The United States is A Very Strong Economy: Implications for the Next 12 Months of the 2023 US Economic Crisis, as viewed by the Deutsche Bank

“Stagflation risks are seen as high across the US, EA and UK for the next 12 months,” said Deutsche Bank strategist Jim Reid in a report Monday about the bank’s investor survey on global market expectations for 2023. Reid added that “there’s a strong consensus that the next US recession will start in 2023.”

When asked what the administration had to say about surging discontent among voters in order to balance its view of the US economy with high inflation, Yellen said that it was unacceptably high. The efforts to bring it back down to levels people are used to will likely take the next couple of years.

I don’t think that means we are going to have something like the Covid situation, but I do think we had a large amount of stimuli during the financial crisis.

We are seeing solid growth this quarter. When asked if the latest GDP data alleviated recession concerns, she replied it had slowed after a very rapid recovery from high unemployment. “We’re at a full employment economy. It is natural for growth to slow. And it has over the first three quarters of this year, but it continues to be OK. We have a very strong labor market. I don’t see signs of a recession in this economy at this point.”

​”We expect Fed Chair Powell will insist on the need to hold policy at a restrictive level for some time to bring inflation down toward the 2% target,” wrote Gregory Daco, chief economist at EY-Parthenon, in a note to clients Monday. “This will serve to push back against current market pricing … Powell will stress that history cautions strongly against prematurely loosening policy.”

Summers on Thursday specifically cited the OPEC+ decision to dramatically cut its oil output targets as a risk to the US economy. “This is not good news that we’ve gotten from OPEC. It raises the risks with respect to inflation. He said that it increased the risks of a recession.

The group of major oil producers, which includes Saudi Arabia and Russia, said Wednesday that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

The Biden administration criticized the OPEC+ decision in a statement on Wednesday, calling it “shortsighted” and saying that it will hurt low and middle-income countries already struggling with elevated energy prices the most.

The Fed Is the Central Banker to the World. The U.S. Economy Is Growing Strong, but Costs Aren’t Lower

Higher interest rates have begun to have the desired effect. Consumer spending has slowed. Prices are still climbing faster than the bank would like, but inflation has dropped significantly.

Higher borrowing costs have already put a big dent in the housing market. And other parts of the economy are beginning to slow. Consumers are flush with cash and still spend money. As a result, the Fed may have to tap the brakes harder, for longer, than it otherwise would.

But many economists and several international bodies have warned that there’s a pronounced danger or overdoing it, including a United Nations agency that warned the damage could be particularly acute in poorer nations. Developing economies had already been dealing with a cost-of-living crisis because of soaring food and fuel prices, and now their American imports are growing steadily more expensive as the dollar marches higher.

It is a recipe for globe-spanning turmoil and even recession. The Fed is going to keep raising interest rates. That’s because the Fed, like central banks around the world, is in charge of domestic economy goals: It’s supposed to keep inflation slow and steady while fostering maximum employment. The Fed is the “centralBanker to the world” because it is the primary lender of funds to the United States.

The report showed some progress in dealing with the increases, but costs went up more in the last three months than they did in the previous three months, Mr. Biden said. He acknowledged that inflation was very high.

If the Fed makes the opposite mistake, they could push interest rates higher and slow the economy more than needed to bring prices under control.

The labor market is hot and inflation is not coming down as fast as I thought, according to recent data.

In an exclusive interview with CNN, Janet Yellen, Secretary of the Treasury, stated that she had not seen signs of a recession in the near term as the US economy rebounded from six months of contraction.

The economy remains strong and that is what the President said, standing out compared to how other economies around the world are doing.

Gross domestic product — the broadest measure of economic activity — rose by an annualized rate of 2.6% during the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. That’s a turnaround from a decline of 1.6% in the first quarter of the year and negative 0.6% in the second.

The Balance of Economic Progress and Policy: Predictions for the Next Three-Fifth Legislators in the Next-Dominated Congress

The complex balancing act that President Joe Biden and his top economic officials have attempted over the course of this year, as they try to highlight a rapid economic recovery and major legislative victories while also pledged to tackle soaring prices, was underscored by the view of Yellen.

It’s a reality that has undercut efforts by the administrationto take advantage of what officials view as a robust record. Republicans criticized Biden when he said the economy is strong as hell.

As the economy continues, those efforts will be felt as they go on. The administration has a general message to Americans which is patience, according to Yellen.

