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Objective
I have a look at the excessive frequency weekly indicators as a result of whereas they are often very noisy, they supply a very good nowcast of the economic system, and can telegraph the upkeep or change within the economic system nicely earlier than month-to-month or quarterly information is accessible. They’re additionally a wonderful solution to “mark your beliefs to market.” Basically, I’m going so as of lengthy main indicators, then brief main indicators, then coincident indicators.
A Word on Methodology
Information is introduced in a “simply the info, ma’am” format with a minimal of commentary in order that bias is minimized.
The place related, I embrace 12-month highs and lows within the information in parentheses to the best. All information taken from St. Louis FRED until in any other case linked.
Just a few objects (e.g., Monetary Circumstances indexes, regional Fed indexes, inventory costs, the yield curve) have their very own metrics based mostly on long-term research of their habits.
The place information is seasonally adjusted, usually it’s scored positively whether it is throughout the high 1/3 of that vary, detrimental within the backside 1/3, and impartial in between. The place it isn’t seasonally adjusted, and there are seasonal points, ready for the YoY change to vary signal will lag the turning level. Thus I make use of a conference: information is scored impartial whether it is lower than 1/2 as constructive/detrimental as at its 12-month excessive.
With lengthy main indicators, which by definition flip a minimum of 12 months earlier than a turning level within the economic system as a complete, there may be an extra rule: information is mechanically detrimental if, throughout an enlargement, it has not made a brand new peak up to now yr, with the only exception that it’s scored impartial whether it is shifting in the best course and is shut to creating a brand new excessive.
For all collection the place a graph is accessible, I’ve offered a hyperlink to the place the related graph may be discovered.
Recap of month-to-month studies
November information included vital will increase in each nominal and actual private earnings and spending, along with the primary deflationary PCE print in 7 years outdoors of the two pandemic lockdown months. Sturdy items orders rose sharply in complete, but it surely was all about transportation, which reversed its massive decline through the UAW strike. Core capital items spending additionally rose. Client confidence as measured by each the U. Of Michigan and the Convention Board rose sharply.
Housing information included permits, which declined, whereas begins rose strongly. Housing items beneath development additionally rose. In the meantime new single household gross sales declined sharply to a 12 month low, whereas present house gross sales rose barely from their 10+ yr low one month beforehand. YoY costs on new houses are nonetheless down, whereas YoY costs on present houses continued to extend.
Lengthy main indicators
Rates of interest and credit score spreads
Charges
- BAA company bond index 5.53%, up +0.04% w/w (1-yr vary: 5.28-6.80)
- 10-year Treasury bonds 3.90%, down -0.02% w/w (3.30-4.93)
- Credit score unfold 1.63%, up +0.06% w/w (1.54-2.42).
(Graph at Moody’s Seasoned Baa Corporate Bond Yield | FRED | St. Louis Fed.)
Yield curve
- 10-year minus 2 yr: -0.43%, up +0.10% w/w (-1.07 – -0.17)
- 10-year minus 3 month: -1.48%, unchanged w/w (-1.89 – 0.21)
- 2-year minus Fed funds: -1.00%, down -0.10% w/w.
(Graph at 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity | FRED | St. Louis Fed.)
30-12 months standard mortgage fee (from Mortgage News Daily) (graph at hyperlink)
- 6.68%, up +0.04% w/w (6.07-8.03) (6 month low).
With the brand new highs in rates of interest nearly 2 months in the past, their score reversed from impartial to detrimental. The brief finish of the rate of interest curve has been various between impartial and detrimental, and is detrimental once more now, as are each different spreads.
As a result of a number of long run rates of interest have jumped forward to the center portion of their three yr vary, I’ve modified their score to impartial. In any other case I’ll look forward to 4 months to cross after their most up-to-date highs to vary their signal.
Housing
Mortgage functions (from the Mortgage Bankers Association)
- Buy apps down -1% to 149 (125-208) (SA)
- Buy apps 4 wk avg. up ) +3 to 147 (SA)
- Buy apps YoY -18% (NSA)
- Buy apps YoY 4 wk avg. -18% (NSA)
- Refi apps down -2% w/w (SA)
- Refi apps YoY up +18% (SA)
*(SA) = seasonally adjusted, (NSA) = not seasonally adjusted
(Graph at Our Charts)
Actual Property Loans (from the FRB)
- Up +0.1% w/w
- Up +3.7% YoY (3.7% – 12.1%) (new 12 month low).
