Succinct Summation of the Week’s Events:
Positives,
1)The initial February UoM consumer confidence index rose 1.5 pts m/o/m to 66.4 and that was above the estimate of 65. All of the gain was driven by the Current Conditions component which was up by 4.2 pts while Expectations fell .4 pts. One year inflation expectations rebounded by 3 tenths to 4.2% after 3 months of declines m/o/m and compares with 4.4% in December. Longer term inflation expectations were unchanged at 2.9%. The UoM said “Overall, high prices continue to weigh on consumers despite the recent moderation in inflation, and sentiment remains more than 22% below its historical average since 1978. Combined with concerns over rising unemployment on the horizon, consumers are poised to exercise greater caution with their spending in the months ahead.” Also, “Rising asset values supported gains in sentiment for some parts of the population. Consumers with large stock holdings reported higher sentiment this month, particularly in how they currently assess their personal finances. In contrast, the recent news of the layoffs in the tech sector contributed to some declines in sentiment for consumers in the West region, with little effect in other parts of the country.”
2)The Atlanta Fed’s January Wage Growth Tracker saw a 6.1% y/o/y rise, the same pace as in December. For perspective, in the 20 yrs leading into Covid, this figure averaged 3.5%. If you were a ‘job switcher’, you saw a wage gain of 7.3% y/o/y vs 7.7% in December and that compares with the 20 yr pre Covid average of 3.8%. ‘Job stayers’ saw a wage rise of 5.4% vs the 20 yr average of 3.3% and that is up one tenth from the December print. The ‘low skill’ worker experienced a 6.6% wage boost and that is more than double the 20 yr average of 2.9%.
3)The January Logistics Managers Index rose 3 pts from December to 57.6 and is the 2nd month in a row of m/o/m gains. LMI is calling this a trend after a string of 7 out of 8 months of declines. They said “Unlike September, supply chains are not so flush with inventory that they are merely shifting goods around. Inventories are much lower now than they were in Q3 of last year, and it seems the supply chains are coming back to life with the goal of replenishment.” Warehouse capacity continues to drop partly due to an increase in inventory levels relative to a year ago. Also, “Transportation prices have continued to decline, but at a slower rate than over the last few months. There is still excess transportation capacity in the market, but respondent future predictions and anecdotal evidence from carriers suggest that increased demand may begin soaking up some of this excess soon.”
4)As the average 30 yr mortgage rate for the week ended February 3rd was at 6.18%, the lowest since mid September, it helped to lift mortgage apps. We know though that mortgage rates have ticked up since. Purchases rose 3.1% w/o/w, though still down 37% y/o/y. Refi’s were higher by almost 18% w/o/w but still down 75% y/o/y.
5)Germany said its January CPI rose less than expected, helped by energy subsidies. It was still up robustly, higher by .5% m/o/m and 9.2% y/o/y but that was less than the estimate of up 1.3% m/o/m and 10% y/o/y.
6)The mood continues to improve in Europe as measured by the Sentix Investor Confidence index which rose to -8 from -17.5 and much better than the estimate of -13.5. While still below the February 2022 print (thus right before the invasion) of +16, it’s the best since March 2022 when it initially plunged. Sentix said “The increase signals that a recession is off the table for the time being. Instead, the scenario of stagnation is gaining in contour.” A warmer winter and the China reopening are certainly helping the mood.
7)Both the RBA and Riksbank hiked rates as expected but talked tough and said more are coming.
8)China CPI was up 2.1% y/o/y as expected for January but PPI fell more than anticipated, by .8% y/o/y.
Negatives,
1)Initial jobless claims remained below 200k but rebounded to 196k from 183k last week and that was 6k above the estimate. This brings the 4 week average to 189k from 192k as a 206k print drops out. That’s the lowest since April. Continuing claims bounced by 38k to 1.69mm and that is the most since the 3rd week in December.
2)From the Fed’s January Senior Loan Officer survey, “Regarding loans to businesses, survey respondents on balance reported tighter standards and weaker demand for C&I loans to large, middle market, and small firms over the fourth quarter. Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate loan categories…For loans to households, banks reported that lending standards tightened or remained basically unchanged across all categories of residential real estate loans and demand for these loans weakened. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Standards tightened and demand weakened, on balance, for credit card, auto, and other consumer loans.”
3)With the drop in mortgage rates, the January Fannie Mae Home Purchase Sentiment Index did rise for a 3rd month but only 17% of those surveyed think it’s a good time to buy a home, down from 21% in December. The chief economist Doug Duncan said “For consumers, the same affordability issues are persisting, as they continue to indicate that high home prices and high mortgage rates make it a ‘bad time to buy’ a home. The latest survey data also indicated that the majority of consumers expect home prices to decrease or remain flat over the next year, which may incentivize some potential homebuyers to delay their purchase decision.”
4)After a pretty decent decline recently, wholesale used car prices (those that dealers buy in the market) rose 2.5% m/o/m seasonally adjusted and by 1.5% non SA. They are still down y/o/y by 11-12.8% depending on that adjustment but Manheim did say “In January, Manheim Market Report values saw price increases that were not typical, culminating in a 1.2% total increase in the Three Year Old Index over the last four weeks.”
5)Maybe a sign consumers are reigning in their credit use? Consumer credit in December rose $11.6b, well below the estimate of $25b but partly offset by a rise of $5b in November. Both revolving and non-revolving credit usage slowed m/o/m.
6)The UK economy saw no q/o/q growth in Q4 but its economy still grew by .4% y/o/y. Specifically in December, its economy shrunk by .5% m/o/m, two tenths more than expected.
7)The trade data out of Taiwan for January was pretty weak but as expected and should improve in coming quarters as China’s economy gets back to normal. Exports fell 21.2% y/o/y vs the estimate of down 20.3% and that’s the biggest drop since 2009.
8)Another year without the Jets in the Super Bowl passes by.