“There were several problems that we could have had, and difficulties many families American families could have faced,” Yellen said. “These are problems we don’t have, because of what the Biden administration has done. So, often one doesn’t get credit for problems that don’t exist.”

The push to highlight the major legislative wins and the tens of billions of dollars in private sector investment that those policies have driven towards manufacturing around the country was one of the reasons why Yellen went to Cleveland.

It’s a critical piece of an economic strategy designed to address many of the vulnerabilities and failings laid bare as Covid-19 ravaged the world, with significant federal investments in infrastructure and shoring up – or creating from scratch – key pieces of critical supply chains.

Listing off a series of major private sector investments, including the $20 billion Intel plant opened a few hours drive outside of Columbus, Yellen said they were “real tangible investments happening now,” even as she acknowledged they would take time to full take effect.

“But you’re beginning to see repaired bridges come online – not in every community, but pretty soon. Bridges that have been falling apart are going to be fixed in many communities. We’re seeing money flow into research and development, which is really an important source of long term strength to the American economy. She said that America will become a more competitive economy as its strength is going to increase.

Source: https://www.cnn.com/2022/10/27/politics/janet-yellen-gdp-recession-cnntv/index.html

The Debt Ceiling and the Great Debt Problem: Remaining Leveraged by the Giant House Democrats Despite Biden’s Outburst

The battle lines that have been drawn this week over raising the debt ceiling, a crisis in Washington, made that House Republicans have once again pledged to use for leverage should they take the majority.

As a result of her outspoken views on the destructive nature of the showdowns, she backed away from doing away with the debt limit altogether. A group of House Democrats wrote to Democratic leaders to request that action in the lame duck session of Congress, but Biden rejected the idea this week.

As the administration moves toward a time period that traditionally leads top officials to leave an administration, she made clear she did not plan to be one of them. The reports that she told the White House she wanted to stay next year were an accurate read, according to Yellen.

Yellen was excited by the program that they talked about. “And I see in it great strengthening of economic growth and addressing climate change and strengthening American households. And I want to be part of that.”

Wednesday is likely to be the day the Federal Reserve announces it will raise interest rates. But investors are hopeful it will be a smaller increase than the last four hikes.

“Interest rates have gone up at a rapid pace, and are not done yet,” said Greg McBride, chief financial analyst at Bankrate. “It’s going to take some time for inflation to come down from these lofty levels, even once we do start to see some improvement.”

Last month, annual inflation dipped to 7.1% from 9% in June after hitting a four-decade high. That’s the smallest annual price increase in 11 months.

Inflation and the Economy: The First Three Months of Growth and Jobs in the Post-Pendidature Secular Reserve Bank of Kansas City

Esther George, President of the Federal Reserve Bank of Kansas City, said that there is a savings buffer for households that may allow them to continue to spend. It suggests we might have to stay at it for a while.

Like her peers on the rate-setting committee, George is determined to control inflation. But she’s also cautioned against raising rates too rapidly at a time of economic uncertainty.

George said last month he was in the camp of steadier and slower rate increases to learn the effects of a lag. “My concern being that a succession of very super-sized rate hikes might cause you to oversteer and not be able to see those turning points.”

The senators wrote a letter to the Fed’s chairman stating they were worried about slowing the economy to a crawl and failing to slow rising prices that harm families.

Shawn Woods said his company’s sales have dropped from a dozen houses a month before the Fed raised rates to less than five.

“I never thought we’d go from 3% to 7% within six months” said Woods, who is also the president of the Home Builders Association of Kansas City.

“I think we’re in for a rough six or eight months,” Woods said. Housing leads us into downturns and it leads out of downturns. We’ve probably been in a housing recession since March or April.

Wall Street will also need to dive even deeper into Friday’s jobs report to get a better sense of what’s happening in the economy. The unemployment rate is expected to remain at 3.7%, close to a half-century low.

In October, the economy is expected to have added 200,000 jobs, which would be well below September’s 263,000 but still above the pre-pandemic average. The unemployment rate is expected to edge up slightly, to 3.6% from 3.5% — still close to a half-century low.

Job openings still outnumber job seekers by more than 2 to 1 in spite of mass layoffs at companies like Microsoft and Facebook.

The Fed raised interest rates from nearly zero to a range of 4.5% to 4% last year to cool the economy. Job numbers have exceeded expectations over the last 10 months. The labor market is stronger than ever: The US added a shocking 517,000 jobs in January and knocked unemployment down to its lowest level since 1969.

