10 Things You Need To Know: January 4, 2023
Key data releases this week include: ISM Manufacturing (Wed), JOLTS Jobs Openings (Wed), FOMC meeting minutes (Wed), ISM Services (Fri), factory orders (Fri), and nonfarm payrolls (Fri).
Bloomberg
December 28, 2022
US pending home sales fell for a sixth month in November to the second lowest on record as higher borrowing costs and an uncertain economic outlook kept many potential buyers out of the market. The National Association of Realtors index of contract signings to purchase previously owned homes decreased 4% last month to 73.9, the lowest outside of the pandemic in data back to 2001. The drop was worse than all estimates in a survey of economists.
Oxford Economics
January 2, 2023
The final manufacturing PMIs for December suggest that the downturn in the eurozone’s industrial activity softened, pointing to a small economic contraction ahead. The survey details show that demand for goods remained weak at the end of 2022, but also signal softening price pressures and easing supply-chain disruptions. A contraction for the manufacturing sector looks inevitable, but the increase in business confidence bodes well for a recovery after the winter’s recession.
Capital Economics
January 3, 2023
The latest surveys suggest that the reopening wave delivered another blow to the economy in December. Services activity looks to have slumped. Industry was not spared, although the hit appears more modest. But a combination of recurrent virus waves, a deepening global downturn and ongoing weakness in the property sector suggest that the economy is likely to remain weak in the coming months.
Barron’s
January 2, 2023
When the yield curve inverted in previous cycles, credit growth slowed sharply, often contracting; this isn’t happening now. And, typically, the fed-funds rate tracks nominal gross-domestic-product growth, he notes. But GDP, measured in current dollars, is up twice as much as the fed-funds median of about 4.4%. The tight credit conditions that precede a recession also are absent.
Barron’s
January 2, 2023
Bears on the economy point to the Fed’s shrinkage of its balance sheet and the corresponding decline in the money supply—portents of past economic downturns. Evercore ISI points out, however, that those measures remain elevated after their huge pandemic-related increases. The M2 money stock is over $21 trillion, versus $15 trillion before Covid-19 struck.
Barron’s
January 2, 2023
Despite 2022’s drops in stock, bond, and home prices, Evercore ISI says consumers’ net worth is $145 trillion, up from a pre-pandemic $115 trillion. And even with the widely advertised decline in average house prices, the Case-Shiller measure of about $300,000 is still way above the $230,000 pre-pandemic level.
Bloomberg
January 3, 2023
A US economic recession is in the cards because of what the Federal Reserve must do to cool inflation, said former New York Fed President William Dudley, but it probably won’t be a severe slowdown. “I don’t think that there’s a big risk of a financial- instability cataclysm that pushes the economy into a deep recession,” he said.
Bloomberg
January 3, 2023
The price of gold notched a six-month high early Tuesday, and analysts believe the rally has further to go in 2023. “In general, we are looking for a price friendly 2023 supported by recession and stock market valuation risks — an eventual peak in central bank rates combined with the prospect of a weaker dollar and inflation not returning to the expected sub-3% level by year-end — all adding support,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Bloomberg
January 3, 2023
A warmer-than-expected start to winter in large parts of the world that could linger for weeks —especially across the US — is easing fears of a natural gas crisis that had been predicted to trigger outages and add to power bills. Gas futures are plummeting on reduced fuel consumption and the weaker outlook. US benchmark prices dropped as much as 12% Tuesday to dip below $4 per million British thermal units for the first time since February.