread turned neutral, while LIBOR rose to its most negative level in 3 years.  Tax withholding and two measures of consumer spending are both still positive, while Gallup's measure of consumer turned even more negative.


Among long leading indicators, interest rates for treasuries, corporate bonds, and mortgages all are neutral.  Money supply, mortgage applications, and real estate loans are still positive.


Among short leading indicators, the interest rate spread between corporates and treasuries remains quite negative, and the US$ even more.  Commodities remain a big global negative, although they bounced off of last week's lows.  Temporary staffing had its most negative week all year. Jobless claims are still very positive, as are oil and gas prices, and gas usage.


Bottom line: the intensified deflationary pulse of the last several months went into hyperdrive due to YoY Thanksgiving week seasonal distortions.  Here's the AAR graph of rail traffic YoY: 2015 is blue, while 2014 is the grayed out red:



The Thanksgiving week downturn occurred one week earlier this year than last year, and this probably accounts for the poor rail, steel, and staffing numbers as well.


I continue to anticipate further near term weakness in the US economy, although the growing service/consumer sector continues to overbalance the deepening industrial recession brought on most of all by the further strengthening in the US$.


Have a nice weekend!

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