Deutsche Bank’s Joseph LaVorgna is out with a list of five U.S. economic indicators he’s watching closely at the moment.
Lavorgna picks these indicators because of their their strong correlation with overall economic activity and also because they are subject to small revisions if at all.
“This is instrumental to gauging the health of the economy, because such top tier economic indicators as nonfarm payrolls, retail sales and GDP are oftentimes susceptible to massive revisions,” he writes.
Here are the five indicators and what they’re telling us about the economy:
- The manufacturing ISM survey: At 52.7, Q1 manufacturing ISM is down from the previous two quarters but is up from Q2 2013.
- Unit motor vehicle sales: March unit motor vehicle sales were up significantly from the previous month and this kept the Q1 rate unchanged from the previous quarter, “which is impressive in light of how weak the quarter started. The story has been similar for jobless claims and tax receipts.”
- Initial jobless claims: The 4-week moving average of initial claims is at 320k, which is close to its post-recession low. Over winter we saw “a weather-related bugle.”
- Employee tax withholding receipts: “The gains in tax receipts suggest nonfarm payrolls are likely to continue to be revised higher in the near-term.”
- The Fed’s Senior Loan Officer Survey (SLOS): LaVorgna focuses on three series within this report. The one that measures lending standards on commercial and industrial (C&I) loans continue to ease, but they haven’t on residential mortgages. Over the past three months, C&I loans have grown at a 16% annualized rate, a post recession high. The third series he watches gauges banks’ willingness to lend to consumers, and this “remains elevated, which is a positive for future spending, especially big-ticket items such as vehicles.”
Bottomline: These indicators suggest the economy is improving.