Weekly Indicators: Manufacturing Fades, But Services Persist

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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

May data included an increase in new home sales, but a decrease in existing home sales. Consumer sentiment as to both the present and the future declined as measured by the University of Michigan.

Coronavirus Vaccinations and Cases

I have discontinued the tracking of vaccinations, since they have virtually come to a halt at roughly 66% of the populace, and 75% of adults, being vaccinated (not counting booster shots). Less than half of children age 5-17 have been vaccinated.

Infections, at 99,900, are roughly 5% lower than last week, even as Ba.2.12.1 is being gradually replaced by Ba.4/5. Deaths remain very low, historically speaking, at 327.

Long Leading Indicators

Interest rates and credit spreads


  • BAA corporate bond index 5.29%, down -0.12% w/w (1-yr range: 3.13-5.48)
  • 10-year Treasury bonds 3.13%, down -0.10 w/w (1.08-3.48)
  • Credit spread 2.16%, down -0.02 w/w (1.65-4.31)

(Graph at FRED Graph )

Yield curve

  • 10-year minus 2-year: +0.08%, up +0.01 w/w (-0.12 – 1.59)
  • 10-year minus 3-month: +1.44%, down -0.16% w/w (-0.99 – 2.04)
  • 2-year minus Fed funds: +1.47%, down -0.86% w/w

(Graph at FRED Graph )

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

  • 5.85%, down -0.18% w/w (2.75-6.28)

Corporate bonds are near the top of their 5-year range, so negative.

Similarly, treasury bonds and mortgage rates are also near 5 or even 10-year peaks, so their rating has also changed to negative.

The spread between corporate bonds and Treasuries remains positive. The yield curve at the important 2- to 10-year levels is back into neutral territory.


Mortgage applications (from the Mortgage Bankers Association)

  • Purchase apps up +8% w/w to 245 (210-349) (‘SA’)
  • Purchase apps 4 wk avg. up +5 to 227 (SA) (341 high Jan 29, low 214 6/10/22)
  • Purchase apps YoY -10% (‘NSA’)
  • Purchase apps YoY 4 wk avg. -14% (‘NSA’)
  • Refi apps down -3% w/w (‘SA’)
  • Refi apps YoY down -77% (‘SA’)

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

(Graph at https://www.yardeni.com/pub/mortgageapprate.pdf )

Real Estate Loans (from the FRB)

  • Up +0.2% w/w
  • Up +7.8% YoY (-0.9 – 8.0)

(Graph at Real Estate Loans, All Commercial Banks | FRED | St. Louis Fed )

The highest mortgage rates in 12 years have pretty much killed both purchase and refinance mortgage applications, the four week averages of which are at or close to 6- and 20-year lows, respectively. We have seen this feed into all of the monthly housing sales and construction reports.

From 2018 until late in 2020 real estate loans with few brief exceptions stayed positive. Earlier last year they varied between neutral and negative, but for the past several months have been very positive. This is being helped by inflation in house prices; thus the turn in the indicator will be when that cools.

Money supply

The Federal Reserve has discontinued this weekly series. Data is now only released monthly. April data was released four weeks ago:

  • Real M1 m/m down -0.8%, YoY Real M1 up +0.7%
  • Real M2 m/m down -0.7%, YoY Real M2 down -0.2%

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, and is a negative. Real M1 has also made a 9 month low, and so moves from positive to neutral. Taken together real money supply has become a negative.

Corporate profits (Q1 actual & Q2 estimated S&P 500 earnings from I/B/E/S via FactSet at p. 27)

  • Q1 2022, unchanged at 54.02, down -2.5% q/q (from 55.37 in Q4)
  • Q2 2022 estimated down -.01 to 55.52, up 2.8% q/q

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, which has now happened for Q1. Now that we are in the last month of the quarter, I am also included Q2 estimates in the average. Profits are now within the -3/+3% q/q metric, and so are neutral.

Credit conditions (from the Chicago Fed) (graph at link)

  • Financial Conditions Index up +.08 (less loose) to -0.18 (-0.17 – -0.72)
  • Adjusted Index (removing background economic conditions) up +0.11 (tight) to +0.08 (+0.08 – -0.75) (new two-year high)
  • Leverage subindex up +.19 (more tight) to +0.49 (+0.69 – -0.39)

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. Leverage is also near 10-year highs, making it a negative.

