2/24 – Weekly Economic Highlights
The market digested top-tier economic data this week along with a hawkish tone reflected in the minutes from the Federal Reserve’s Open Market Committee meeting on February 1st. Both the headline Personal Consumption Expenditures (PCE) Index and the Core PCE Index (excluding food and energy) accelerated more than expected in January, increasing 0.6% month-over-month. The headline index rose 5.4% and the core index 4.7% year-over-year, exceeding both last month’s increase and consensus expectations. Prices for both goods and services appreciated on a widespread basis. Expenditures on goods were led by motor vehicles and pharmaceuticals, while spending on services was led by rent and food services. The personal savings rate increased to 4.7%, to a seven-month high.
2/17 – Weekly Economic Highlights
This week’s top tier economic data focused on inflation both at the consumer and producer level. The headline Consumer Price Index (CPI) rose 0.5% in January versus the upwardly revised -0.1% reading in December. Inflation increased 6.4% year-on-year, down from 6.5% in December. Core CPI, excluding the volatile food and energy components, increased to 0.4% in January and 5.6% on a year-on-year basis, decelerating from 5.7% in December. Key factors contributing to inflation in January were housing, food, gasoline, and natural gas. Inflation at the producer level rebounded in January above the consensus of market participants. The Producer Price Index (PPI) jumped 0.7% last month and 6.0% year-over-year bolstered by higher energy costs. Core PPI, excluding the volatile food and energy components, rose 0.5% in January and 5.4% year-over-year. Inflation appears to be stickier than many market participants anticipated and remains above the Fed’s target providing another data point for the Fed to continue to increase the federal funds rate at its next meeting.
2/10 – Weekly Economic Highlights
Although economic data was relatively light this week, numerous members of the Federal Reserve including Fed Chief Powell were consistent in their messaging this past week regarding the need for additional rate increases to curtail inflation. Another consistent theme among all Fed members interviewed this week was the strength of last week’s labor market report showing employers added 517,000 workers in January and an unemployment rate of 3.4%, the lowest rate since 1969. Chair Powell in a moderated discussion at the Economic Club of Washington, D.C. referenced the employment report, stating that “it shows you why we think this will be a process that takes a significant period of time.” In addition, Federal Reserve Bank of New York President John Williams at a Wall Street Journal event in New York referenced wage growth, which is above levels necessary to reach the Federal Reserve’s 2% goal for inflation.
2/03 – Weekly Economic Highlights
This morning’s employment report surprised to the upside with 517,000 jobs added to the US economy in January, crushing consensus expectations for 188,000 and pushing the unemployment rate down to 3.4%. Hiring was broad-based across industries with leisure and hospitality, professional and business services, and government hiring leading the gains. In addition, upward revisions for November and December totaled +71,000 jobs. The labor force participation rate ticked up slightly to 62.4%, although still running below the pre-pandemic level of 63.3%. Average hourly earnings declined to 4.4% year-over-year in January from 4.8% year-over-year in December, a sign that a key component of inflation is moderating.
1/27 – Weekly Economic Highlights
Interest rates continue to trade in recently established ranges but did migrate higher over the course of the week, correlated with the generally constructive economic data and next week’s Federal Open Market Committee (FOMC) meeting on February 1st. The advance report on fourth quarter GDP was released on Thursday and moderately surprised to the upside, coming in at 2.9% compared to the consensus estimate of 2.7%, but notably below the widely followed Atlanta Fed GDP Now model which predicted growth of 3.5%. The underlying details of the GDP report were mixed, with household and government spending solid, somewhat offset by a higher-than-expected inventory build, which could be a drag on growth in the first half of 2023. This morning PCE inflation was released and more or less came in at expectations, with the PCE Deflator at 0.1% month-over-month and 5.0% year-over-year, a drop of 0.5% from the prior annualized number, and the PCE Core Deflator coming in at 0.3% month-over-month and 4.4% year-over-year, a drop of 0.3% annualized. Notably, in Chandler’s view, weekly jobless claims remain quite low, most recently at 186k per week, well beneath the 250k caution area. The totality of the recent data remains consistent with an outlook for positive, but below trend growth in the first half of 2023, with the trajectory of the economy not yet approaching stall speed.
1/20 – Weekly Economic Highlights
Market volatility continued this week as investors digested softer economic data. The December Producer Price Index (PPI) confirmed a declining inflation trend, and weak retail sales provided evidence of slower consumer spending and economic growth. Producer prices fell 0.5% month-over-month in December and increased 6.2% year-over-year, decelerating from November’s 7.3% year-over-year increase. The Core Producer Price Index (PPI Ex-Food and Energy) rose just 0.1% for the month and 5.5% year-over-year in December, down from 6.2% year-over-year growth last month. Energy disinflation was the most significant factor in December’s lower numbers, while food prices came down marginally as well. Retail sales dropped 1.1% in December after a downward revision to a 1% decline in November. Retail sales rose 6% year-over-year in December, unchanged from November’s year-over-year gain. Weakness was widespread among core retail and food service sectors. Non-store retailers, motor vehicles, and gasoline all softened as well. Softer inflation and growth data should provide support for a downshift in the magnitude and pace of Fed rate hikes.
1/13 – Weekly Economic Highlights
Market participants focused on December’s Consumer Price Index (CPI) report this week. Headline CPI fell 0.1% in December versus the +0.1% reading in November. Inflation rose 6.5% year-on-year, down from 7.1% in November. Core CPI edged up slightly to 0.3% in December, and to 5.7% on a year-on-year basis, from 6.0% in November. A key factor driving down inflationary pressure this month was a 4.5% drop in energy prices, led by falling gasoline prices. Core goods prices fell 0.3% for the month and in particular, used cars saw a substantial drop along with new-car prices which contracted for the first time in almost two years. Core services prices were up 0.5% for the month driven by increases in shelter and medical-care services. Overall, this was a constructive report on inflation and gives the Federal Reserve room to reduce the pace and magnitude of future federal funds rate hikes. The next meeting of the Federal Open Market Committee (FOMC) will be on February 1st.
1/6 – Weekly Economic Highlights
The U.S. economy added 223,000 jobs in December, slightly higher than market expectations of 203,000, but a decline from November’s revised increase of 256,000. In somewhat of a surprise, jobs in the goods producing sector were up 40,000 in December with an increase of 28,000 in construction, 8,000 in manufacturing, and 4,000 in mining and logging. The unemployment rate dipped to 3.5%, returning to its pre-pandemic level, and lower than the Bloomberg survey of 3.7%. The labor participation rate increased only slightly to 62.3% from 62.1% in November indicating the supply of labor will likely remain a challenge for employers in 2023.
12/30 – Weekly Economic Highlights
As expected at the December 14th meeting, the Federal Open Market Committee (FOMC) raised the fed funds target rate by 50 basis points to a range of 4.25 – 4.50%, in a downshift from four consecutive 75 basis point hikes. The decision was unanimous, and there was no change to the November statement. The sentiment was hawkish, indicating that “ongoing increases” in the fed funds rate are likely appropriate and citing continued labor market imbalances.
12/23 – Weekly Economic Highlights
As expected at the December 14th meeting, the Federal Open Market Committee (FOMC) raised the fed funds target rate by 50 basis points to a range of 4.25 – 4.50%, in a downshift from four consecutive 75 basis point hikes. The decision was unanimous, and there was no change to the November statement. The sentiment was hawkish, indicating that “ongoing increases” in the fed funds rate are likely appropriate and citing continued labor market imbalances.