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Weekly Indicators: Mixed Signals As Data Edges Towards Turning

Trending 1 year ago
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Taking decisions for nan future

BrianAJackson

Purpose

I look astatine nan high wave play indicators because while they tin beryllium very noisy, they supply a bully nowcast of nan economy, and will telegraph nan attraction aliases alteration successful nan system good earlier monthly aliases quarterly information is available. They are besides an fantabulous measurement to "mark your beliefs to market." In general, I spell successful bid of agelong starring indicators, past short starring indicators, past coincident indicators.

A Note connected Methodology

Data is presented successful a "just nan facts, ma'am" format pinch a minimum of commentary truthful that bias is minimized.

Where relevant, I see 12-month highs and lows successful nan information successful parentheses to nan right. All information taken from St. Louis FRED unless different linked.

A fewer items (e.g., Financial Conditions indexes, location Fed indexes, banal prices, nan output curve) person their ain metrics based connected semipermanent studies of their behavior.

Where information is seasonally adjusted, mostly it is scored positively if it is wrong nan apical 1/3 of that range, antagonistic successful nan bottommost 1/3, and neutral successful between. Where it is not seasonally adjusted, and location are seasonal issues, waiting for nan YoY alteration to alteration motion will lag nan turning point. Thus I make usage of a convention: information is scored neutral if it is little than 1/2 arsenic positive/negative arsenic astatine its 12-month extreme.

With agelong starring indicators, which by meaning move astatine slightest 12 months earlier a turning constituent successful nan system arsenic a whole, location is an further rule: information is automatically antagonistic if, during an description , it has not made a caller highest successful nan past year, pinch nan sole objection that it is scored neutral if it is moving successful nan correct guidance and is adjacent to making a caller high.

For each bid wherever a chart is available, I person provided a nexus to wherever nan applicable chart tin beryllium found.

Recap of monthly reports

January information released this week included a higher than expected summation successful user prices, but besides crisp rebounds successful unit income and manufacturing production. Industrial accumulation arsenic a full was unchanged. Housing starts declined again, but permits roseate slightly. The Index of Leading Indicators for nan period declined again.

Long starring indicators

Interest rates and in installments spreads

Rates

  • BAA firm enslaved scale 5.70%, up +0.19 w/w (1-yr range: 3.97-6.59)
  • 10-year Treasury bonds 3.82%, up +0.19 w/w (1.66-4.25)
  • Credit dispersed 1.88%, unchanged w/w (1.76-2.42).

(Graph astatine Moody's Seasoned Baa Corporate Bond Yield | FRED | St. Louis Fed.)

Yield curve

  • 10 twelvemonth minus 2 year: -0.80%, up +0.02% w/w (-0.85 - 1.59)
  • 10 twelvemonth minus 3 month: -1.00%, up +0.09% w/w (-1.17 - 2.04)
  • 2 twelvemonth minus Fed funds: +0.04%, up +0.17% w/w.

(Graph astatine 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity | FRED | St. Louis Fed.)

30-Year accepted owe complaint (from Mortgage News Daily) (graph astatine link).

  • 6.80%, up +0.30% w/w (3.67-7.38).

Although they declined importantly since October, firm bonds stay adjacent nan apical of their 10 twelvemonth range, truthful are negative. The aforesaid applies to agelong word treasury bonds and owe rates, which person rebounded sharply higher successful nan past respective weeks. Corporate enslaved yields, which often highest moreover earlier nan Fed finishes raising rates, look to person already made their high.

While nan dispersed betwixt firm bonds and Treasuries remains positive, 2 of nan 3 of my output curve indicators person now turned negative. The 3rd - 2 twelvemonth minus Fed funds, improved capable to alteration from antagonistic to neutral this week. Only nan Fed costs and 3 period Treasury are not afloat inverted vs. nan remainder of nan curve, wherever nan 6 period Treasury continues to beryllium nan highest yielding maturity.