(Graph at Real Estate Loans, All Commercial Banks | FRED | St. Louis Fed.)
Mortgage charges, like bond yields, lately made multi-decade new highs. Moreover, buy mortgage functions two months in the past sank to repeated new long run lows. Refinancing has turned markedly larger YoY, warranting a change of signal to constructive, however that’s in opposition to practically non-existent ranges one yr in the past.
Actual property loans turned ever extra constructive throughout 2022. This was helped by inflation in home costs. This indicator declined by 1/third from its peak YoY% change in August, turning impartial, and a number of other months in the past sank under 6.0%, the final housing indicator to show detrimental.
Cash provide
The Federal Reserve has discontinued this weekly collection. Information is now solely launched month-to-month. October information was launched three weeks in the past:
- M1 m/m down -0.5%, YoY Actual M1 down -13.3%
- M2 m/m down -0.1%, YoY Actual M2 down -6.5%.
No recession has occurred and not using a YoY actual M1 detrimental, or YoY actual M2 under +2.5%. Actual M2 fell under that threshold in March 2022. Actual M1 additionally turned detrimental as of Could 2022.
Company earnings (Q3 precise and This autumn estimated) from I/B/E/S through FactSet at p. 32) (no report till January 5)
- Q3 precise 58.90, up +8.0% q/q
- This autumn estimated down -0.31 w/w to 54.50, down -7.5% q/q.
FactSet estimates earnings, that are changed by precise earnings as they’re reported, and are up to date weekly. The “impartial” band is +/-3%. I additionally common the earlier two quarters collectively, till a minimum of 100 corporations have really reported. This score lately modified from detrimental to impartial, and when Q3 earnings made a brand new all-time excessive, modified to constructive. Now that This autumn estimates have entered the combination, and an enormous decline is anticipated, the measure has reverted to impartial.
This indicator is not going to be up to date for one more two weeks.
Credit score circumstances (from the Chicago Fed) (graph at hyperlink)
- Monetary Circumstances Index down -0.02 (looser) to -0.53 (-0.03 – -0.62)
- Adjusted Index (eradicating background financial circumstances) down -.03 (looser) to -0.53 (+0.16 – -0.59)
- Leverage subindex down -0.03 (looser) to -0.40 (+1.61 – -0.37) (new 1 yr low).
In these indexes, decrease = higher for the economic system. The Chicago Fed’s Adjusted Index’s actual break-even level is roughly -0.25. Within the leverage index, a detrimental quantity is nice, a constructive poor. The historic breakeven level has been -0.5 for the unadjusted Index. The leverage index had improved from detrimental to impartial, then briefly retreated again to detrimental, however is constructive for the previous a number of weeks. The adjusted index had improved past its breakeven level, briefly turning constructive earlier than reverting to impartial, and in addition now constructive once more. The unadjusted index is constructive once more as nicely.
Brief main indicators
Financial Indicators from the late Jeff Miller’s “Weighing the Week Forward”
- Miller Rating (previously “C-Rating”): down -42 w/w to 195, -87 m/m (154 9/22/23 – 315 on 3/15/23)
- St. Louis Fed Monetary Stress Index: down -0.1009 to -0.5182 (1.5746 3/23/23 – -.7854 7/28/23) St. Louis Fed Financial Stress Index
- BCIp from Georg Vrba: down -10.2 w/w to 1.6 as of 12/21/23 iM’s Business Cycle Index (100 is max worth, under 25 is recession sign averaging 20 weeks forward).
The Miller Rating is designed to look 52 weeks forward for whether or not or not a recession is feasible. Any rating over 500 means no recession. This quantity fell under that threshold at the start of August 2021, so not solely is it detrimental, however we at the moment are nicely into the “recession eligible” time interval.
The St. Louis Monetary Stress index is one the place a detrimental rating is a constructive for the economic system, and through its restricted existence, has risen above zero earlier than a recession by lower than one yr. It did so in December, after which once more briefly in March, however nearly instantly decreased again under zero once more and stayed there.
