Saturday, July 7, 2018

Weekly Indicators for July 2 - 6: long term forecast continues to deteriorate


 - by New Deal democrat

June data started out with another strong jobs report, but once again with weak wage growth. Motor vehicle sales and both the ISM manufacturing and nonmanufacturing indexes were very positive as well.  
May data included and increase in construction spending and factory orders.
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, and will telegraph the maintenance or change in the economy well before monthly or quarterly data is available. They are also an excellent way to "mark your beliefs to market."
In general I go in order of long leading indicators, then short leading indicators, then coincident indicators.
NOTE that I include 12 month highs and lows in the data in parentheses to the right. All data taken from St. Louis FRED unless otherwise linked.
Interest rates and credit spreads
  • BAA corporate bond index 4.79% down -.05% w/w (1 yr range: 4.15 - 4.94) 
  • 10 year treasury bonds 2.82% down -.04% w/w (2.05 - 3.11) 
  • Credit spread 1.97% down -.01% w/w (1.56 - 2.30)
Yield curve, 10 year minus 2 year:
  • 0.28%, down -0.05% w/w (0.28 - 1.30) (new expansion low)
  • 4.69%, up +0.03% w/w (3.84 - 4.79) 
BAA Corporate bonds remain neutral. If these go above 5%, they will become a negative. Mortgage rates and treasury bonds are still both negatives. The spread between corporate bonds and treasuries has now gone above 1.85%, and so I have switched it from positive to neutral. The only remaining positive is the yield curve, and if that declines to +0.25%, that too will become a neutral.
Housing
  • Purchase apps down +1% to 244 w/w (225 - 262)
  • Purchase apps 4 week avg. -2 to 248
  • Purchase apps YoY -1%, 4 week YoY avg. +1%
  • Refi app down -2% w/w
  • Up +.1% w/w 
  • Up +3.8% YoY ( 3.3 - 6.5) (re-benchmarked, adding roughly +0.5% to prior comparisons) 
Refi has been dead for some time. Purchase applications were strong almost all last year, began to falter YoY in late December, but rebounded during spring, ultimately making new expansion highs. The 4 week average declined from the peak enough to qualify as neutral for most of the past month, including this week. If it drops below 240 and is negative YoY, it will become a negative.
With the re-benchmarking of the last year, the growth rate of real estate loans changed from neutral to positive. If the YoY rate falls below +3.25%, I will downgrade back to neutral.
Money supply
M1
  • -0.1% w/w 
  • -0.7% m/m 
  • -0.8% Real M1 last 6 months
  • +0.9% YoY Real M1 (0.9 - 6.9) (new expansion low) 
M2
  • +0.1% w/w 
  • +0.5% m/m 
  • +1.9% 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 negative. Real M1 growth this week was again below 3.5% YoY, and again on a 6 month basis was negative, so real M1 overall is scored as neutral. Note that it is less than 1% above the point where it will turn outright negative.
Credit conditions (from the Chicago Fed)
  • Financial Conditions Index up +0.03 to -0.78
  • Adjusted Index (removing background economic conditions) up +.02 to -0.51
  • Leverage subindex up +.05 to -0.26 (2 year high)
The Chicago Fed's Adjusted Index's real break-even point is roughly -0.25. In the leverage index, a negative number is good, a positive poor. The historical breakeven point has been -0.5 for the unadjusted Index. All three metrics presently show looseness and so are positives for the economy; HOWEVER, in the last two months, leverage has turned up by roughly +0.2 to a two year high.
Trade weighted US$ 
  • Up +0.15 to 124.12 w/w +2.3% YoY (last week) (broad) (116.42 -128.62) 
  • Down -0.49 to 94.00 w/w, -2.08% YoY (yesterday) (major currencies
The US$ appreciated about 20% between mid-2014 and mid-2015. It went mainly sideways afterward until briefly spiking higher after the US presidential election. Both measures had been positives since last summer, but in the last month the broad measure turned neutral.

