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By New_Deal_democrat October 10, 2015 8:44 am
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Weekly Indicators: US economy slips a small notch weaker edition
Monthly data for September this week, revealing deflation in both import and export prices. The ISM services index remained very positive.  Wholesale sales fell slightly; inventory increased slightly.  Thus the inventory to sales ratio rose slightly.

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 am going in order of long leading indicators, then short leading indicators, then coincident indicators.


Interest rates and credit spreads

  • 5.35% BAA corporate bonds down -0.01%
  • 2.08% 10 year treasury bonds up +0.03%
  • 3.27% credit spread between corporates and treasuries down -0.04%
30 year conventional mortgage rate:
  • 3.89%, up +.12%


Interest rates for BAA corporate bonds made a 50+ year low in January. This was not confirmed by AAA corporate bonds.  Their one year low was 4.3%, and more recently their one year high was 5.3%.  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 in 2015 have averaged a little over 2%.  Spreads have widened further, and are very negative.

Mortgage rates which remain under 4% also remain a positive.




Mortgage applications


  • +26% w/w Purchase applications
  • +49% YoY Purchase applications
  • +24% w/w Refinance applications
Real Estate loans
  • unchanged w/w
  • +5.1% YoY

Mortgage applications had been awful for several years, before turning up early this year in response to very low rates.  With rates back below 4% recently, this number has turned positive.

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


Money supply


  • -0.3% w/w
  • unchanged m/m
  • +6.4% YoY Real M1
  • -0.4% w/w
  • +0.4% m/m
  • +5.9% YoY Real M2

Real YoY money supply remains firmly positive.


Trade weighted US$ (Broad)

  • Down -0.69 to 120.20


The US$ appreciated about 20% against the Euro in particular late last year.  It made yet another new high one week ago.  As a result the US is importing deflation strongly, and exporting, not so much.


Commodity prices


  • Down -1.18 to 86.70 w/w 
  • Down -29.03 YoY
BBGt Industrial metals ETF
  • 101.75 up +4.27 w/w
Commodity prices as measured by ECRI are again at multi-year lows this week, and the YoY comparisons are deteriorating even more, although  industrial metals rose.


Employment metrics

 Initial jobless claims

  • 263,000 down -14,000 
  • 4 week average 267,500 down -3,250

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


The American Staffing Association Index 


  • Unchanged at 100
  • Down -3.45 YoY

The YoY comparison had generally been positive to strongly positive since last spring. In the last five months this turned neutral and then increasingly negative. The YoY comparison has blown out to its worst comparisons since the Great Recession during the last month.


Tax Withholding

  • $52.3 B for the first 6 days of October vs. $55.4 B one year ago, down -$3.1 B or -5.6%
  • $163.8 B for the last 20 reporting days ending Thursday vs. $156.4 B one year ago, up +$7.4 B or +4.7%


Beginning with the last half of 2014, with a few exceptions, virtually all readings have been positive. October started off negative.  As the 20 day rolling total is positive. I am returning this to a weak positive.


Oil prices and usage

  • Oil up +$4.84 to $49.50 w/w
  • Gas unchanged at  $2.32 w/w 
  • Usage 4 week average up +5.2% YoY


The 2010-13 Oil choke collar remains broken.  The price of gas and oil bottomed at the end of January at $2.02.  They rose $0.80 to $2.82 in June, and have declined since then. Gas is below $2 in many states.


Bank lending rates


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


Consumer spending

Both the Goldman Sachs and Johnson Redbook Indexes weakened after last Christmas, and weakened further YoY beginning in May, and have weakened further in the last month, probably as YoY gas price comparisons turn flatter.  Until the last 4 weeks, with the exception of 3 weeks in April, the Gallup report had been negative since the beginning of this year.  The big difference appears to be that Gallup does not measure big, durable, purchases, but most importantly does include gas purchases. Gallup had yet another good week this week.



Railroad transport

  • Carloads down -3.2% YoY
  • loads ex-coal down -2.2% YoY
  • Intermodal units up +1.9% YoY
  • Total loads down -0.7% 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 has been at consistent, less negative YoY comparisons since, indicating that if we could seasonally adjust, we would probably find traffic increasing in the last few months.

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. 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.

Steel production


  • Down -0.5% w/w
  • Down -7.3% YoY

Over the last several years steel production had generally been in a decelerating uptrend.  Since  spring 2014, it turned mixed, and then cliff-dived 7 months ago.




Among long leading indicators, interest rates for corporate bonds and treasuries  remained neutral.  Mortgage rates, and purchase and refinance mortgage applications are positives. Real estate loans are positive.  Money supply is positive.


Among short leading indicators, the interest rate spread between corporates and treasuries remains quite negative, as is the US$.  Positives included jobless claims, oil and gas prices, and gas usage.  Commodities remain a big global negative.  Temporary staffing is negative for the 21st week in a row, and more intensely so for the 3rd straight week.


Among coincident indicators, steel production, shipping, rail transport ex-intermodal, the TED spread and LIBOR all are negative.  Tax withholding and consumer spending are weakly positive.


The only changes this week were that October's tax  withholding got off to a poor start, and railroad got slightly weaker.  Aside from that, the story remains the same as recently.  Consumer-related indicators - mortgages, oil and gas, jobless claims, and consumer spending - all remain positive.  But those portions of the US economy most exposed to global forces, including the US$, commodities, and industrial production and transportation, are all firmly negative.  Employment on net is still a positive, though more weakly so.  The US economy is clearly importing weakness, but not enough to overcome domestic positives.


Have a nice weekend!

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