Short Leading Indicators

Economic Indicators from the late Jeff Miller’s “Weighing the Week Ahead”

  • Miller Score (formerly “C-Score”): down -53 w/w to 117, -115 m/m (117 this week – 564 on 7/2/21)
  • St. Louis Fed Financial Stress Index: down -0.0828 to -1.5881 (-0.2562 12/3/21 – -1.6510 6/10/22)
  • BCIp from Georg Vrba: down -3.5 to 96.5 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. With this number having fallen below that threshold last year, it is negative. (It’s relentless decline had mainly been a function of soaring gas prices and very low weekly unemployment claims; that has now been joined by several significant Fed rate hikes).

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. Thus the present reading is also a positive for the economy.

Trade weighted US$

In early 2021, both the broad rating and the USD against major currencies turned higher YoY, and so changed to neutral. With both measures now well above +5% YoY, these ratings are negative.

Commodity prices

Bloomberg Commodity Index

  • Down -5.47 to 121.31 (79.11-135.43)
  • Up +31.2% YoY (Best: +52.3% June 4)

(Graph at BCOM | Bloomberg Commodity Index Overview | MarketWatch )

Bloomberg Industrial metals ETF (from Bloomberg) (graph at link)

  • 157.83, down -11.09 w/w (131.43-230.32)
  • Up +2.3% YoY (Best +69.0% May 7)

During the Boom last year, commodity prices soared. Total commodities are extremely positive, with a recent downturn in the indexes having reversed higher to new highs. This has cooled somewhat again. The decline in industrial metals has put this indicator in the bottom 1/3rd of its 52 week range, and so it is now a negative.

Stock prices S&P 500 (from CNBC) (graph at link)

This last high for this index was January 3. As there has not been a new three month high since then, but there have been ongoing new 3 month and even 1-year lows, so this indicator has been a negative.

Regional Fed New Orders Indexes

(*indicates report this week)

  • Empire State up +14.1 to +5.3
  • Philly down -34.5 to -12.4
  • Richmond down -22 to -16
  • Kansas City down -23 to -8
  • Dallas down -8.9 to +3.2
  • Month-over-month rolling average: down -5 to -6

The regional average is more volatile than the ISM manufacturing index, but usually correctly forecasts its month-over-month direction. These had usually been extremely positive ever since June 2020, but in the last several months have fallen, and precipitously so in the past month. The indicator having now fallen below -5, moves from neutral to negative.

Employment metrics

Initial jobless claims

  • 229,000, down -2,000 w/w
  • 4-week average 223,000, up +4,500 w/w

(Graph at St. Louis FRED)

New claims making new all-time lows on a 4 week average basis seven weeks ago. It remains close to that figure. Although there has been a trend in the last several months slightly higher, this metric remains positive until it fails to make a new 3 month low. It will not turn negative unless and until the 4 week average is higher YoY.

Temporary staffing index (from the American Staffing Association) (graph at link)

  • Unchanged at 106 w/w
  • Up +10.4% YoY

This gradually improved to neutral at the beginning of 2021, and positive since then.

Tax Withholding (from the Dept. of the Treasury)

  • $232.8 B for the last 20 reporting days this year vs. $219.0 B one year ago, +$13.8 B or +6.3%

YoY comparisons turned positive in the beginning of 2021, and have remained that way – usually very strongly so – almost every week since. These are now normally reliable. The YoY% change has fallen below 5% several times in the past few weeks, making it a neutral, but this week it once again rebounded to positive.

Oil prices and usage (from the E.I.A.) *(No update this week)

  • Oil down -$2.47 to $107.43 w/w, up +63.5% YoY
  • Gas prices up +$.13 to $5.01 w/w, up $1.94 YoY (new all-time high)*
  • Usage 4-week average down -1.1% YoY*

(Graphs at This Week In Petroleum Gasoline Section – U.S. Energy Information Administration (‘EIA’) )

Both gas and oil prices remain firm negatives, particularly with gas at all-time highs.

While there is some anecdotal evidence of consumers cutting back on other types of purchases due to the cost of filling up their fuel tank, a hallmark of an oil shock is an overreaction by consumers – and we do not appear to be there at this point.

Bank lending rates

  • 0.637 TED spread up +0.057 w/w (0.02 -.637) (new 2-year high)
  • 1.162 LIBOR up +.054 w/w (0.0753- 1.162) (graph at link) (new multi-year high)

TED was above 0.50 before both the 2001 and 2008 recessions. Since early 2019 the TED spread had remained positive, except the worst of the coronavirus downturn, until earlier this spring. After declining enough last week to go back to neutral, this week it made a new high and is negative again.