I should statement that liking rates person not made a caller precocious since October aliases November, depending connected nan metric. At immoderate constituent successful nan adjacent period aliases so, if they proceed to inclination little arsenic they person since then, immoderate aliases each of them whitethorn alteration from "negative" to "neutral."

Housing

Mortgage applications (from nan Mortgage Bankers Association)

  • Purchase apps down -6% w/w to 170 (154-349) (SA)
  • Purchase apps 4 wk avg. down -5 to 183 (SA) (282 precocious Feb 15, debased 158 Nov 25)
  • Purchase apps YoY -43% (NSA)
  • Purchase apps YoY 4 wk avg. -40% (NSA)
  • Refi apps down -13% w/w (SA)
  • Refi apps YoY down -76% (SA).

*(SA) = seasonally adjusted, (NSA) = not seasonally adjusted

(Graph astatine yardeni)

Real Estate Loans (from nan FRB)

  • Up little than +0.1% w/w
  • Up +11.6%YoY (-0.9 - 11.7).

(Graph astatine Real Estate Loans, All Commercial Banks | FRED | St. Louis Fed.)

The highest owe rates successful 12 years killed some acquisition and refinance owe applications, nan 4 week averages of which proceed astatine aliases adjacent to 8 and 20 twelvemonth lows, respectively. On nan different hand, owe rates, for illustration enslaved yields, look to person made their highest for this rhythm successful October, and are getting "less negative."

From 2018 until precocious successful 2020, existent property loans pinch fewer little exceptions stayed positive. Earlier past year, they varied betwixt neutral and negative, but for nan past respective months person been very positive. This is being helped by ostentation successful location prices; frankincense nan move successful nan parameter will beryllium erstwhile that cools. Interestingly, this week for nan first clip successful a agelong time, specified loans really declined slightly.

Money supply

The Federal Reserve has discontinued this play series. Data is now only released monthly. December information was released 3 weeks ago:

  • M1 m/m down -1.3%, YoY Real M1 down -10.1% (40+ twelvemonth low)
  • M2 m/m down -0.7%, YoY Real M2 down -7.7% (60+ twelvemonth low).

No recession has happened without a YoY existent M1 negative, aliases YoY existent M2 beneath +2.5%. Real M2 fell beneath that period past March. Real M1 besides turned antagonistic arsenic of May.

Corporate profits (Q4 estimated + existent S&P 500 net from I/B/E/S via FactSet astatine p. 29)

  • Q4 82% existent + 18% estimated up +0.11 to 53.45 w/w, down -4.0% q/q.

FactSet estimates earnings, which are replaced by existent net arsenic they are reported, and are updated weekly. The "neutral" set is +/-3%. I besides mean nan erstwhile 2 quarters together, until astatine slightest 100 companies person really reported. The cumulative diminution since nan caller Q2 highest is -5.4%. Needless to say, this metric is now a patient negative.

Credit conditions (from nan Chicago Fed) (graph astatine link)

  • Financial Conditions Index down -.08 (looser) to -0.44 (-0.03 - -0.62)
  • Adjusted Index (removing inheritance economical conditions) down -.06 (looser) to -0.49 (+0.16 - -0.59)
  • Leverage subindex down -.08 (less tight) to +0.00 (+0.51 - -0.35).

In these indexes, little = amended for nan economy. The Chicago Fed's Adjusted Index's existent break-even constituent is astir -0.25. It is sufficiently beneath that constituent to warrant its standing alteration to positive. In nan leverage index, a antagonistic number is good, a affirmative poor. The humanities breakeven constituent has been -0.5 for nan unadjusted Index. The leverage scale has been declining successful caller weeks, and this week was unchanged, truthful turns from antagonistic to neutral.

Short starring indicators

Economic Indicators from nan precocious Jeff Miller's "Weighing nan Week Ahead"

  • Miller Score (formerly "C-Score"): up +26 w/w to 201, -31 m/m (125 6/24/22 - 374 connected 2/25/22)
  • St. Louis Fed Financial Stress Index: down -0.1930 to -0.7704 (0.4997 5/27/22 - -.8325 9/16/22)
  • BCIp from Georg Vrba: up to 23.3 iM's Business Cycle Index (100 is max value, beneath 25 is recession awesome averaging 20 weeks ahead).

