10 Things You Need to Know: February 13, 2024
Key data releases this week include: NFIB Small Business Optimism (Tue), CPI (Tue), retail sales (Thu), industrial production (Thu), NAHB Housing Market Index (Thu), housing starts (Fri), consumer sentiment (Fri), and PPI (Fri).
Capital Economics
February 9, 2024
ECB policymakers have continued to push back against the prospect of rate cuts this spring. But they won’t feel bound by that guidance if their assessment of the inflation outlook changes. So, we still think the first cut is most likely to happen in April because we expect inflation to fall to only just over 2% in February and March. But policymakers may still err on the side of caution and wait until June.
Bloomberg
February 8, 2024
Credit investors are betting that Germany’s struggles are more than a temporary blip. Economic stagnation, real estate woes and the highest company distress rate in Europe have left bondholders demanding higher corporate spreads from German firms than they are for the wider euro area. That’s a trend that’s been widening since Russia invaded Ukraine, which sent power prices for the country’s energy-intensive manufacturers soaring.
Capital Economics
February 8, 2024
The upcoming Year of the Dragon will bring some improvements to China’s economy, including an uptick in births, increased fiscal support and a further normalization in consumer behavior. But with the prop from stimulus likely to be short-lived and structural problems still looming large, we think growth will slip further this year.
Barron’s
February 12, 2024
Estimates of the current housing shortage range from 1.5 million to several million units. Those upper estimates aren’t plausible. But even the low estimates represent a severe shortage that will take years to eliminate. New construction is currently running about 1.4 million units at an annual rate, close to growth in underlying demographic demand, but still far short of what’s needed to reduce the shortfall.
Bloomberg
February 12, 2024
Federal Reserve Governor Michelle Bowman repeated that the central bank’s benchmark lending rate is in a good place to keep downward pressure on inflation, and she doesn’t see a need to cut interest rates soon. “As long as economic conditions remain where they are,” Bowman says, “I think that tells me that our policy rate is in the right place.”
Bloomberg
February 8, 2024
Treasury Secretary Janet Yellen said that US regulators are monitoring risks stemming from nonbank mortgage lenders and cautioned that a failure of one of them is possible in the case of market strains. “They’re reliant on short-term financing that may be a lot less stable than deposits, and in stressful times, their credit lines can be pulled,” said Yellen. “There is concern that in stressful market conditions we could see the failure of one of these.”
Financial Times
February 7, 2024
The Congressional Budget Office predicted the US budget deficit will rise over the next 10 years to $2.6 trillion from $1.6 trillion currently. That would increase debt as a percentage of GDP to 6.1% from 5.6% in 2024, above the 3.7% average of the last 50 years.
Bloomberg
February 8, 2024
Investor demand for long-dated debt appears to be holding up. The US government sold $25 billion in 30-year bonds at a lower-than-expected yield Thursday, the largest sale in over two years. It was the last of three Treasury auctions this week. The bonds had a yield of 4.36%, compared with 4.38% just before they went up for sale, indicating higher-than-anticipated demand.
Bloomberg
February 8, 2024
“There are probably more jobs in the economy that are being cut because of AI already than are getting attributed to that or announced. Every time a company mentions it, they get headlines across every news outlet for like a month,” according to outplacement firm Challenger, Gray & Christmas Inc. “They would rather go under the radar most of the time.”