Data Briefing For April 2018, revealed indices data included new and existing home sales, both down; durable goods, down; durable goods up; and University of Michigan sentiment index, down.
My usual note: I look at  high-frequency weekly indicators because while they can be very noisy, they provide a good Now-cast of the , and will telegraph the maintenance or change the before monthly or quarterly data is available.  They are also an excellent way to “mark your beliefs to .”
general I go order of , then , then coincident indicators.
NOTE that I include 12 highs and lows the data parentheses to the right.

Interest rates and credit spreads

  • BAA bond index 4.82% down -.12% w/w (1 yr range: 4.15 – 4.4)
  • 10 treasury bonds 2.3% down -.13% w/w  (2.05 – 3.11) (new 7 high intraweek)
  • Credit spread 1.8% up +.01% w/w (1.56 – 2.30)
Yield curve, 10 minus 2 :
  • 0.45%, down -0.06% w/w (0.43 – 1.30)
30 conventional mortgage
  • 4.61%, down -0.17% w/w (3.84 –  4.79)

BAA bonds remain neutral. If these go above 5%, they will become a . Mortgage rates and treasury bonds are still both negatives. The spread between bonds and treasuries has now gone above 1.85%, and so I have switched it from positive to neutral. The remaining positive is the yield curve.

Mortgage applications

  • apps down -2% to 247 w/w
  • apps 4 week avg. down -5 to 253
  • apps YoY up +3%, 4 week YoY avg. +4%
  • Refi app down -4% w/w
  • Down -0.3% w/w
  • Up +3.6% YoY ( 3.3 – 6.5) (re-benchmarked, adding roughly +0.5% to prior comparisons)

Refi has been dead for time. Purchase applications were strong almost all last year, but began to falter YoY in late December, frequently turning neutral (under 3%) and even for week. But they made new expansion highs ago.

With the re-benchmarking of the last year, the growth of changed from neutral to positive. If the YoY falls below +3.25%, I will downgrade to neutral.

supply

M1

  • +1.0% w/w
  • -0.4% m/m
  • Up +0.7% Real M1 last 6 months
  • +1.6% YoY Real M1 (1.6 – 6.9) (new multiyear low)
M2
  • +0.2% w/w
  • +0.3% m/m
  • +1.1% YoY Real M2 (0.9 – 4.1)

Since 2010, both real M1 and real M2 were resolutely positive.  Both decelerated substantially in 2017. Real M2 growth has fallen below 2.5% and is thus a .  Real M1 growth week was again below 3.5% YoY, but returned to positive on a 6 basis. I have thus upgraded it to weakly positive. As I noted last week, I expect whipsawing, but the decelerating seems clear.

Credit conditions (from the Chicago Fed)

  • Conditions Index down -0.02 to -0.83
  • Adjusted Index (removing background economic conditions) down -.03 at -0.58
  • Leverage subindex up +.02 to -0.47
The Chicago Fed’s Adjusted Index’s real break-even is roughly -0.25.  In the leverage index, a negative is good, a positive poor. The historical breakeven has been -0.5 for the unadjusted Index. All three metrics presently show looseness and so are positives for the .

-weighted US$

  • up +1.55 to 122.16 w/w -0.8% YoY (last week) (broad) (116.42 -128.62)
  • Up +0.60 to 94.26 w/w, -3.23% YoY (yesterday) (major currencies)

The US$ appreciated 20% between mid-2014 and mid-2015.  It went mainly sideways afterward until briefly spiking higher after the US presidential election. It has been a positive since last summer.

Commodity prices

JoC ECRI 

  • Up +0.96 to 110.35 w/w
  • Up +4.99 YoY
BBG Industrial Metals ETF
  • 135.42 down -0.22 w/w, up +20.80% YoY (108.00 – 149.10)

Commodity prices bottomed the end of 2015. After briefly turning negative, metals also surged higher after the 2016 presidential election.  ECRI has been neutral for months.  On the other hand, industrial metals have been strongly positive and recently made a new high.Stock prices S&P 500

  • Up +0.3% w/w at 2721.33
Stock prices are a neutral, having not made either a new 3 month high or low in the last three months.  They made a string of new all-time highs beginning in summer 2016.

Fed New Orders Indexes

(*indicates report week) 

  • Empire State up +7.0 to +16.0
  • Philly up +22.2 to +40.6
  • *Richmond up +25 to +16
  • *Kansas City up +1 to +38
  • Dallas up +19.6 to +27.9
  • Month over month rolling average: up +5 to +28
The average has been volatile than the ISM manufacturing index, but has accurately forecast its month over month direction. Last month was a pause, but month it is very strongly positive.