Commodity prices
Bloomberg Commodity Index
  • Up +0.68 to 86.21 (81.67 - 91.94)
  • Up +5.38% YoY
  • 124.23 down -5,81 w/w, up +9.28% YoY (112.03 - 149.10) 
Commodity prices bottomed near the end of 2015. After briefly turning negative, metals also surged higher after the 2016 presidential election. The overall commodity index (which includes oil) is neutral. Industrial metals had been strongly positive and recently made a new high, but have declined significantly in the past several weeks, enough to change their rating to neutral.
  • Up +1.5% w/w at 2759.82 
After being neutral for several months, by an ever-so-slight margin stock prices made a new 3 month high on June 12, and so have returned to being positive.
Regional Fed New Orders Indexes
(*indicates report this week) (no reports this week)
The regional average has been more volatile than the ISM manufacturing index, but has accurately forecast its month over month direction. After being very positive for most of this year, it has moderated slightly in the last few weeks.
Employment metrics
Initial jobless claims
  • 231,000 up +4.000
  • 4 week average 224,500 up +2,500 
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 back on its multi-year pace. 

  • Unchanged at 97 w/w
  • Up +1.1% YoY
This index was generally neutral from May 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 returned to a positive since then.
  • $181.0 B for the last 20 reporting days vs. $184.2 B one year ago, down -$3.2 B or -1.7%
  • 20 day rolling average adjusted for tax cut [+$4 B]: up +$0.8 B or +0.4%
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 makes it too noisy to be of real use.
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 down -$0.46 to $73.93 w/w, up +61.1% YoY
  • Gas prices up +$.01 to $2.84 w/w, up $0.58 YoY 
  • Usage 4 week average up +1.2% 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 trend in 2017. Usage turned negative in the first half of 2017, but has almost always been positive since then. The YoY change went back above 40% recently, so the rating has turned negative.
Bank lending rates
  • 0.429 TED spread down -0.028 w/w 
  • 2.010 LIBOR up +0.001 w/w (tied for new expansion high)
Both TED and LIBOR rose in 2016 to the point 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 whipsawed between being positive or negative. This week it was positve.

Consumer spending 
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
  • Carloads up +0.7 YoY
  • Intermodal units up +8.5% YoY
  • Total loads up +4.6% 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 when 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 near the end of 2017, declined early this year, but recently has hit multiyear highs.
I am wary of reading too much into price indexes like this, since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as well as demand.
  • Up +0.5% w/w
  • Up +1.9% 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 three weeks recently has been positive since then. 
SUMMARY: 
Among the long leading indicators, the Chicago Fed Adjusted Financial Conditions Index,  real estate loans, and the yield curve remain positives -- but the the Chicago Fed Financial Leverage Index, while still positive, is significantly less so than in the last two years. Corporate bonds, credit spreads,mortgage rates, and real M1 are neutral, rejoined this week by purchase mortgage applications. Real M1 is on the cusp of turning negative. Treasuries, refinance applications, and real M2 are all negative.
Among the short leading indicators, the regional Fed new orders indexes, the Chicago National Conditions Index, jobless claims, stock prices (just barely), and staffing are all positive. Gas prices, the commodities indexes, and the spread between corporate and Treasury bonds are neutral. The US$ is mixed. Oil prices are strongly negative.
Among the coincident indicators, positives include consumer spending, Harpex, and rail, steel, the TED spread, and tax withholding. The Baltic Dry Index also turned positive this week.  LIBOR remains negative.
As has been the case for many months, both the nowcast and the short term forecast remain positive. Manufacturing in particular is doing very well. 
The longer term forecast, however, led by real M1, the yield curve, the credit spread,  purchase mortgage applications, and now one financial conditions index, continues to deteriorate. The first three are all very close to downgrades.  About a month ago the deterioration was enough to downgrade the forecast from positive to neutral. *IF* this trend continues, it is within the range of reasonable possibility that the forecast turns negative within the next month.
Have a nice weekend!