The BCIp, deteriorated sharply earlier this yr under its recession-signaling threshold, however then improved sufficiently in order that IM rescinded the recession sign. Final week, it went again under the “25” recession warning threshold, however improved above it two weeks in the past. IM has up to date its accompanying textual content to say that one measure is signaling a recession to start in 13 weeks +/-8 weeks, whereas a second measure just isn’t signaling recession in any respect.
Commerce weighted US$
- Down -1.09 to 120.06 w/w, down -2.1% YoY (final week) (broad) (117.60 – 124.77) (Graph at Nominal Broad U.S. Dollar Index
- Down -0.78 to 101.74 w/w, down -2.5% YoY (major currencies) (graph at hyperlink) (100.79-114.78).
Ever since 2021, each measures of the US$ had been nicely above +5% larger YoY, and so detrimental. Lately, each declined into the impartial vary, and in earlier this yr, each turned constructive.
Commodity costs
Bloomberg Commodity Index
- Up +0.45 to 99.35 (97.86 12/08/23-118.14)
- Down -11.7% YoY (Finest: +52.3%; worst -25.3%).
(Graph at BCOM | Bloomberg Commodity Index Overview | MarketWatch.)
Bloomberg Industrial metals ETF (from Bloomberg) (graph at hyperlink)
- 141.23, up +1.55 w/w (135.23 12/8/23-154.13 1/4/23)
- Down -15.4% YoY (Finest +69.0% Could 7, 2022).
In the course of the Growth of 2021, commodity costs soared, and complete commodities had been very constructive. Each indexes at the moment are within the backside 1/third of their 12 month vary, so each are detrimental, though industrial commodities are only a hair away from turning impartial.
Word, importantly, that as a result of this specific decline in commodity costs might mirror elevated provide slightly than destruction of demand, the message of a virtually -10% YoY decline might have been very completely different from ordinary. Then again, the FRBNY’s “World Provide Chain Stress Index,” a month-to-month indicator, simply went above 0 in November for the primary time since January, indicating slight tightness.
Inventory costs S&P 500 (from CNBC) (graph at hyperlink)
Shares made a number of new 3 month highs and even a brand new 12+ month excessive earlier this yr, together with on the finish of July. Since then, final month noticed a brand new 3 month low; however up to now two weeks we’ve got seen new 3 month (and certainly 12+ month) highs as nicely. Since we’ve got had each throughout the final 3 months, this indicator has turned from detrimental to impartial.
Regional Fed New Orders Indexes
(*signifies report this week)
- Empire State down -6.4 to -11.3
- *Philly down -26.9 to -25.6
- Richmond down -7 to -4
- *Kansas City down -8 to -8
- Dallas down -11.7 to -20.5
- Month-over-month rolling common: down -2 to -10.
The regional common is extra risky than the ISM manufacturing index, however often appropriately forecasts its month-over-month course. Since spring 2022, these progressively declined to impartial after which detrimental. Lately they grew to become “much less detrimental,” however reversed within the final two months.
Employment metrics
Preliminary jobless claims
- 205,000, up +2,000 w/w
- 4-week common 212,000, down -1,500 w/w.
(Graph at St. Louis FRED.)
The 4-week common had been larger by 5% or extra YoY for many of this yr, however not at ranges which have up to now triggered a “recession warning.” Since late summer season issues improved significantly, warranting a impartial score. For the previous two weeks claims have been decrease than they had been one yr in the past, warranting a score change to constructive.
Short-term staffing index (from the American Staffing Association) (graph at hyperlink)
- Unchanged at 98 w/w
- Down -8.1% YoY (low 8.1%- excessive +0.9%) (new 24+ month low).
Throughout 2022, the comparisons at first slowly after which extra sharply deteriorated, and by early this yr had turned detrimental. After bettering considerably, up to now two months the YoY comparisons have pale once more, and this week it had its worst studying of the yr.
Tax Withholding (from the Division of the Treasury) https://fsapps.fiscal.treasury.gov/dts/issues
- $278.7 B for the final 20 reporting days this yr vs. $297.3 B one yr in the past, -$18.6 B or -6.3%.
