Weekly High Frequency Indicators: Short-Term Forecast Worsens

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New Deal Democrat


  • High frequency indicators can give us a nearly up-to-the-moment view of the economy.
  • The metrics are divided into long leading, short leading, and coincident indicators.
  • The short-term forecast continues to worsen, but the long-term forecast, while slightly negative, looks like it may make a bottom.


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 also are 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's scored positively if it's within the top 1/3 of that range, negative in the bottom 1/3, and neutral in between. Where it's not seasonally adjusted, and there are seasonal issues, waiting for the year-over-year change to change sign will lag the turning point. Thus I make use of a convention: Data is scored neutral if it's 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's 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's scored neutral if it's moving in the right direction and is close to making a new high.

Recap of monthly reports

January data was headlined by very negative industrial production, the worst in nearly a decade. CPI was flat, while PPI declined slightly. Industrial production.

Meanwhile, in late December data, retail sales absolutely bombed!

Long leading indicators

Interest rates and credit spreads


  • BAA corporate bond index 4.92% down -.04% w/w (1-year range: 4.15 - 5.29)
  • 10-year Treasury bonds 2.65% down -.01% w/w (2.44 - 3.24)
  • Credit spread 2.27% down -.03% w/w (1.56 - 2.46)

Yield curve, 10-year minus two-year:

  • 0.16%, up +.02% w/w (0.04 - 1.30)

30-year conventional mortgage rate (from Mortgage News Daily)

  • 4.45%, down -0.04% w/w (4.43 - 5.05)

BAA Corporate bonds and Treasury bonds are negative. The spread between corporate bonds and Treasuries has risen above 2.10% and so also is negative. Mortgage rates fell below 4.6% and so are neutral, as is the yield curve.


Mortgage applications (from the Mortgage Bankers Association)

  • Purchase apps +2% w/w to 237 (214 - 268) (SA)
  • Purchase apps 4 wk avg. 242 (SA)
  • Purchase apps YoY +3% (NSA)
  • Purchase apps YoY 4 wk avg. -3% (NSA)
  • Refi apps +6% w/w (SA)

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

Real Estate Loans (from the FRB)

  • Up less than +0.1% w/w
  • Up +3.7% YoY ( 2.7 - 6.5)

Refi has recently been at or near 20-year lows, although with a decline in mortgage rates, had a nice pop. Purchase applications made new expansion highs last spring. During summer they declined through neutral to negative, then rose into positive, before turning negative again in December. With lower rates, for three weeks applications surged to an eight-year high, bringing this indicator back up to positive. But in the last three weeks, it returned to neutral.

With the re-benchmarking of the last year, the growth rate of real estate loans changed from neutral to positive. It went back above +3.25%, and so went back from neutral to positive.

Money supply


  • -0.7% w/w
  • +2.4% m/m
  • +3.1% YoY Real M1 (-0.7 - 3.8)


  • <+0.1% w/w
  • +0.3% m/m
  • +2.9% YoY Real M2 (0.9 - 3.1)

Since 2010, both real M1 and real M2 were resolutely positive. Both decelerated substantially in 2017. Real M2 growth fell below 2.5% earlier this year and has thus been rated negative. Real M1 briefly turned negative about two months ago, then rebounded, then was negative for two weeks. In the last two months both M1 and M2 have turned securely positive.

Credit conditions (from the Chicago Fed)

  • Financial Conditions Index down -.03 (looser) to -0.85
  • Adjusted Index (removing background economic conditions) down -.05 (looser) to -0.66
  • Leverage subindex +.03 (less loose) 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. Late last year, the leverage subindex turned up to near neutral, then turned more positive.

Short leading indicators

Trade weighted US Dollar

  • Up +0.94 to 127.15 w/w, +7.7% YoY (last week) (broad) (115.19 -129.13)
  • Down -0.36 to 96.55 w/w, +7.4% year-over-year (major currencies)

The US dollar briefly spiked higher after the US presidential election. Both measures had been positives since last summer, but recently the broad measure turned neutral, followed more recently by the measure against major currencies. As of three weeks ago, both are negative.

Commodity prices

Bloomberg Commodity Index

  • Up +1.16 to 82.12 (76.27 - 91.94)
  • Down -7.4% year-over-year

Bloomberg Industrial metals ETF (from Bloomberg)

  • 119.77 up +4.65 w/w, down -13.0% year-over-year (106.51 - 149.10)

Commodity prices surged higher after the 2016 presidential election. Both industrial metals and the broader commodities indexes both declined to very negative in the past year. Industrial metals had improved enough to be scored neutral last week, but are back to negative this week.

Stock prices S&P 500 (from CNBC)

  • Up +0.6% to 2792.67 (new 3 month high)

Stock prices last made a new all-time high at the end of September last year. As of the end of 2018, having not made a new high in three months, while having made a new 52-week low on Christmas Eve, their rating changed to negative. Today they made a new three-month high. With both three-month highs and lows in the last three months, their rating is now neutral.

Regional Fed New Orders Indexes

(*indicates report this week)

The regional average is more volatile than the ISM manufacturing index, but usually correctly forecasts its month-over-month direction. It was "very" positive for most of last year. Since last summer it gradually cooled to weakly positive. As of this week, it has declined to neutral.