Friday, July 6, 2018

June jobs report: another strong late cycle reading


 - by New Deal democrat


HEADLINES:
  • +213,000 jobs added
  • U3 unemployment rate up +0.2% from 3.8% to 4.0%
  • U6 underemployment rate up +0.2% from 7.6% to 7.8%
Here are the headlines on wages and the broader measures of underemployment:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now:  up +75,000 from 5.183 million to 5.258 million   
  • Part time for economic reasons: down -205,000 from 4.948 million to 4.743 million
  • Employment/population ratio ages 25-54: up +0.1% from 79.2% to 79.3% (tied for expansion high)
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.04 from  $22.58 to $22.62, up +2.7% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)      
Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  
  • Manufacturing jobs rose +36,000 for an average of +24,000/month in the past year vs. the last seven years of Obama's presidency in which an average of 10,300 manufacturing jobs were added each month.   
  • Coal mining jobs rose +100 for an average of +100/month vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month
April was revised upward by 16,000. May was also revised upward by 21,000, for a net change of 37,000.   

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.
  • the average manufacturing workweek rose 0.1 hour from 40.8 hours to 40.9 hours.  This is one of the 10 components of the LEI.
  •  
  • construction jobs increased by 13,000. YoY construction jobs are up 282,000.  
  • temporary jobs increased by 9300. 
  •  
  • the number of people unemployed for 5 weeks or less increased by 193,000 from 2,034,000 to 2,227,000.  The post-recession low was set one month ago.
Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime rose 0.1 hour from 3.5 hours to 3.6 hours.
  • Professional and business employment (generally higher-paying jobs) increased by 50,000 and  is up 521,000 YoY.

  • the index of aggregate hours worked for non-managerial workers rose by 0.2%.
  •  the index of aggregate payrolls for non-managerial workers rose by 0.3%.     
Other news included:            
  • the  alternate jobs number contained  in the more volatile household survey increased by  132,000  jobs.  This represents an increase of 2,326,000 jobs YoY vs. 2,374,000 in the establishment survey.      
  •      
  • Government jobs increased by 11,000.       
  • the overall employment to population ratio for all ages 16 and up was unchanged at 60.4%  m/m and is up 0.3% YoY.          
  • The labor force participation rate rose 0.2% from 62.7%  m/m to 62.9% and is 0.1% YoY  

SUMMARY

This was another very good report, with the exception of wages. The majority of the leading components rose, as did employment in the most economically sensitive blue-collar industries.

The unemployment and underemployment rates rose, but that was only because participation in the labor force rose strongly.

There were only a couple of weak points. Although they remain very positive, the number of new, higher-paying professional and business jobs as been fading slightly over the past year. Involuntary part time employment, which fell significantly last year, has not made any progress since early this year.  And of course, wages remain problematic. Nominal wage growth for non-managerial workers has been rising YoY, but so has inflation. In real terms, non-managerial wages are doing no better than treading water.

I continue to view the recent wage reports as a run of good numbers that were telegraphed by strong short leading indicators late last year, but nevertheless consistent with a late cycle.

Thursday, July 5, 2018

At the start of the second half, all clear in the near term


 - by New Deal democrat

Second half data has started out continuing to be positive.

On Monday, the ISM manufacturing index continued to be very strong. Of note, the new orders subindex, which leads the overall number, remains above 60 (h/t Briefing.com):



This tells me that manufacturing should remain very positive, at least for the next few months.

On Tuesday, motor vehicle sales continued at roughly 17 million vehicles at an annualized rate (h/t Calculated Risk):



This series tends to plateau during expansions, and start to decline significantly in the year before a recession. If it were to fall to 16 million or below, I would be concerned. I'm not now.

This morning, initial jobless claims were reported at 231,000. This was -8.0% below the equivalent date last year:



Initial claims go neutral YoY before rising YoY into a recession. So for the short term, these are also forecasting growth.