YoY comparisons peaked in Q1 2022. Since summer season, it has oscillated between impartial and constructive, and was detrimental on a month-to-month foundation a number of instances. For the reason that first of the yr, these have usually turned constructive. That was not the case for the month of April, however in Could it turned again constructive, and on a 20 day foundation it has often been close to its greatest stage in 12 months for the previous couple of months. For 3 weeks it turned detrimental, however rebounded to constructive for a number of weeks, earlier than turning sharply detrimental once more this week. It’s possible that that is an artifact of comparisons with an enormous enchancment on the finish of final yr which needed to do with the delayed cashing in of inventory choices.
Oil costs and utilization (from the E.I.A.)
- Oil up +$2.03 to $73.58 w/w, down -0.5% YoY ($66.74 – $98.62)
- Gasoline costs down -.09 to $3.05 w/w, down -$0.15 YoY
- Utilization 4-week common up +1.9% YoY.
(Graphs at
This Week In Petroleum Gasoline Section – U.S. Energy Information Administration (EIA).)
Oil costs each stay within the center 1/third of their 3 yr vary, and so are impartial. Gasoline costs at the moment are down close to the lows of their 3 yr vary, and so are constructive. Mileage pushed turned detrimental for five weeks earlier than turning constructive six weeks in the past.
Word: given this measure’s excessive volatility, I consider the very best measure is in opposition to their 3 yr common. Measuring by 1 yr, each are constructive.
Financial institution lending charges
- 5.31 Secured In a single day Financing Price (SOFR), unchanged
- 5.47 LIBOR unchanged w/w (0.10130- 5.47) (graph at hyperlink).
The TED Unfold has been discontinued, and LIBOR is within the technique of being discontinued. On the suggestion of a reader, I’m starting to trace the SOFR as a substitute. Sadly, SOFR has solely been in existence since 2018, so there isn’t a monitor document has to the way it would possibly behave round regular recessions (vs. the pandemic). Over the previous 5 years, it does seem to have matched the development in LIBOR.
However due to its very transient monitor document, though I’ll report it I can’t be together with it in my listing of indicators within the conclusion, a minimum of for now.
Coincident indicators
St. Louis FRED Weekly Economic Index
- Down -0.03 to 2.36 w/w (Low 0.66 Dec 10, 2022 – excessive 2.39 Dec 16, 2023).
After a really constructive 2021, this measure declined to lower than half its greatest YoY stage, thus altering to impartial. It remained in that vary all this yr till two weeks in the past, when it broke above 2.0, altering its score to constructive. Then it declined again into detrimental, earlier than turning again to constructive up to now two months.
Restaurant reservations YoY (from Open Desk) State of the Restaurant Industry | OpenTable (no replace this week)
- December 7 seven day common -3% YoY (Worst this yr -11% 5/11/23).
I’ve been measuring its 7 day common to keep away from every day whipsaws.
Open Desk’s information since early April has usually proven a YoY% decline within the vary from -2% to -7%.
Client spending
- Johnson Redbook up +3.6% YoY, 4 week common +4.0% (excessive 10.1% in December 2022; low -0.4% July 13, 2023) United States Redbook Index.
The Redbook index progressively deteriorated from extraordinarily constructive in early 2022 to impartial by the tip of the yr, to detrimental by this summer season, earlier than rebounding up to now few months. After an excellent October, comparisons have pale considerably up to now few weeks. The hyperlink above goes to a 5 yr graph to greatest present the comparability.
Transport
Railroads (from the AAR)
- Carloads up +6.5% YoY
- Intermodal items up +8.6% YoY
- Whole hundreds up +7.6% YoY
(Graph at Railfax Report – North American Rail Freight Traffic Carloading Report.)
Transport transport
- Harpex unchanged at 810 (810– 4586) (24 month low)
- Baltic Dry Index down -324 to 2087 (530-2937) (graph at hyperlink).
Rail information has been very risky this yr, with numerous volatility from constructive to detrimental and again once more. This week they had been constructive once more.
Harpex backed off all the best way to new lows earlier this yr. BDI traced the same trajectory, rebounding sharply earlier this yr after which retreating simply as sharply, and stays detrimental – till final week, when it elevated sharply to a 1 yr+ excessive This week it declined once more, however stays constructive.
