Weekly High Frequency Indicators: Lower Interest Rates Have Not Filtered Through To Most Shorter-Term Metrics

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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.
  • Led by lower interest rates, the long leading indicators have improved.
  • But the short leading and coincident indicators remain weak.


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 are 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 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'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

March data included a decline in consumer sentiment as measured by the University of Michigan. Producer and consumer inflation rose, the latter was due mainly to gas prices.

In February, factory orders declined, and labor market conditions deteriorated.

Long leading indicators

Interest rates and credit spreads


  • BAA corporate bond index 4.71% down -.02% w/w (1-year range: 4.15 - 5.29)
  • 10-year Treasury bonds 2.56% up +.06% w/w (2.40 - 3.24)
  • Credit spread 2.15% down -.08% w/w (1.56 - 2.46)

Yield curve, 10-year minus 2-year:

  • 0.17%, up +.01% w/w (0.04 - 1.30)

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

  • 4.19%, down -0.02% w/w (4.03 - 5.05)

BAA Corporate bonds and treasury bonds remain neutral. The spread between corporate bonds and treasuries is still above 2.10%, and so remains negative. The two- vs. 20-year yield curve is also neutral. Note that I will not change Treasury ratings to positive unless they fall below 4.25%. Mortgage rates fell back below 4.2%, (1/2 of the way to their post-Brexit low) they return to positive from neutral.


Mortgage applications (from the Mortgage Bankers Association)

  • Purchase apps +1% w/w to 278 (214 - 278) (SA) (New one year high)
  • Purchase apps 4 wk avg. 264 (SA)
  • Purchase apps YoY +13% (NSA)
  • Purchase apps YoY 4 wk avg. +7% (NSA)
  • Refi apps -11% w/w (SA)

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

Real Estate Loans (from the FRB)

  • Up less than +0.1% w/w
  • Up +3.3% YoY ( 2.7 - 6.5)

Refi has recently been at or near 20-year lows, although lower rates caused a huge spike in the past two weeks, such that they are now a positive. 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 this year, in most weeks applications have been positive YoY, and in the past three weeks all the way back to positive.

With the re-benchmarking of the last year, the growth rate of real estate loans turned from neutral to positive. This week it rose back above +3.25%, and so improved from neutral to positive.

Money supply


  • -0.1% w/w
  • -1.1% m/m
  • -0.2% YoY Real M1 (-0.7 - 3.8)


  • +0.3% w/w
  • +0.7% m/m
  • +2.3% 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% almost all last year and has thus been rated negative. Real M1 briefly turned negative about three months ago. Both real M1 and M2 then improved all the way to positive for one month, has declined back to negative for the past four weeks after taking March CPI into account.

Corporate profits (estimated and actual S&P 500 earnings from I/B/E/S via FactSet.com)

  • Q4 2018 actual, unchanged w/w at 41.37, down -3.5% q/q
  • Q1 2019 estimated, down -0.15 w/w to 37.09, down -10.3% q/q

I initiated coverage of this metric two weeks ago on an experimental basis. FactSet estimates earnings, which are replaced by actual earnings as they are reported, and are updated weekly. Because estimates are revised as earnings come in, and in any given quarter tend to be revised down over all timeframes by an average of -3%, I'm treating any q/q change in "estimates" of +/-2% as neutral. Further, until 100 companies have reported in any given quarter, I'm only incorporating half of the quarterly change.

Using this metric, averaged Q4 and Q1 corporate earnings are down -6.9% and are negative.

Credit conditions (from the Chicago Fed)

  • Financial Conditions Index up +.01 (less loose) to -0.84
  • Adjusted Index (removing background economic conditions) up +.02 (less loose) to -0.67
  • Leverage subindex down -.03 (looser) to -0.35

The Chicago Fed's Adjusted Index's real breakeven 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 +0.45 to 127.48 w/w, +8.3% YoY (last week) (broad) (115.19 -129.13)
  • Down -0.43 to 96.96 w/w, +8.0% YoY (major currencies)

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

Commodity prices

Bloomberg Commodity Index

  • Up +1.28 to 82.37 (76.27 - 91.94)
  • Down -5.2% YoY

Bloomberg Industrial metals ETF (from Bloomberg)

  • 120.42 down -1.56 w/w, down -10.7% YoY (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 briefly improved enough to be scored neutral for one week, but are back to negative.

