Weekly High Frequency Indicators: Surprisingly, Consumer Spending Has Continued To Hold Up

October 16, 2020 0 By administrator

Purpose

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

September data included a big increase in retail sales, but a substantial decrease in industrial production. Both consumer and producer prices increased at typical pre-pandemic normal monthly paces. October consumer sentiment as measured by the University of Michigan decreased as to present conditions, but increased as to future expectations.

NEW NOTE: For most indicators I have now added both the weeks of the best and worst readings since the coronavirus crisis began in parentheses following this week’s number. This will tell us whether gains are continuing, leveling off, or whether we are starting to turn back down. This week I added “Best” readings for three more: two measures of commodities, and business formations.

Long leading indicators

Interest rates and credit spreads

Rates

  • BAA corporate bond index 3.39%, down -0.07% w/w (1-yr range: 3.12-5.18)
  • 10-year Treasury bonds 0.74%, down -0.04% w/w (0.54-2.79)
  • Credit spread 2.65%, down -0.03% w/w (1.96-4.31)

(Graph at FRED Graph | FRED | St. Louis Fed )

Yield curve

  • 10 year minus 2 year: +0.60%, down -0.03% w/w (-0.04 – 0.67)
  • 10 year minus 3 month: +0.64%, down -0.03% w/w (-0.04 – 0.70)
  • 2 year…

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