The Miller Score is designed to look 52 weeks up for whether aliases not a recession is possible. Any people complete 500 intends nary recession. This number fell beneath that period astatine nan opening of August 2021, truthful not only is it negative, but we are now good into nan "recession eligible" clip period.

The St. Louis Financial Stress scale is 1 wherever a antagonistic people is simply a affirmative for nan economy, and during its constricted existence, has risen supra zero earlier a recession by little than 1 year. It did truthful successful December, but nan 4 week mean has subsequently dropped beneath 0, warranting a alteration successful standing backmost to positive.

The BCIp, which remained very affirmative until very recently, deteriorated sharply successful nan past month. It has mostly been beneath its recession-signaling period for complete a month.

Trade weighted US$

  • Up +0.66 to 120.12 w/w, +4.6% YoY (last week) (broad) (114.23 - 128.58) (Graph astatine Nominal Broad U.S. Dollar Index
  • Up +0.29 to 103.85 w/w, up +8.1% YoY (major currencies) (graph astatine link) (94.63-114.78).

In early 2021, some nan wide standing and nan USD against awesome currencies turned higher YoY, and truthful changed to neutral. For a agelong time, some measures were good supra +5% YoY, and frankincense negative. The wide $ is now beneath +5.0% YoY truthful is neutral, but nan $ arsenic against awesome currencies rebounded sharply, truthful is antagonistic again.

Commodity prices

Bloomberg Commodity Index

  • Down -2.15 to 106.53 (103.54-136.61)
  • Down -4.6% YoY (Best: +52.3% June 4).

(Graph astatine BCOM | Bloomberg Commodity Index Overview | MarketWatch.)

Bloomberg Industrial metals ETF (from Bloomberg) (graph astatine link)

  • 163.14, down -1.91 w/w (135.97-327.84)
  • Down -12.2% YoY (Best +69.0% May 7).

During nan Boom of 2021, commodity prices soared, and full commodities were very positive. Total commodities (which see oil) are successful nan little 1/3rd of their range, truthful are negative. Industrial metals person besides declined into nan bottommost 1/3rd of their 52 week range, truthful person besides turned negative.

Stock prices S&P 500 (from CNBC) (graph astatine link)

  • Down -0.3% to 4079.09.

Since January 3 of past year, location person been ongoing caller 3 period and moreover 1 twelvemonth lows. Last week we made a caller 3 period high, but location has been nary 3 period caller low, truthful nan standing of this parameter improves from neutral to positive.

Regional Fed New Orders Indexes

(*indicates study this week)

  • *Empire State up +23.3 to -7.8
  • *Philly down -2.7 to -13.6
  • Richmond down -20 to -24
  • Kansas City down -2 to -8
  • Dallas up +7.0 to -4.0
  • Month-over-month rolling average: up +4 to -13.

The location mean is much volatile than nan ISM manufacturing index, but usually correctly forecasts its month-over-month direction. These had usually been highly affirmative ever since June 2020, but since past spring, gradually declined to neutral and past negative. They are very antagonistic now.

Employment metrics

Initial jobless claims

  • 194,000, down -1,000 w/w
  • 4-week mean 189,500, up +500 w/w.

(Graph astatine St. Louis FRED.)

New claims made caller all-time lows connected a 4 week mean successful April. Once this metric grounded to make a caller 3 period low, its standing changed to neutral. It will not move antagonistic unless and until nan 4 week mean is higher YoY. Instead, successful nan past fewer weeks it made a caller 8 period low, truthful this metric turned affirmative again.

Temporary staffing scale (from nan American Staffing Association) (graph astatine link).

  • Up +1 to 102 w/w
  • Down -1.2% YoY.