Finally, for a note of some caution, here is the "quick and dirty" short term indicator of initial claims (blue, inverted) and stock prices (red, right scale):



Both of these have been going more or less sideways since February (stocks did ever so slightly make a new 3 month high in mid-June). It's not the first time this has happened during the expansion -- take a look at late 2016 -- but it does suggest there might be a slowdown before the end of the year, something that the long leading indicators were forecasting one year out at the end of last year.  And of course, a full-scale trade war could upend this analysis pretty quickly.

But for now, the signs are all clear for continued short term positivity. 

Wednesday, July 4, 2018

On July 4, a consideration of Dred Scot


 - by New Deal democrat

On a 4th of July on which the President has expressed open longing for a lifetime term, and murmurings that a significant share of enlisted men in the military would be willing to overturn the Constitutional order should he call on them to do so, I'm not too interested in empty sloganeering celebrations.

With the obvious exception of African slaves, the Constitution was a very forward looking document for most people when it was adopted. But the Founders could not anticipate every shortcoming, and some of them are so entrenched that it would be nearly impossible to obtain the required supermajority to change them. How many saeculums must such shortcomings be sacrosanct against the will of the majority? 

For example, in nearly every country that adopted the Madisonian Presidential system, the result has been a degeneracy into Presidential dictatorships. The only counterexamples are some hybrid systems like France which have both Presidents and Prime Ministers. I never cast a vote for a Presidential (vs. Parliamentary) system. Did you?

Meanwhile, in our own country, in two of the last five Presidential elections, the popular vote loser has been crowned the winner. I never signed up for the Electoral College. Did you? Even so, if 200 years ago, the Congress had placed the Florida panhandle in Alabama, and the upper peninsula of Michigan in Wisconsin, both Al Gore and Hillary Clinton would have won. I never agreed that such accidents of history should be so dispositive. Did you? Have votes on such been held in our lifetimes, or indeed the last three or four lifetimes?

Which brings me to Dred Scot. When I was a kid, I was taught that the Dred Scot decision held that negro slaves had no rights. . But it was actually much, much worse. For, as I learned, the Supreme Court invalidated the Missouri Compromise. I was never taught what that really meant. What the Supreme Court said was that the Congress did not have the power to regulate slavery within the Territories. Thus it could not force a Territory to enter the Union as a free State. Worse, the reasoning openly invited the interpretation that States couldn't forbid slavery, either. If a slaveowner took his slaves from, say, Alabama to Massachusetts, then Massachusetts was bound to respect his contract rights of ownership in the slave.

Beyond that, there was political meddling in the handling of the case between President-elect Buchanan and several members of the Court. Buchanan wanted the matter settled before he assumed office, so that he could just throw up his hands and declare himself helpless. Taney's correspondence openly indicated that he wanted the to settle the matter of slavery for all time, in favor of the South.

In the 1800s, lifespans being what they were, the average Supreme Court only served about 10 years on the Court. The new Republican party adopted on its platform that slavery should not be extended to any new States. The method by which such progress would be made was one Justice's funeral at a time. Needless to say, that wasn't how it happened.

As a kid, I was taught that the passage of the Thirteenth, Fourteenth, and Fifteenth Amendments meant that Congress took over from the States the protection of civil rights in the country, the States having obviously proven inadequate to the task. Fundamentally, I think that is exactly the correct interpretation. 

Each of the three Amendments contains a section that states, "The Congress shall have power to enforce this article by appropriate legislation." In reaction to Dred Scot, this explicit grant to Congress is a direct rebuke to the Courts. In other words, even if the Courts do not believe that a particular form of protection is necessary, or that it steps on the previously granted rights of the States, the Congress has the power to Act for such protection anyway. This fundamental truth was marginalized and ignored by the Roberts Court in the Shelby County case.

On July 4, 2018, we find ourselves on the precipice of a Court which, with the begrudging acceptance that slavery is not permissible, seems bent upon returning us to the jurisprudence of 1857. 

Tuesday, July 3, 2018

May residential construction: decelerating trend continues


 - by New Deal democrat

May residential construction was reported yesterday. This series lags permits, starts, and new home sales, but has the virtue of being the least volatile of any housing measure. So let's take an updated look.