The Fed is worried that inflation is keeping it uncomfortably high because there are 1.9 jobs for every one person looking for work. With plenty of options, workers are demanding higher wages; and with few applicants, managers are forking out higher pay, which bolsters demand for goods and services (and therefore drives up prices).

The central bank has a double mandate, with one being to maximize employment and the other to ensure price stability. The Fed would like everyone to keep their jobs and do nothing to stoke inflation, which is currently sitting at 8.2%. Most economists say the likelihood of that so-called soft landing is now remote — although Powell still considers it possible.

Democrats are hoping to hold on to power next week, but it appears the pain of inflation outweighs any good feelings about job security. Three-quarters of the voters in the new CNN poll think the country is in a recession.

The Boomer’s Story of Mortgage Rates, Homebuying, and the Dream of the Baby Boomer: The 2020 Real Estate Boom Is Coming to an End

The narrative got flipped on it’s head in 2020. It wasn’t because they disliked the suburbs but because they couldn’t afford them. But when the pandemic hit and demand for property exploded, the furor was driven by people in their 30s — finally flush after years of slogging away at whatever jobs were left for them in the fallout of the Great Recession, and, for many, eager to flee to the wide-open spaces of suburban life.

(It also didn’t hurt that dizzying stock surges meant Baby Boomer parents with large investment portfolios were happy to pass on some of those gains to their darling Millennial kids.)

Those who closed on a house in the crush of competition should be very lucky as the 2020 housing boom comes to an end.

Here’s the deal: On Thursday, a new report showed that first-time buyers made up just 26% of all homebuyers in the year ending in June — an all-time low over the four decades that the National Association of Realtors has been conducting its survey.

Jessica Lautz said that they have to save while paying for rent, student debt, child care and other expenses. Home prices are going up while mortgage rates are going up.

Mortgage rates have risen throughout most of 2022, spurred by the Federal Reserve’s regime of interest rate hikes. Last week, the Fed announced it would raise interest rates by another 75 basis points, the sixth rate increase this year and the fourth-consecutive hike of that size.

It is broken. Inventory constraints and outdatedzoning restrictions are part of the problem, though I don’t think I have a silver bullet.

Housing supply has been expanded through subdivisions at the urban fringe rather than rebuilding within existing neighborhoods. There are more people and homes in vulnerable areas because of that.

Federal and local governments have a good chance to rethink the way they view the American Dream as affordability reaches crisis levels. Those who are going to benefit the most are those who are better represented in elected office. Schuetz contends that the Boomer’s reluctance to change the system that earned them their position is related to the fact that they are in power now.

Fed Rates in the Pre-Preliminary CNN Business Before the Bell Newsletter: How Rates Have Risen in the Past Three Months

The Fed bumped up rates by three-quarters of a percentage point in the past four meetings (June, July, September and November). There have been two rate hikes this year. The central bank’s key short-term interest rate, which sat at zero at the beginning of the year, is now at a range of 3.75% to 4%.

The Minneapolis Fed President said last week that he is open to a larger interest rate increase in March. (That’s a quarter or half of a percent. A basis point is one hundredth of one percent).

A version of this story first appeared in CNN Business’ Before the Bell newsletter came out. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

Predictions from a Fed Chairman’s Message: The Stock Market is Doomed and the Economy Will Be Weaker than Expected

Stocks surged on Thursday in their best day since 2020 after a key inflation indicator came in softer than expected. Investors broke out their party hats as they interpreted the report to mean that peak inflation may finally be behind us. That shows the Federal Reserve may be less aggressive with rate hikes.

When investors hope for a central bank pivot they end up getting crushed by another piece of data or a Fed official’s message.

The Fed chair will reiterate that more needs to be done to bring down inflation to 2%, according to a preview of the report.

What else: Wednesday will also bring the Fed’s latest forecasts for the unemployment rate and gross domestic product (GDP) growth. Those numbers will highlight whether Fed officials think recession is likely and how high their tolerance for pain is as they continue the fight to bring down persistent inflation.

Bill Adams wrote in a note that if the Fed didn’t tighten as aggressively, the economy would weaken less and the stock market would calm down.

Bitcoin prices fell more than 15% in November and have plummeted about 65% this year. The collapse of FTX has investors wondering what the future will hold, despite the firm’s high valuation.

Unfortunately, those assets have gotten hit just like stocks and bonds, proving there really is no place to hide in a market where worries about rate hikes and recession reign supreme.