Employment metrics

Initial jobless claims

  • 216,000 down -23,000
  • Four-week average 235,750 up +4,000

Initial claims had generally been very positive for over a year. In November they briefly spiked, and have done so again in the past three weeks, the worst of which was probably connected to the government shutdown, particularly via contractors.

Because it's both higher year-over-year, and more than 10% above its low point, I'm mechanically changing its rating for purposes of this exercise to neutral, but I suggest this be taken with a big grain of salt until the big spike three weeks ago is no longer in the four-week average.

Temporary staffing index (from the American Staffing Association)

  • Unchanged at 94 w/w
  • Down -0.5% YoY

This index was positive with a few exceptions all during 2017. It was negative for over a month at the beginning of 2018, but returned to a positive since for most the year. In the last three months it gradually declined, turning neutral in the last month, and finally turning negative for the last two weeks.

Tax Withholding (from the Department of the Treasury)

  • $206.2 B for the last 20 reporting days vs. $199.9 B one year ago, up +6.3 B or +3.2%
  • 20-day rolling average adjusted for tax cut (prorated at .25 of +$4 B): up +$7.3 B or +3.7%

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 tax cuts started in February of last year.

I have been adjusting based on Treasury Department estimates of a decline of roughly $4 billion over a 20-day period. This is the final week of a four-week phase out of this adjustment. Beginning next week, year-over-year comparisons should be valid again.

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

  • Oil up +$1.43 to $57.17 w/w, down -9.4% YoY
  • Gas prices up +$.04 to $2.32 w/w, down -$0.24 YoY
  • Usage four-week average down -0.4% YoY

The price of gas bottomed three years ago at $1.69. Generally prices went sideways with a slight increasing trend in 2017 and 2018. In the last three months, however, prices have plummeted. This is a negative for the oil patch, but a positive for consumers, so the rating changes from neutral to positive. Usage was positive YoY during most of 2018, but turned negative again in the last two months, before turning positive again in the past two weeks.

Bank lending rates

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. Earlier this year the TED spread has whipsawed between being positive or negative, but more recently was very positive. It has risen again recently, but is still positive.

Coincident indicators

Consumer spending

Both the Retail Economist and Johnson Redbook Indexes generally improved from weak to moderate or strong positives during 2017 and remained positive all last year. The Retail Economist measure decelerated in the past few months. Last week it decelerated enough to change to neutral, but rebounded this week and so is positive again. Johnson Redbook has fallen sharply from briefly being 9%+ YoY three weeks ago. If it falls to 3.5% or below, it will rate a neutral, but for now is still positive.


Railroads (from the AAR)

  • Carloads down -3.9% YoY
  • Intermodal units down -2.1% YoY
  • Total loads down -3.0% YoY

Shipping transport

Rail was generally positive during 2017 with the exception of some of autumn. In 2018, after some weakness in January and February, it remained positive until autumn, when It weakened precipitously, probably due to tariffs. It rebounded strongly in the last month, until the last three weeks, when it declined to negative YoY as to carloads. It's thus mixed or neutral.

Harpex made multi-year lows in early 2017, and after oscillating improved to new multi-year highs earlier this year, but has now fallen enough to rate negative. BDI traced a similar trajectory, and made three-year highs near the end of 2017, and at mid-year hit multi-year highs, but has since declined all the way to negative now.

I'm 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 (from the American Iron and Steel Institute)

  • Down -0.6% w/w
  • Up +3.8% YoY

Steel production was generally positive in 2017. It turned negative in January and early February of 2018, but with the exception of three weeks recently has been positive since then. For the last two weeks the year-over-year comparison abruptly declined to less than 1/2 of it recent range over 10% year-over-year and so is changed to a neutral.

Summary And Conclusion:

Among the long leading indexes, Real M1 and M2, real estate loans, the Chicago Fed Adjusted Financial Conditions Index and the Leverage subindex are positives. The yield curve and mortgage rates are neutral. Treasuries, corporate bonds, and refinance applications are negative, joined this week by purchase mortgage applications.

Among the short leading indicators, the only positives are the Chicago National Conditions Index and oil and gas prices (note that I'm weighting the benefit to consumers more than the distress to the Oil Patch). Initial jobless claims are neutral, joined this week by stock prices and the regional Fed new orders indexes. Both measures of the US dollar, the general commodity index, the spread between corporate and Treasury bonds, industrial metals, and temporary staffing are negative, joined this week by gas usage.

Among the coincident indicators, consumer spending, tax withholding, and the TED spread are positive. Steel is neutral. LIBOR, the Baltic Dry Index, Harpex, and rail are negative.

The short-term forecast turned sharply negative last week, and slightly more this week, even though stocks moved back from negative to neutral. The coincident nowcast has returned from negative to neutral. The long-term forecast shaded slightly to negative as well this week, although with the improvement in interest rates and real money supply, it looks like this segment wants to bottom.

Once again I caution that the effects of the government shutdown may be temporarily skewing the data to the downside. If so, I expect a recovery in the next couple of weeks.

This article was written by

New Deal Democrat profile picture
New Deal democrat As a professional who started an individual investor for almost 30 yeas ago, I quickly focused on economic cycles and the order in which they typically proceed. I have been writing about the economy for nearly 15 of those years, developing several alternate systems that include mid-cycle, long leading, short leading, coincident, lagging and long lagging indicators. I also focus particularly on their effects on average working and middle class Americans.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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