I look at the high frequency weekly indicators because while they can be very noisy, they provide a good nowcast 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.
A Note on Methodology
Data is presented in a “just the facts, ma’am” format with a minimum of commentary so that bias is minimized.
Where relevant, 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.
A few items (e.g., Financial Conditions indexes, regional Fed indexes, stock prices, the yield curve) have their own metrics based on long-term studies of their behavior.
Where data is seasonally adjusted, generally it is scored positively if it is within the top 1/3 of that range, negative in the bottom 1/3, and neutral in between. Where it is not seasonally adjusted, and there are seasonal issues, waiting for the YoY change to change sign will lag the turning point. Thus I make use of a convention: data is scored neutral if it is less than 1/2 as positive/negative as at its 12-month extreme.
With long leading indicators, which by definition turn at least 12 months before a turning point in the economy as a whole, there is an additional rule: data is automatically negative if, during an expansion, it has not made a new peak in the past year, with the sole exception that it is scored neutral if it is moving in the right direction and is close to making a new high.
For all series where a graph is available, I have provided a link to where the relevant graph can be found.
Recap of monthly reports
October data consisted of the University of Michigan consumer confidence survey, which showed further declines as to both present conditions and sentiment about the future.
Long leading indicators
Interest rates and credit spreads
- BAA corporate bond index 6.33%, down -0.18% w/w (1-yr range: 5.28-6.80)
- 10-year Treasury bonds 4.62%, up +0.05% w/w (3.30-4.93)
- Credit spread 1.71%, down -0.23% w/w (1.71-2.42) (new 12 month low).
- 10 year minus 2 year: -0.43%, down -0.16% w/w (-1.07 – -0.17)
- 10 year minus 3 month: -0.80%, up +0.04% w/w (-1.89 – 0.21)
- 2 year minus Fed funds: -0.28%, up +0.21% w/w.
30-Year conventional mortgage rate (from Mortgage News Daily) (graph at link)
- 7.56%, up +0.18% w/w (6.07-8.03).
With the new highs in interest rates a past month ago, their rating reversed from neutral to negative. The short end of the interest rate curve has been varying between neutral and negative, and is negative again now. Both of the other spreads remain inverted and thus negative.
Mortgage applications (from the Mortgage Bankers Association)
- Purchase apps up +3% to 129 (125-260) (SA) (new 28 year low)
- Purchase apps 4 wk avg. down -2 to 128 (SA) (new low 128 this week)
- Purchase apps YoY -20% (NSA)
- Purchase apps YoY 4 wk avg. -21% (NSA)
- Refi apps up +2% w/w (SA)
- Refi apps YoY down -7% (SA)
*(SA) = seasonally adjusted, (NSA) = not seasonally adjusted
(Graph at https://www.yardeni.com/pub/mortgageapprate.pdf.)
Real Estate Loans (from the FRB)
- Down less than -0.1% w/w
- Up +5.2% YoY (5.2% – 12.1%) (new 12 month low).
Mortgage rates, like bond yields, recently made multi-decade new highs. Additionally, purchase mortgage applications in the past month sank to repeated new long term lows. Refinancing has turned neutral YoY, but that is basically because it was almost non-existent one year ago, and is still almost non-existent.
Real estate loans turned ever more positive during 2022. This was helped by inflation in house prices. This indicator declined by 1/3rd from its peak YoY% change in August, turning neutral, and last week sank below 6.0%, the last housing indicator to turn negative.
The Federal Reserve has discontinued this weekly series. Data is now only released monthly. September data was released two weeks ago:
- M1 m/m down -0.7%, YoY Real M1 down -14.1%
- M2 m/m down -0.3%, YoY Real M2 down -7.3%.
No recession has happened without a YoY real M1 negative, or YoY real M2 below +2.5%. Real M2 fell below that threshold in March 2022. Real M1 also turned negative as of May 2022.
- Q3 92% actual +8% estimated up +0.56 to 58.92, up +6.5% q/q (NEW ALL TIME HIGH).
FactSet estimates earnings, which are replaced by actual earnings as they are reported, and are updated weekly. The “neutral” band is +/-3%. I also average the previous two quarters together, until at least 100 companies have actually reported. This rating recently changed from negative to neutral, and two weeks ago, as profits made a new all time high, changed to positive.
Credit conditions (from the Chicago Fed) (graph at link)
- Financial Conditions Index down -0.2 (looser) to -0.36 (-0.03 – -0.62)
- Adjusted Index (removing background economic conditions) down -.03 (looser) to -0.33 (+0.16 – -0.59)
- Leverage subindex unchanged (tight) at +0.14 (+1.61 – -0.35).
In these indexes, lower = better for the economy. 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. The leverage index had improved from negative to neutral, but has now retreated back to negative. The adjusted index had improved beyond its breakeven point, briefly turning positive before reverting to neutral as well. The unadjusted index had also moved close enough to its breakeven point to turn neutral, but reverted to negative last week.