Bitcoin and Wall Street Has a Thaw: A Cryptothaw in Wall Street, and the US Economy Will Fail next Year

A crypto thaw: Bitcoin soared through the Covid-era on the wings of near-zero interest rates, stimulus cash and a big influx of investors from large-scale institutions. In November it hit a record high of more than $70,000.

The dollar strengthened greatly after central banks started raising rates in order to fight inflation, and investors preferred it as a safe haven. At the same time, the economy began to sour and those new investors who still viewed bitcoin as a risky asset exited in droves.

The volatility on Wall Street may be unnerving — the CNN Business Fear & Greed Index, which measures seven indicators of market sentiment, is now in Neutral territory after spending the past month in Greed mode — but it pales in comparison to what’s happening with bitcoin and other cryptocurrencies.

According to the National Association of Realtors, sales have fallen for eight months now because of the change in cost to finance a home. A survey by Fannie Mae shows that only 16 percent of people think this is a good time to buy a home.

As of Monday, markets are expecting the Fed to make another quarter-point raise: The CME FedWatch Tool is showing a 69.4% probability of such a hike; however, the perceived chances of a half-point increase (at 30.6%) have grown considerably during the past few weeks. The probability of a half-point increase was 3.0% one month ago according to the FedWatch Tool.

Even if interest rate hikes do ease off, they will remain high, and economists are largely expecting that the US economy will endure a recession next year. Powell said in November that there is still a chance the economy avoids recession but the odds are slim, noting: “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing.”

How Do Markets Get Their Cosmic Eggs? The Consumer Price Index, CPI, and the Dot Plot Revisited

It may not be that simple. The government reported Friday that a key measure of wholesale prices, the Producer Price Index, rose 7.4% over the past 12 months through November. It was an improvement over the expected rate but still a decrease from the 8% increase through October.

The Consumer price index data for November comes out a day before the Fed’s announcement. CPI rose 7.7% year-over-year through October.

The Fed will conclude its rate hike regimen by the second quarter of next year, predicted JPMorgan analysts in a recent note. Inflation is expected to continue to diminish and fiscal policy is likely on hold, which should mean the Fed will probably end its tightening cycle early in the new year. The analysts expect two quarter-point hikes in the first half of 2023.

But the main event at December’s meeting will be the Federal Reserve’s highly anticipated Summary of Economic Projections and what’s known colloquially as the dot plot. Investors will be paying close attention to these forecasts for clues about the path of rate hikes in the new year and beyond. They’re worried that they’ll show a more aggressive monetary policy tightening path, indicating that more hikes are coming next year.

“A pivot or pause is not a cure-all for this market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “Rate cuts may be too late. Recession risks are still relatively high.”

On the consumer front, two key economic reports — the Consumer Price Index read on inflation and retail sales — come out Tuesday and Thursday. The numbers will be used to figure out the health of American consumers. Is they still shopping despite price increases?

It is possible that consumers were getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.

“Everybody has been talking about inflation this year. According to Cosserat, it will be more about disinflation in the years to come.

What Does Cosserat Mean for Investors? A Time for the Fed to Steer, and What Will We Do in the Next Three Years?

What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes

            (HESAF) and cosmetics giant L’Oreal

            (LRLCF).

Friday: Eurozone purchasing managers’ survey; retail sales from the UK.

Stocks rallied sharply in October and November due to hopes that the Fed would begin to scale back on the size of its rate hikes. They are still down sharply for the year, though, and stocks have been more volatile so far in December.

Long-term bond yields have eased as well, with the yield on the 10-year US Treasury edging back down to about 3.5% after moving above 4.3% in late October. That was the highest the 10-year has been since 2008.

The major concern is that the Fed and other central banks may not begin to pause, let alone consider lowering interest rates to try and stimulate the economy, until it’s too late.

Tom Essaye, founder and editor of the Sevens Report investing newsletter said that the macroeconomic focus will shift due to how badly growth slows and earnings fall before central banks can hint at providing accommodation.

Investors may get some answers this week when FTX founder Sam Bankman-Fried testifies in front of the House Financial Services Committee on Tuesday. The Senate Banking Committee will hold its own FTX hearing Wednesday, but Bankman-Fried is not currently on the list of witnesses set to appear.

The Fed is Getting Closer to Expect: Expectations for the Fed Funds Rate and Mortgage Rates to Decline by the Year 2024

Maybe investors will be able to relax and take a deep breath before the Fed announcement and press conference later that day. Although there is no guarantee of that.