This gradually improved to neutral astatine nan opening of 2021, and has been affirmative since then. There is simply a awesome woody of seasonality successful nan numbers, which typically emergence slow passim nan twelvemonth isolated from for definite vacation periods. The comparisons successful nan past respective months person deteriorated sharply, and past week for this first clip having turned antagonistic YoY, person turned antagonistic for standing purposes arsenic well.

Tax Withholding (from nan Dept. of nan Treasury).

  • $277.4 B for nan past 20 reporting days this twelvemonth vs. $265.1 B 1 twelvemonth ago, +$12.3 B aliases +4.6%.

YoY comparisons turned affirmative successful nan opening of 2021, remained that measurement until a short clip ago. The YoY% alteration fell beneath 5% respective times since summer, past rebounded, and oscillated betwixt neutral and affirmative for respective months. As nan 20 time mean picked up sharply since nan first of nan year, these person turned very positive. It is noteworthy that since nan opening of this fiscal twelvemonth connected October 1, aggregate taxation withholding is only hardly supra zero.

Oil prices and usage (from nan E.I.A.)

  • Oil down -$3.46 to $76.34 w/w, down -1.8% YoY ($71.46 - $123.70)
  • Gas prices down -$.05 to $3.39 w/w, unchanged YoY
  • Usage 4-week mean down -3.2% YoY.

(Graphs astatine This Week In Petroleum Gasoline Section - U.S. Energy Information Administration (EIA)).

Gas prices are successful nan mediate 1/3rd of their 3 twelvemonth range, and truthful person returned to neutral. Oil is besides successful nan mediate of its 3 twelvemonth range, and truthful it remains neutral. It does look that some person made their emblematic wintertime bottoms.

Mileage driven remains negative.

Note: With state and lipid prices truthful volatile successful nan past 12 months, I judge nan champion measurement is against their 3 twelvemonth average. Measuring by 1 year, some person turned positive.

Bank lending rates

  • 0.236 TED spread down -0.038 w/w (0.02 -.685)
  • 4.60 LIBOR up +0.03 w/w (0.10130- 4.601) (graph astatine link)(new 12 period high).

TED was supra 0.50 earlier some nan 2001 and 2008 recessions. Since early 2019 nan TED dispersed had remained positive, isolated from nan worst of nan coronavirus downturn, until this spring. It has been very choppy recently, varying betwixt neutral and negative. It has declined good beneath that level, and has turned positive.

LIBOR has been expanding consistently good into its antagonistic range.

Coincident indicators

St. Louis FRED Weekly Economic Index

  • Down -0.05 to +0.93 w/w (+0.77 1/27/23 - +6.16 2/19/22).

After a very affirmative 2021, this measurement declined to little than half its champion YoY level, frankincense changing to neutral. I will proceed to dainty it arsenic neutral unless nan number turns negative.

Restaurant reservations YoY (from Open Table)

  • February 9 7 time mean -1% YoY (Best +% Jan. 5, 2023)
  • February 16 7 time mean +1% YoY (Worst -29% Jan 13, 2022).

Last twelvemonth nan metric gradually improved to neutral, and for 1 week, positive. It has precocious been very volatile. This week it was somewhat supra zero, truthful neutral.

Note I americium now measuring its 7 time mean to debar regular whipsaws.

Consumer spending

The Redbook scale remained affirmative almost without objection since nan opening of 2021 until October. With 2 exceptions nan past 8 weeks person been nan lowest YoY comparisons successful galore months. The caller nexus I person added supra goes to a 5 twelvemonth chart to champion show nan comparison.

I precocious downgraded this metric to neutral. After rebounding sharply for respective weeks, past week fell to yet different caller 22 period low, and nan 4 week mean is besides adjacent a 2 twelvemonth low.

Transport

Railroads (from the AAR)

  • Carloads down -1.6% YoY
  • Intermodal units down -10.2% YoY
  • Total loads down -6.2% YoY.

(Graph astatine Railfax Report - North American Rail Freight Traffic Carloading Report.)