Short leading indicators
Economic Indicators from the late Jeff Miller’s “Weighing the Week Ahead”
- Miller Score (formerly “C-Score”): up +5 w/w to 309, +48 m/m (154 9/22/23 – 315 on 3/15/23)
- St. Louis Fed Financial Stress Index: down -0.2209 to -0.5559 (1.5746 3/23/23 – -.7854 7/28/23) St. Louis Fed Financial Stress Index
- BCIp from Georg Vrba: up +6.4 to 29.1 as of 10/19/23 iM’s Business Cycle Index (100 is max value, below 25 is recession signal averaging 20 weeks ahead).
The Miller Score is designed to look 52 weeks ahead for whether or not a recession is possible. Any score over 500 means no recession. This number fell below that threshold at the beginning of August 2021, so not only is it negative, but we are now well into the “recession eligible” time period.
The St. Louis Financial Stress index is one where a negative score is a positive for the economy, and during its limited existence, has risen above zero before a recession by less than one year. It did so in December, and then again briefly in March, but almost immediately decreased back below zero again and stayed there.
The BCIp, deteriorated sharply earlier this year below its recession-signaling threshold, but then improved sufficiently so that IM rescinded the recession signal. Last week, it went back below the “25” recession warning threshold, but improved above it this week. IM has updated its accompanying text to say that it “is again trending towards a recession signal.”
Trade weighted US$
- Down -1.79 to 122.23 w/w, down -3.8% YoY (last week) (broad) (118.06 – 128.31) (Graph at Nominal Broad U.S. Dollar Index
- Up +0.69 to 105.79 w/w, down -0.5% YoY (major currencies) (graph at link) (100.79-114.78).
Ever since 2021, both measures of the US$ were well above +5% higher YoY, and so negative. Recently, both declined into the neutral range, and in the past several months, both turned positive.
Bloomberg Commodity Index
- Down -3.62 to 101.61 (97.95 5/31/23-118.14)
- Down -13.1% YoY (Best: +52.3%; worst -25.3%).
Bloomberg Industrial metals ETF (from Bloomberg) (graph at link)
- 137.04, down -1.53 w/w (136.32 8/15/23-179.68)
- Down -9.6% YoY (Best +69.0% May 7, 2022).
During the Boom of 2021, commodity prices soared, and total commodities were very positive. Both indexes are now in the bottom 1/3rd of their 12 month range, so both are negative. (Note, importantly, that because this particular decline in commodity prices may reflect increased supply rather than destruction of demand, the message of a nearly -10% YoY decline may have been very different from usual.)
Stock prices S&P 500 (from CNBC) (graph at link)
Stocks made several new 3 month highs and even a new 12+ month high earlier this year, including at the end of July. But since then, not only has there been no new 3 month high, but there have been several new 3 month lows, including as recently as last week. Thus as of one week ago – despite the big upward move – the signal of this indicator is now negative.
Regional Fed New Orders Indexes
(*indicates report this week)(no reports this week)
- Empire State down -4.2 to -9.3
- Philly up +14.6 to +4.4
- Richmond down -7 to -4
- Kansas City down -8 to -22
- Dallas down -3.6 to -8.8
- Month-over-month rolling average: down -1 to -8.
The regional average is more volatile than the ISM manufacturing index, but usually correctly forecasts its month-over-month direction. Since spring 2022, these gradually declined to neutral and then negative. Recently they became “less negative,” but last month’s readings were generally slightly lower.
Initial jobless claims
- 217,000, down -3,000 w/w
- 4-week average 212,250, up +1,500 w/w.
(Graph at St. Louis FRED.)
In spring, revisions caused major changes in this index. The 4 week average had been higher by 5% or more YoY for most of this year, but not at levels which have in the past triggered a “recession warning.” In the past month things have improved considerably, and with the four week average less than 5% higher YoY, this metric has changed to neutral.
Temporary staffing index (from the American Staffing Association) (graph at link).
- Down -1 to 100 w/w
- Down -7.2% YoY.
This was extremely positive at the end of 2021. During 2022, the comparisons at first slowly and then more sharply deteriorated, and by early this year had turned negative. After improving somewhat, in the past two months the YoY comparisons have faded again, and now it is close to its worst reading of the year.
Tax Withholding (from the Department of the Treasury)
- $246.5 B for the last 20 reporting days this year vs. $231.8 B one year ago, +$14.7 B or +6.3%.
YoY comparisons peaked in Q1 2022. Since summer, it has oscillated between neutral and positive, and was negative on a monthly basis several times. Since the first of the year, these have generally turned positive. That was not the case for the month of April, but in May it turned back positive, and on a 20 day basis it has been near its best level in 12 months for the last few months.
Oil prices and usage (from the E.I.A.)
- Oil down -$3.89 to $77.28 w/w, up +0.8% YoY ($66.74 – $98.62)
- Gas prices down -.07 to $3.40 w/w, down -$0.40 YoY
- Usage 4-week average up +1.6% YoY (no report this week; will resume next week).
Gas and oil prices both remain in the middle 1/3rd of their 3 year range, and so are neutral. Mileage driven turned negative for 5 weeks before turning positive last week.
Note: given this measure’s extreme volatility, I believe the best measure is against their 3 year average. Measuring by 1 year, both are positive.