The first thing to notice is that the positive trend is continuing:



That being said, there has been noticeable deceleration of that positive trend since the beginning of 2017.

This becomes apparent when we look at the data YoY (blue), and compare with single family permits (red):



Note the tight fit, but that construction spending is much less volatile. Further, residential spending turning negative YoY has been indicative of at very least a slowdown (1994) if not outright recession.

Here is a close-up of the last 6 years:



Based on continued positivity of permits, I'm not expecting residential construction to decelerate further over the near term, but a sideways trend is more likely.

Weekly Indicators for June 25 - 29


 - by New Deal democrat

May data included positive new home sales (with the second highest reading of the entire expansion), a very positive Chicago PMI, and positive personal income and spending. Real personal spending, however, was flat, and durable goods orders declined. Two measures of consumer confidence diverged, with the Conference Board's going higher, but the University of Michigan's going lower.
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, and will telegraph the maintenance or change in the economy well before monthly or quarterly data is available. They are also an excellent way to "mark your beliefs to market."
In general I go in order of long leading indicators, then short leading indicators, then coincident indicators.
NOTE that I include 12 month highs and lows in the data in parentheses to the right. All data taken from St. Louis FRED unless otherwise linked.
Interest rates and credit spreads
  • BAA corporate bond index 4.84% down -.01% w/w (1 yr range: 4.15 - 4.94) 
  • 10 year treasury bonds 2.86% down -.04% w/w (2.05 - 3.11) 
  • Credit spread 1.98% up +.03% w/w (1.56 - 2.30)
Yield curve, 10 year minus 2 year:
  • 0.33%, down -0.01% w/w (0.32 - 1.30) (new expansion low intraweek)
  • 4.66%, down -0.03% w/w (3.84 - 4.79) 
BAA Corporate bonds remain neutral. If these go above 5%, they will become a negative. Mortgage rates and treasury bonds are still both negatives. The spread between corporate bonds and treasuries has now gone above 1.85%, and so I have switched it from positive to neutral. The only remaining positive is the yield curve, and if that declines to +0.25%, that too will become a neutral.
Housing
  • Purchase apps down -6% to 242 w/w 
  • Purchase apps 4 week avg. unchanged at 250
  • Purchase apps YoY +1%, 4 week YoY avg. +3%
  • Refi app down -6% w/w
  • Up +.4% w/w
  • Up +3.8% YoY ( 3.3 - 6.5) (re-benchmarked, adding roughly +0.5% to prior comparisons) 
Refi has been dead for some time. Purchase applications were strong almost all last year, began to falter YoY in late December, but rebounded during spring, ultimately making new expansion highs. The 4 week average declined from the peak enough to qualify as neutral for the last several weeks, but for the last two weeks rebounded to positive.
With the re-benchmarking of the last year, the growth rate of real estate loans changed from neutral to positive. If the YoY rate falls below +3.25%, I will downgrade back to neutral.
Money supply
M1
  • -0.5% w/w 
  • -0.1% m/m 
  • -0.5% Real M1 last 6 months
  • +2.1% YoY Real M1 (1.6 - 6.9) 
M2
  • +0.1% w/w 
  • +0.7% m/m 
  • +1.6% 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 negative. Real M1 growth this week was again below 3.5% YoY, and again on a 6 month basis was negative, so real M1 overall is scored as neutral.
Credit conditions (from the Chicago Fed)
  • Financial Conditions Index unchanged at -0.81
  • Adjusted Index (removing background economic conditions) down -.01 -0.53
  • Leverage subindex up +.03 to -0.31
The Chicago Fed's Adjusted Index's real break-even point is roughly -0.25. In the leverage index, a negative number is good, a positive poor. The historical breakeven point has been -0.5 for the unadjusted Index. All three metrics presently show looseness and so are positives for the economy.
Trade weighted US$ 
  • Up +0.05 to 123.97 w/w +1.5% YoY (last week) (broad) (116.42 -128.62) 
  • Down -0.06 to 94.49 w/w, -1.19% YoY (yesterday) (major currencies
The US$ appreciated about 20% between mid-2014 and mid-2015. It went mainly sideways afterward until briefly spiking higher after the US presidential election. Both measures had been positives since last summer, but in the last three weeks the broad measure turned neutral.