Stock prices S&P 500 (from CNBC)

  • Up +0.5% to 2907.41

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. Several weeks ago they made several new three-month highs but made no new three-month lows in the last three months, and thus their rating returned to positive.

Regional Fed New Orders Indexes

(*indicates report this week)(no reports 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. For the last five weeks, it alternated between neutral and, as again this week, weakly positive.

Employment metrics

Initial jobless claims

  • 196,000 down -8,000, new 49-year-low.
  • Four-week average 207,000 down -6,500 (new 49-year-low)

Initial claims had generally been very positive for over a year. In November they briefly spiked and did so again at the end of January, the worst of which was probably connected to the government shutdown. They have recovered since then, and this week made yet another new 49+ year low.

Temporary staffing index (from the American Staffing Association)

  • Unchanged at 93 w/w
  • Down -1.6% 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 five months, it has gradually declined, turning neutral in January and increasingly negative since early February, although it is slightly above its worst YoY reading this week.

Tax Withholding (from the Department of the Treasury)

  • $209.4 B for the last 20 reporting days vs. $213.3 B one year ago, down -3.9 B or -1.8%

With the exception of the month of August and late November, this was positive for almost all of 2017. It was generally negative last year once the effects of the tax cuts started in February.

I have been now phased out the tax law adjustments. Straight YoY comparisons should be valid again. They turned negative this week for the first time since then.

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

  • Oil up +$0.52 to $63.81 w/w, up +4.7% YoY
  • Gas prices up +$.05 to $2.74 w/w, up +$0.05 YoY
  • Usage four-week average up +1.2% YoY

The price of gas bottomed over three years ago at $1.69. Generally, prices went sideways with a slight increasing trend in 2017 and 2018. While at the end of last year, prices plummeted, oil has now gone up YoY, so is neutral. Usage was positive YoY during most of 2016 but has oscillated between negative and positive for the last two months. This week once again it was positive.

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. Early last 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, and for the fifth time in the past seven weeks, has declined to neutral. Johnson Redbook did fall sharply from briefly being 9%-plus at the beginning of this year, improved enough for several weeks to return positive, but for the past two weeks fell back to neutral.


Railroads (from the AAR)

  • Carloads down -3.9% YoY
  • Intermodal units down -1.6% YoY
  • Total loads down -2.8% 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 January, but during February it generally declined to neutral or negative. It was negative again this week. Note that rail traffic, particularly in the western US, is likely impacted by the widening of the Panama Canal, which has allowed ships to bypass West Coast ports and proceed directly to Gulf and East Coast ports.

Harpex made multi-year lows in early 2017, and after oscillating improved to new multi-year highs earlier in 2018, but recently enough to rate negative. In the past two weeks, it has rebounded enough to be neutral. BDI traced a similar trajectory and made three-year highs near the end of 2017, and at midyear 2018 hit multi-year highs. Since then it declined all the way to negative.

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)

  • Up +0.8% w/w
  • Up +7.9% 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. Recently, the YoY comparison abruptly declined to less than 1/2 of its recent range over 10% YoY, and was neutral, and has been varying between neutral and positive since, as it was this week.

Summary And Conclusion:

Among long leading indicators, mortgage rates, purchase and refinance mortgage applications, real estate loans, and the Chicago Fed Adjusted Financial Conditions Index and Leverage subindex are positives. The yield curve, corporate bonds, and treasuries are neutral. Corporate profits and real M1 and M2 are negative.

Among the short leading indicators, stock prices, the Chicago National Conditions Index, initial jobless claims, and the regional Fed new orders indexes are positives. Oil and gas prices are neutral. Both measures of the US dollar, the general commodity index, the spread between corporate and Treasury bonds, industrial metals, gas usage, and temporary staffing are negative.

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

Two weeks ago the long-term forecast improved from neutral to positive. Then last week it returned to just above neutral. This week it improved to positive again. The short-term forecast remains negative. The nowcast also fell back from neutral to negative.

I think too much emphasis is being put on a few short-term indicators by most observers. While interest rates have improved, we still have to get through last year's weakness in the long leading indicators before the improvement filters through.

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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