The increases since to the Russian invasion of Ukraine, have added more stress. LIBOR has also turned from positive all the way to negative.

Coincident Indicators

St. Louis FRED Weekly Economic Index

  • Up +1.03 to +3.57 w/w (+2.54 6/17/22 – +10.40 5/29/21)

In the 5 years before the onset of the pandemic, this Index varied between +.67 and roughly +3.00. Just after the Great Recession, its best comparison was +4.63. After a very positive 2021, it declined to less than half its best YoY level, thus changing to neutral.

Restaurant reservations YoY (from Open Table)

  • June 16 seven day average -9% YoY (Best +31% Oct 21)
  • June 23 seven day average +6% YoY (Worst -29% Jan 13)

The comparison year for this metric is 2019 and not 2021. Compared with the depths of the pandemic, in 2021 reservations rebounded to neutral, and even positive for a number of months, before declining back to neutral. During the Omicron tsunami they turned very negative, but in the past several months have improved to neutral.

Note I am now measuring its 7 day average to avoid daily whipsaws.

For some reason, last Sunday saw a big one-day jump in dining around the globe. If the current reading over +5% persists for another week, I will change the rating to positive.

Consumer spending

  • Johnson Redbook up +12.8% YoY (high 21.4% on Dec 28, 2021; low 11.4% June 11,2022)

In April 2020 the bottom fell out in the Redbook index. It has remained positive almost without exception since the beginning of this year. There was never any perceptible change at all due to either the Delta or the Omicron waves.


Railroads (from the AAR)

  • Carloads up +0.4% YoY
  • Intermodal units down -4.9% YoY
  • Total loads down -2.5% YoY (Best +34.0% April 23, 2021)

(Graph at Railfax Report – North American Rail Freight Traffic Carloading Report )

Shipping transport

  • Harpex unchanged at 4461 (1038- 4586) https://harpex.harperpetersen.com/harpexVP.do
  • Baltic Dry Index down -108 to 2354 (1302-5650) (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 three months.

Earlier in 2021 Harpex repeatedly rose to new multiyear highs, before leveling off in October. It declined from that peak, but has increased to near record highs again. Meanwhile, BDI traced a similar trajectory, repeatedly making new multi-year highs. But several months ago, it fell about 75%, warranting a change to negative. It has now rebounded enough to be neutral.

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) (no update this week)

  • Down -1.5% w/w
  • Down -4.7% YoY

Since the end of March 2021, against terrible comparisons, this metric had been positive, typically running at a double digits higher YoY percentage growth. Several months ago, after almost continuous deterioration, it turned negative.

Summary & 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
Corporate bonds
10-year Treasury
10 yr-2 yr Treasury
10 yr-3mo Treasury
2 Yr Treasury-Fed funds
Mortgage rates
Purchase Mtg. Apps.
Refi Mtg Apps.
Real Estate Loans
Real M1
Real M2
Corporate Profits
Adj. Fin. Conditions Index
Leverage Index
Totals: 3 3 8

Short Leading Indicators Positive Neutral Negative
Credit Spread
Miller Score
St. L. Fin. Stress Index
US$ Broad
US$ Major currencies
Total commodities
Industrial commodities X
Stock prices
Regional Fed New Orders X
Initial jobless claims
Temporary staffing
Gas prices
Oil prices
Gas Usage
Totals: 5 1 8

Coincident Indicators Positive Neutral Negative
Weekly Econ. Index
Open Table
Rail X
Tax Withholding X
Financial Cond. Index
Totals: 3 4 4

The long leading forecast continues to be negative, with a “Recession Watch” start time of Q1 of next year. The short term forecast also flipped to negative for the first time this week, driven by several industrial and manufacturing indicators. If this continues, it will suggest that we won’t have to wait beyond Q1 of next year at the latest.

Meanwhile – as I have repeated for the past several weeks – consumer coincident indicators, particularly Redbook consumer spending and restaurant dining, are still holding up. I continue to think that, unless we get a true “oil shock,” the primary economic problem being next year rather than now or the immediate future.

One further note: this expansion has been anomalous in that goods spending soared during the pandemic “work from home” phase. As that has ended, goods spending has sputtered – but services spending has picked up. So the decline in manufacturing and goods production generally might be less of a true indicator right now compared with usual.