Commodity prices
  • Down -0.47 to 109.10 w/w
  • Up +5.53 YoY 
  • 130.04 down -3.16 w/w, up +14.06% YoY (112.03 - 149.10)
Commodity prices bottomed near the end of 2015. After briefly turning negative, metals also surged higher after the 2016 presidential election. With the exception of one week ago, ECRI has been neutral for many months. On the other hand, industrial metals have been strongly positive and recently made a new high.
  • Down -1.3% w/w at 2718.37 
After being neutral for several months, by an ever-so-slight margin stock prices made a new 3 month high on June 12, and so have returned to being positive.
Regional Fed New Orders Indexes
(*indicates report this week) 
The regional average has been more volatile than the ISM manufacturing index, but has accurately forecast its month over month direction. After being very positive for most of this year, it has moderated slightly in the last few weeks.
Employment metrics
Initial jobless claims
  • 227,000 up +9.000
  • 4 week average 222,000 up +1,000 
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 back on its multi-year pace. 

  • Unchanged at 97 w/w
  • Up +1.3% YoY
This index was generally neutral from May 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 returned to a positive since then.
  • $175.5 B for the last 20 reporting days vs. $164.0 B one year ago, up +$11.5 B or +7.0%
  • 20 day rolling average adjusted for tax cut [+$4 B]: up +$15.5 B or +9.5%
With the exception of the month of August and late November, this was positive for almost all of 2017. It has generally been negative -- but not this week! -- 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 makes it too noisy to be of real use.
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 up +$5.21 to $74.39 w/w, up +61.6% YoY (new 1 year high)
  • Gas prices down -$.04 to $2.83 w/w, up $0.54 YoY 
  • Usage 4 week average down -0.1% 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 trend in 2017. Usage turned negative in the first half of 2017, but has almost always been positive since then. About a month ago, the YoY change went back above 40%, so the rating turned negative.
Bank lending rates
  • 0.457 TED spread up +0.005 w/w 
  • 2.090 LIBOR unchanged w/w (tied for new expansion high)
Both TED and LIBOR rose in 2016 to the point 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 whipsawed between being positive or negative. This week it was positve.
Consumer spending 
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
  • Carloads up +2/5 YoY
  • Intermodal units up +4.9% YoY
  • Total loads up +3.7% 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 when 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 near the end of 2017, declined early this year, but recently has hit multiyear highs.
I am wary of reading too much into price indexes like this, since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as well as demand.
  • Up +1.8% w/w
  • Up +1.4% 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 three weeks (including two weeks earlier this month) has been positive since then. 
SUMMARY: 
Among the long leading indicators, the more leading Chicago Fed Financial Conditions Indexes,  real estate loans, and purchase mortgage applications, and the yield curve remain positives -- but the last two a very close to turning neutral. Corporate bonds, mortgage rates, and real M1 are neutral. Treasuries, refinance applications, and real M2 are all negative.
Among the short leading indicators, industrial metals, the regional Fed new orders indexes, financial leverage, jobless claims, and staffing are all positive, rejoined for the last two weeks by stock prices (just barely). Gas prices, the ECRI commodities index and the spread between corporate and Treasury bonds are neutral. the US$ is mixed. Oil prices are strongly negative.
Among the coincident indicators, positives include consumer spending, Harpex, and rail, steel, the TED spread, and tax withholding. The Baltic Dry Index is neutral. LIBOR remains negative.

As has been the case for many months, both the nowcast and the short term forecast remain positive. Manufacturing in particular is doing very well. The longer term forecast crossed the line ever so slightly from positive to neutral several weeks ago, and deteriorated again very slightly this week.  Only strong credit supply and housing data is keeping this from turning outright negative.