Employment metrics

Initial jobless claims

  • 234,000 up +12,000
  • 4 week average 219,750 up +6,500

Initial claims have recently made several 40+ year lows and so are very positive. The YoY% change in these metrics had been decelerating but is now on its multi-year pace.

The American Staffing Association Index

  • Up +1 to 97 w/w
  • Up +2.3% YoY

This index was generally neutral from through December 2016, and then positive with a few exceptions all during 2017. It was negative for over a month at the beginning of this year, but has returned to a positive.

Tax Withholding

  • $176.3 B for the last 20 reporting days vs. $178.3 B year ago, down -$2.0 B or -1.1%
  • 20 day rolling average adjusted for tax cut [+$4 B]: up +$2.0 B or +1.1%

With the exception of the month of August and late November, this was positive for almost all of 2017. It has generally been negative since the effects of the recent tax cuts started in February.

I have discontinued the intramonth metric for the remainder of this year, since the kludge to guesstimate the impact of the recent tax cuts it too noisy to be of real .

I have been adjusting based on Treasury Dept. estimates of a decline of roughly $4 Billion over a 20 day period. Until we have YoY comparisons, we have to take this measure with a big grain of salt.

Oil prices and usage 

  • Oil down -$3.89 to $67.50 w/w,  up +39.0% YoY
  • Gas prices up +$.05 to $2.92 w/w, up $0.52 YoY
  • Usage 4 week average up +1.0% YoY

The price of gas bottomed over 2 years ago at $1.69.  With the exception of last July, prices generally went sideways with a slight increasing in 2017.  Usage turned negative in the first of 2017, but has almost always been positive since then. I suspect we won’t get a reaction, however, until gas goes over $3/gallon, a mark it reached by some measures on Friday. Because the YoY change has gone back down to under 40%, the rating has changed from negative to neutral.

lending rates

Both TED and LIBOR rose in 2016 to the where both were usually negatives, with lots of fluctuation.  Of importance is that TED was above 0.50 before both the 2001 and 2008 recessions.  The TED spread was generally increasingly positive in 2017, while LIBOR was increasingly negative. This year the TED spread has also turned negative, but in the past few weeks it returned to being a positive.

 

  • Johnson Redbook up +3.2 YoY

Both the Goldman Sachs and Johnson Redbook Indexes generally improved from weak to moderate or strong positives during 2017 and have remained positive this year.

Transport

Railroad transport

  • Carloads up +1.2 YoY
  • Intermodal units up +5.9% YoY
  • Total loads up +3.6% YoY

Shipping transport

Rail was generally positive since November 2016 and remained so during all of 2017 with the exception of a period during autumn it was mixed. After some weakness in January and February this year, rail has returned to positive.

Harpex made multi-year lows in early 2017, then improved, declined again, and then improved yet again to recent highs. BDI traced a similar trajectory and made 3 year highs the end of 2017. Early this year it declined but has reversed course again.

I am wary of reading too much price indexes like this since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as as demand.

Steel production

  • Up +1.6% w/w
  • Up +3.3% YoY

Steel production improved from negative to “less bad” to positive in 2016 and with the exception of early summer, remained generally positive in 2017. It turned negative in January and early February, but with the exception of week has been positive since then.

SUMMARY: 

The was a little rebound among the this week. Positives include purchase mortgage applications, the leading Chicago Fed Conditions Indexes, and , rejoined this week by real M1. Corporate bonds are neutral. Mortgage rates, Treasuries, refinance applications, and real M2 are all negative.

Among the leading indicators, industrial metals, the Fed new orders indexes, leverage, the US$, jobless claims, staffing, and gas prices and usage all remain positive (gas prices very weakly so). Stock prices, the ECRI commodity index, and the spread between corporate and Treasury bonds are all neutral, rejoined this week by .

Among the coincident indicators, positives include consumer , Harpex, steel, rail, tax withholding, and the TED spread. The Baltic Dry Index is neutral. LIBOR remains negative.

Both the nowcast remains and the -term forecast remains positive. Manufacturing appears particularly strong. This appears primarily as a rebound in the Oil patch as revealed by the Kansas City and Texas regional Fed surveys.

Although the -term indicators rebounded a little this week based primarily on a retreat in bond yields, several indicators — purchase mortgage applications and loans — edged closer to neutrality, so while the forecast remains slightly positive, the slow towards at very least neutrality has continued.