Shipping transport

  • Harpex down -26 to 1065 (1065-4586) harperpetersen (new 18 period low)
  • Baltic Dry Index down -73 to 530 (530-3369) (graph astatine link) (3 twelvemonth low).

Rail carloads turned affirmative early successful 2021, earlier gradually fading to antagonistic from August done nan extremity of nan twelvemonth and nan opening of this year. The full loads scale has been consistently antagonistic for nan past 4 months. In nan past respective months, comparisons person hovered adjacent nan zero line, varying betwixt neutral and negative. This week they were neutral again.

Harpex accrued to adjacent grounds highs again early successful 2022, but has since backed disconnected each nan measurement to caller lows. BDI has traced a akin trajectory, warranting a alteration to negative.

I americium wary of reference excessively overmuch into value indexes for illustration this, since they are heavy influenced by proviso (as in, a immense overbuilding of ships successful nan past decade) arsenic good arsenic demand.

Steel production (American Iron and Steel Institute)

  • Up +0.5% w/w
  • Down -5.2% YoY (worst -10.0% Dec 2, 2022).

Since nan extremity of March 2021, against unspeakable comparisons, this metric had been positive, typically moving astatine a double digits higher YoY percent growth. This past spring, aft almost continuous deterioration, it turned negative, and has remained so. The YoY comparisons person improved considerably successful nan past fewer weeks. If it should amended to supra -5.0% YoY, that would warrant a standing alteration to neutral.

Summary And Conclusion

Below are this week's spreadsheets of nan agelong leading, short leading, and coincident readings. Check marks bespeak nan coming reading. If location has been a alteration this week, nan anterior reference is marked pinch an X:

Long Leading Indicators Positive Neutral Negative
Corporate bonds
10 twelvemonth Treasury
10 yr-2 yr Treasury
10 yr-3mo Treasury

2 yr- Fed funds

X
Mortgage rates
Purchase Mtg. Apps.
Refi Mtg Apps.
Real Estate Loans
Real M1
Real M2
Corporate Profits
Adj. Fin. Conditions Index
Leverage Index X
Totals: 2 2 10
Short Leading Indicators Positive Neutral Negative
Credit Spread
Miller Score
St. L. Fin. Stress Index
US$ Broad
US$ Major currencies
Total commodities
Industrial commodities
Stock prices
Regional Fed New Orders
Initial jobless claims
Temporary staffing
Gas prices
Oil prices
Gas Usage
Totals: 4 3 7
Coincident Indicators Positive Neutral Negative
Weekly Econ. Index
Open Table X
Redbook
Rail
Harpex
BDI
Steel
Tax Withholding
TED
LIBOR
Financial Cond. Index
Totals: 3 3 5

Three months agone I went from "Recession Watch" to "Recession Warning," arsenic each 3 of my superior systems are accordant pinch a near-term aliases imminent recession.

Holiday distortions successful nan play information are now gone. On nan 1 hand, respective liking complaint agelong starring indicators are connected nan cusp of moving from antagonistic to neutral, though they aren't location yet. Additionally, layoffs person been truthful debased that first claims person besides rebounded to positive.

On nan different hand, user spending arsenic measured by Redbook and impermanent staffing person continued to slow worsen.

I fishy this past week's unit income jump was owed to quirks of Holiday seasonality successful nan monthly January data, arsenic it followed 2 months of crisp declines, which is precisely what happened 1 twelvemonth ago. Meanwhile nan monthly CPI continues to beryllium dominated by nan very lagging measurement of shelter prices, arsenic good arsenic by state value fluctuations.

This article was written by

New Deal Democrat floor plan picture

New Deal politician As a master who started an individual investor for almost 30 yeas ago, I quickly focused connected economical cycles and nan bid successful which they typically proceed. I person been penning astir nan system for astir 15 of those years, processing respective alternate systems that see mid-cycle, agelong leading, short leading, coincident, lagging and agelong lagging indicators. I besides attraction peculiarly connected their effects connected mean moving and mediate people Americans.

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga



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