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.
12/16 – 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.
12/09 – Weekly Economic Highlights
Economic data releases were light and bond yields remained volatile this week as market participants positioned their portfolios ahead of next week’s Federal Open Market Committee’s (FOMC) two-day meeting starting next week on December 13th. We believe the FOMC is likely to increase the federal funds rate 0.50% at its December meeting, lifting the target range to 4.25%-4.50%.
12/02 – Weekly Economic Highlights
The market received key updates on the state of the US economy this week; the November employment report was released this morning and indicated that the US economy added 263,000 jobs last month, exceeding the consensus estimate from economists of 200,000. Gains were broad-based across a number of industries, with leisure and hospitality leading the job growth, followed by health care and government (mostly local government), respectively. The unemployment rate was unchanged at 3.7% and the underemployment rate eased to 6.7% in November. A point of interest in the report was the unexpectedly high average hourly earnings jump of 0.6% month-over-month, and 5.1% over the last year, which might have received a boost from severance packages resulting from recent layoffs.
11/23 – Weekly Economic Highlights
Inflation continues to run well above the Fed’s longer-run target of around 2.0%. The Consumer Price Index (CPI) was up 7.0% year-over-year in December, versus up 6.8% year-over-year in November. Core CPI (CPI less food and energy) was up 5.5% year-over-year in December, versus up 4.9% in November.
11/18 – Weekly Economic Highlights
Recent inflation data releases from both the Consumer Price Index (CPI) and Producer Price Index (PPI) have been constructive for market participants, supporting asset prices and adjusting expectations for the future path of monetary policy. Last Thursday, November 10th, CPI was released, and both the headline and core numbers came in moderately below consensus expectations, pushing down the y/y year numbers for both headline and core CPI. The October y/y headline number was 7.7% versus 8.2% y/y in the prior month, and 6.3% y/y for the core number, versus 6.6% in the prior month. The trends in CPI inflation are poised to continue to improve as the elevated readings from November and December in 2021 roll out of the index. The PPI index was released on November 15th and the prints were also below consensus expectations on the headline and core numbers, lowering the y/y trends from the prior month. Both headline and core PPI ticked down 0.4% on a y/y basis to 8.0% and 6.7%, respectively. The PPI, consistent with the CPI, is also poised to benefit from high monthly readings of the prior year rolling out of the index in coming months.