It’s still double the Fed’s customary quarter-point hike, and a sizable increase that will likely cause economic pain for millions of American businesses and households by pushing up the cost of borrowing for homes, cars and other loans.

The Fed has said that if they stopped hiking rates they could stay elevated into the year 2024, but the average period between peak interest rates and the first reductions is 11 months.

The European Central Bank, Bank of England, and Swiss National Bank are expected to follow the United States with half-point moves on Thursday. Norway, Mexico, Taiwan, Colombia and the Philippines will also likely increase their borrowing costs this week.

The question is how big of a jump will there be in the dots. The Fed was expecting rates to only finish at 0.9% this year.

The fed funds rate should grow to 5.5% from its current range of 4% to 4%, but he wouldn’t be surprised if it hit 6.

Along those lines, Williams said that there will likely be “a period of subdued growth and some softening of labor market conditions.” He said he expected real GDP growth of just 1% this year and that the unemployment rate will “edge up over the next year” to between 4% and 4.5%. The rate of unemployment is 3.4%.

Nurses in the Line: Tesla Cannot Self-Driving During the November/December Inflationary Squarue

The nurses join hundreds of thousands of other British workers who are striking this December, including rail staff, postal workers and ambulance drivers. The pay dispute is related to the fact that inflation hit a 41-year high of 11.1% in October.

The RCN states on its website that patient safety is a top priority and that some staff would continue to work through the strike. The RCN has promised to maintain critical services, including chemotherapy and dialysis treatments, during this month’s stoppages.

It is the broadest wave of industrial unrest since the country’s infamous “winter of discontent” in the late 1970s, when huge numbers of workers, from truck drivers to gravediggers, went on strike.

Tesla CEO Elon Musk has said numerous times since 2015 that Tesla cars would be entirely self-driving in two years, or less. But years after his self-imposed deadlines have blown by, it still hasn’t happened. My colleague Peter Valdes-Dapena reports that a car with a $15,000 technology package can’t actually drive on its own.

In a court filing on November 28, attorneys for the company said that failing to realize a long-term goal is not fraud.

The lawsuit, filed by the California firm of Cotchett, Pitre & McCarthy, also cited numerous cases of crashes involving the use of Tesla’s driver assist technology.

The hike, smaller than the previous four increases, comes after the latest government reading showed inflation is running at its slowest annual rate in nearly a year.

In a speech at the university, the author said there was more work to be done. In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time will likely be necessary.

The Price of Inflation is Still Strong: U.S. Consumer Prices Rise by the Day After The First Coins were Given A $26$ Billion

Many Americans are feeling the effects of increased interest on credit cards, mortgage and car loans because of the price increases. Currently, used car buyers are charged an average interest rate of 9.34%, compared to 8.12% last year, and they’re making the largest monthly payments on record, according to credit reporting firm Experian.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the central bank said in a statement on Wednesday.

November’s jobs report showed a strong labor market and caused stocks to plunge. They fell again on Thursday when weekly numbers showed the number of Americans filing for unemployment benefits fell, indicating a still-tight labor market.

Rents continue to climb, but Fed officials believe the worst of shelter inflation may be behind us. Market rents have increased in the spring.

The price of haircuts rose 6.8% last year, while the price of drycleaning went up 7.9%. Services other than housing and energy account for nearly a quarter of all consumer spending.

The Fed’s Decline Revisited: Consumer Price Pressures in the U.S. Since the Great Depression and the Great Wall

“We see goods prices coming down,” Powell said. “We understand what will happen with housing services. But the big story will really be the the rest of it, and there’s not much progress there. It’s going to take some time.

Powell said the job market was out of balance because there were more job openings than workers were available to fill. While the U.S. economy has now replaced all of the jobs that were lost during the pandemic, the share of adults who are working or looking for work has not fully recovered.

Many older workers who retired in the last two years may not return to the job market. To restore balance the Fed is trying to reduce demand.

The central bank has made it clear it will do whatever it takes to bring inflation back down, and on Wednesday it raised interest rates for the seventh time in nine months.

Gasoline prices have dropped sharply and are now lower than they were before Russia’s invasion of Ukraine. The prices of other goods have fallen because of the supply chain problems. And travel-related prices for things like airplane tickets and rental cars have dropped, as the pent-up demand that followed lockdowns has faded, and travelers become more price-conscious.

Fed President Borel Powell: A narrow path to avoid a recession without hitting a deep one, or is it going to be a soft landing?

