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By New_Deal_democrat December 26, 2015 8:48 am
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Weekly Indicators: US consumers say "Ho ho ho" edition
Monthly data for November included new and existing home sales, both negative, personal income and spending, both positive, unchanged durable goods orders, and an uptick in consumer sentiment.
 

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

  • 5.53% BAA corporate bonds up +.08%
  • 2.27% 10 year treasury bonds up +.03%
  • 3.26% credit spread between corporates and treasuries up +.05%
30 year conventional mortgage rate:
  • 4.10%, up +.08%

 

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.  Spreads remain very negative.

 

Housing

 

Mortgage applications

 

  • +4% w/w Purchase applications
  • +37% YoY Purchase applications
  • +11% w/w Refinance applications
Real Estate loans
  • Up +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 positive, but very close to their lows.

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

 

Money supply

M1

  • +0.6% w/w
  • -0.8% m/m 
  • +4.4% YoY Real M1
M2
  • +0.2% w/w
  • +0.1% m/m
  • +5.5% YoY Real M2 

Real YoY money supply remains firmly positive.

 

Trade weighted US$ (Broad)

  • Up +0.58 to 122.95 (FRED) (new 10 year high set intraweek)
  • Down -0.85 to 98.70 (Bloomberg)

 

Because the FRED's daily measure is delayed a week, I have added Bloomberg which is accurate as of Thursday (although I believe it does not measure the broad US$).  The US$ appreciated about 20% against the Euro in particular late last year.  It made yet another new high this week.  As a result the US is importing deflation strongly, and exports have declined. This has intensified since the beginning of October. 

 

Commodity prices

JoC ECRI

  • Up +0.90 to 79.17 w/w 
  • Down -25.42 YoY
BBG Industrial metals ETF
  • 90.05 up +0.87 w/w
Commodity prices as measured by ECRI and industrial metals bounced a little bit.  The commodity bust has intensified over the last 3 months.

 

Employment metrics

 Initial jobless claims

  • 267,000 down -4,000 
  • 4 week average 272,500 down -2,000

 

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 103
  • Down -3.95 YoY

The YoY comparison in the last six months this turned neutral and then increasingly negative.

 

Tax Withholding

  • $163.3 B for the first 17 days of December vs. $156.1 B one year ago, up +$7.2 B or +4.6%
  • $194.0 B for the last 20 reporting days ending Wednesday vs. $189.8 B one year ago, up $4.2 B or +2.2%

Beginning with the last half of 2014, virtually all readings were positive, but turned more mixed and choppy in August and September.  In general they have remained positive, but a little more weakly so, in the last 45 days.

Oil prices and usage

  • Oil up +$3.57 to $38.12 w/w
  • Gas down -$.01 to $2.03 w/w 
  • Usage 4 week average up` +0.6% 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 finally went below $2 on GasBuddy this week.  Usage is a positive.

 

Bank lending rates

  • 0.410 TED spread up +0.054 w/w
  • 0.420 LIBOR up +0.020 w/w (near 6 year high)

 

Both TED and LIBOR were already rising since the beginning of this year to the point where both have usually been negatives, although there were some wild fluctuations.  Both TED and LIBOR spiked further to new 3 and 5 year highs 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 turned flatter, before improving somewhat since the beginning of November.  Gallup has also turned positive in the last 2 weeks.

 

Transport

Railroad transport

  • Carloads down -14.9% YoY
  • loads ex-coal down -7.2% YoY
  • Intermodal units down -3.5% YoY
  • Total loads down -9.5% 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 through summer.  Since the beginning of October, comparisons have turned more negative than even earlier this year.

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 another post-recession low one week ago.

Steel production

 

  • Down -0.8% w/w
  • Down -15.2% YoY

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 3 months.

 
 

SUMMARY: 

 

This week is a replay of last week.

 

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.  Temporary staffing remains very negative. Jobless claims are still very positive, as are oil and gas prices, and gas usage.

 

Among coincident indicators, steel production, shipping, and rail transport all remain very negative.  The TED spread and LIBOR both made stir more 5 year highs.  Tax withholding and all three measures of consumer spending are positive.

 

Against a global background of collapsing commodities and a soaring US$, the US economy continues to be buoyed up by the almighty US consumer, who continues to buy houses, cars, and general retail spending.  I continue to anticipate further near term weakness in the US industrial economy, but I also continue to anticipate that it will be overbalanced by the far larger service/consumer sector.  The key metric to continue to watch is almost certainly the US$.

 

Have a nice weekend!

 
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