Bank lending rates
- 5.32 Secured Overnight Financing Rate (SOFR) up +.01
- 5.44 LIBOR unchanged w/w (0.10130- 5.45) (graph at link).
The TED Spread has been discontinued, and LIBOR is in the process of being discontinued. At the suggestion of a reader, I am beginning to track the SOFR instead. Unfortunately, SOFR has only been in existence since 2018, so there is no track record has to how it might behave around normal recessions (vs. the pandemic). Over the past 5 years, it does appear to have matched the trend in LIBOR.
But because of its very brief track record, although I will report it I will not be including it in my list of indicators in the conclusion, at least for now.
St. Louis FRED Weekly Economic Index
- Down -0.16 to 2.07 w/w (Low 0.66 Dec 10, 2022 – high 2.41 Oct. 21, 2022).
After a very positive 2021, this measure declined to less than half its best YoY level, thus changing to neutral. It remained in that range all this year until two weeks ago, when it broke above 2.0, changing its rating to positive. Then it declined back into negative, before turning back to positive in the past few weeks.
Restaurant reservations YoY (from Open Table) State of the Restaurant Industry | OpenTable
- October 26 seven day average -3% YoY (Worst this year -11% 5/11/23).
I have been measuring its 7 day average to avoid daily whipsaws.
Open Table’s data indicate that by early April reservations had stabilized at slightly below zero YoY, and they have generally faded from -2% to -7% since.
- Johnson Redbook up +3.1% YoY, 4 week average +4.4% (high 10.3% in November 2022; low -0.4% July 13, 2023) United States Redbook Index.
The Redbook index remained positive almost without exception since the beginning of 2021 until last October. The new link I have added above goes to a 5 year graph to best show the comparison. After 3 weeks of negative readings, the 4 week average returned to positive for the past 3 months, and one week ago had its best reading since last winter.
Railroads (from the AAR)
- Carloads down -5.2% YoY
- Intermodal units up +1.5% YoY
- Total loads down -1.7% YoY.
- Harpex down -28 to 845 (845– 4586) (new 12 month low)
- Baltic Dry Index up +213 to 1598 (530-2071) (graph at link)
Rail carloads turned positive early in 2021, before gradually fading to negative from August through the end of the year and the beginning of this year. The total loads index has been consistently negative for the past five months. In the past several months, comparisons have hovered near the zero line, varying between neutral and negative. This week they were mixed again.
Harpex increased to near record highs again early in 2022, but has since backed off all the way to new lows. BDI traced a similar trajectory, rebounding sharply earlier this year and then retreating just as sharply, and remains negative.
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.
Steel production (American Iron and Steel Institute)
- Down -0.5% w/w
- Up +6.6% YoY (worst -10.0% Dec 2, 2022).
Since the end of March 2021, against terrible comparisons, this metric had been positive, typically running at a double digits higher YoY percentage growth. In spring 2022, it turned negative, but the YoY comparisons gradually improved. It finally improved to positive for about two months, before turning negative again for a short time. It remains positive this week.
Consumer inflation by Truflation (Independent, economic & financial data in real time on-chain).
- Up +1.00% to +3.53% YoY (High 9.71% 10/15/22 – Low 2.11% 7/14/23).
Thanks to a commenter for bringing this indicator to my attention. This is a daily update to inflation, similar to the “billion prices project” of the last decade (which required a subscription). I have not added this to my list below of the status of coincident or leading indicators, but needless to say it is an up-to-the-moment reading on this very important indicator.
Summary And Conclusion
Below are this week’s spreadsheets of the long leading, short leading, and coincident readings. Check marks indicate the present reading. If there has been a change this week, the prior reading is marked with an X:
|Long leading Indicators||Positive||Neutral||Negative|
|10 year Treasury||✓|
|10 yr-2 yr Treasury||✓|
|10 ry. – 3 mo. Treasury||✓|
|2 yr – Fed funds||✓|
|Purchase Mtg. Apps.||✓|
|Refi Mtg Apps.||✓|
|Real Estate Loans||✓|
|Adj. Fin. Conditions Index||✓|
|Short Leading Indicators||Positive||Neutral||Negative|
|St. L. Fin. Stress Index||✓|
|US$ Major currencies||x||✓|
|Regional Fed New Orders||✓|
|Initial jobless claims||✓|
|Weekly Econ. Index||✓|
|Financial Cond. Index||✓|
As for a long time now, the long leading indicators remain negative, with only corporate profits being positive. On a quarterly basis, credit conditions as measured by the Senior Loan Officer Survey got “less bad” as well. Interest rates, housing, and money supply remains relentlessly negative.
Both short leading and coincident measures are neutral. Despite interest rates, general financial conditions remain neutral. Commodities are also neutral, and the further decline in gas prices is an outright positive. Despite their big rebound, for now stock prices remain a negative. Finally, YoY consumer spending and tax collections remain very positive, while the very sensitive discretionary restaurant spending remains negative.
Overall the data is consistent with a weakly positive economy. As I wrote last week, it will be interesting to see if the recent further downturn in gas prices comes to the economy’s rescue again.