I’m cautious of studying an excessive amount of into value indexes like this, since they’re closely influenced by provide (as in, an enormous overbuilding of ships within the final decade) in addition to demand.
Metal manufacturing ( American Iron and Steel Institute)
- Up +1.0% w/w
- Up +8.8% YoY (worst -10.0% Dec 2, 2022).
In spring 2022, this metric turned detrimental, however the YoY comparisons progressively improved. It usually and progressively improved this yr, and has been constructive now for a lot of months.
Client inflation by Truflation (Independent, economic & financial data in real time on-chain)
- Down -0.19% to +2.76% YoY (Excessive 6.71% 12/24/22 – Low 2.11% 7/14/23).
This latest addition is a every day replace to inflation, just like the “billion costs undertaking” of the final decade (which required a subscription). I’ve not added this to my listing under of coincident or main indicators, however for sure it’s an up-to-the-moment studying on this crucial indicator.
Abstract And Conclusion
Under are this week’s spreadsheets of the lengthy main, brief main, and coincident readings. Test marks point out the current studying. If there was a change this week, the prior studying is marked with an X:
| Lengthy main Indicators | Optimistic | Impartial | Damaging | |
|---|---|---|---|---|
| Company bonds | ✓ | |||
| 10 yr Treasury | ✓ | |||
| 10 yr-2 yr Treasury | ✓ | |||
| 10 ry. – 3 mo. Treasury | ✓ | |||
| 2-yr – Fed funds | ✓ | |||
| Mortgage charges | ✓ | |||
| Buy Mtg. Apps. | ✓ | |||
| Refi Mtg Apps. | ✓ | |||
| Actual Property Loans | ✓ | |||
| Actual M1 | ✓ | |||
| Actual M2 | ✓ | |||
| Company Earnings | ✓ | |||
| Adj. Fin. Circumstances Index | ✓ | |||
| Leverage Index | ✓ | |||
| Totals: | 3 | 3 | 8 | |
| Brief Main Indicators | Optimistic | Impartial | Damaging | |
|---|---|---|---|---|
| Credit score Unfold | ✓ | |||
| Miller Rating | ✓ | |||
| St. L. Fin. Stress Index | ✓ | |||
| US$ Broad | ✓ | |||
| US$ Main currencies | ✓ | |||
| Whole commodities | ✓ | |||
| Industrial commodities | ✓ | |||
| Inventory costs | ✓ | |||
| Regional Fed New Orders | ✓ | |||
| Preliminary jobless claims | ✓ | |||
| Short-term staffing | ✓ | |||
| Gasoline costs | ✓ | |||
| Oil costs | ✓ | |||
| Gasoline Utilization | ✓ | |||
| Totals: | 5 | 4 | 5 | |
| Coincident Indicators | Optimistic | Impartial | Damaging | |
|---|---|---|---|---|
| Weekly Econ. Index | ✓ | |||
| Open Desk | ✓ | |||
| Redbook | ✓ | |||
| Rail | ✓ | X | ||
| Harpex | ✓ | |||
| BDI | ✓ | |||
| Metal | ✓ | |||
| Tax Withholding | x | ✓ | ||
| TED (deleted) | ||||
| LIBOR (deleted) | ||||
| Monetary Cond. Index | ✓ | |||
| Totals: | 6 | 0 | 3 | |
The rate of interest parts of the lengthy main indicators have begun to enhance. Company earnings are impartial, and credit score circumstances have turned constructive. The lengthy main conclusion continues to be “much less dangerous.”
Brief main measures stay very combined. Manufacturing stays detrimental, as do most housing metrics, however however the additional decline in gasoline costs stays constructive. As indicated in textual content, commodity costs low in contrast with a yr in the past is generally a detrimental, however within the post-pandemic period most likely mirror a provide rebound, therefore really constructive. This can be altering as industrial commodities agency.
Coincident indicators proceed very constructive. I believe the sudden YoY decline in tax withholding is an artifact of year-end funds.
To total take stays because it was final week: the bond and inventory markets have each sounded the “all clear,” however the items manufacturing a part of the economic system just isn’t taking part at this level.