Still, Powell warned economy watchers that “the job is not fully done” and that the labor market remains too tight for his liking. He doesn’t believe he will cut rates this year unless the economy changes drastically.

The central bank has lowered its forecast for economic growth next year and raised its forecast for unemployment. Powell says there’s considerable uncertainty.

“I don’t think anyone knows whether we’re going to have a recession or not and if we do, whether it’s going to be a deep one or not,” he said on Wednesday.

Changes in the weather or the war in Ukraine could cause big swings in prices at the gas station and the grocery store. Faster or slower economic growth around the world could also cause gyrations in the price of crude oil and other commodities.

The price of services is heavily dependent on what happens to wages. That depends in turn on how many jobs the country adds each month, how many workers are available to fill those jobs, and how productive workers are when they’re employed.

What might happen: “Boy the Fed is really committed to this put us in a high unemployment recession thing,” Jon Stewart, former host of The Daily Show, tweeted after Wednesday’s meeting.

“I think it’s a really, really narrow path, and the Fed’s tone [during its December meeting] doesn’t give me a lot of optimism that they can navigate that without hitting a recession. … If a soft landing is avoiding a recession altogether, then I think that’s a pretty tough task. I think that it is still possible, if it is a milder recession than recent history.

“Employment has yet to soften notably, but I think the jobs data is likely to deteriorate meaningfully and quickly,” said finance professor Jeremy Siegel of The Wharton School of the University of Pennsylvania in his weekly commentary for WisdomTree last week.

Powell expressed optimism that a soft landing was possible with the labor market tight enough to handle an increase in unemployment and not spiral into a recession. The jobs numbers will be watched very closely by investors.

The Secret Santa Clause: An Observation of the Banks Building a House of Cards on a Foundation of Deception to Fool Investors

Bankman-Fried is expected to agree to extradition to the US, the person said. It was first reported that Bankman-Fried would withdraw his fight.

The Southern District of New York charged Bankman-Fried with eight counts of fraud and conspiracy. Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him, though he likely wouldn’t get the maximum sentence.

According to the US market regulators, banks built a house of cards on a foundation of deception to fool investors, who were told that it was one of the safest buildings in the crypt.

The Saturday before Christmas — also known as Super Saturday — is typically the busiest shopping day of the November-December gift-buying period. Super Saturday is on Dec. 17th this year, as Christmas Day and Christmas Eve both fall on a Sunday. National Retail Federation estimates 158 million consumers will shop on that day.

Shoppers have only completed half their gift purchasing so far, the NRF estimates. With less than a week to go until Christmas Day, and drop-dead shipping deadlines approaching, people have a lot more buying to do.

Source: https://www.cnn.com/2022/12/19/investing/premarket-stocks-trading/index.html

The Rise and Fall of the Inflaton Rate: The Declining Economy of the Cosmic Second Half of the November 1st Quarter

It’s also costly for retailers to sit on an oversupply of merchandise for too long. Retailers who store merchandise in their own warehouse and distribution centers have a finite amount of space to work with, with some wiggle room to accommodate excess inventory. If more space is needed, costs will go up because they cannot quickly clear out.

Over time unsold products lose value. Even though last year was a good one, savvy shoppers won’t buy last year’s style if the trend is still going strong. Stores are often forced to discount in order to make money.

Well ahead of the final full weekend before Christmas, stores this year were already offering discounts of 50% to 60% off, and tacking on free shipping for online orders.

Ross Steinman, professor of consumer behavior at Widener University, said that he has studied the holiday season for 20 years and hasn’t seen discount as dramatic as this.

He said that the retailers were nervous. The clock is running and they need to maximize every opportunity to get consumers to make purchases.

The Federal Reserve preferred measure of inflation showed price increases still moderate in November, providing another sign that the high prices are over.

The core PCE was up 4.7% on an annual basis and 2% on a monthly basis, matching expectations of economists.

To be sure, much of this decline reflects falling energy prices. But even the so-called “core” inflation rate, which excludes volatile energy and food prices and thus provides a more reliable reading on price trends, has also moved down a bit in recent months, to 5.7% year-over-year in December.

Spending continued to rise in the month of November, but at a much slower pace than in previous months. Spending was up 0.1% in November as compared to 0.8% the month before. In November, personal income went up by 0.4% compared to the previous month.

The November PCE report provides a snapshot of an economy in transition. Tasked with reining in the highest inflation since the early 1980s, the Fed has undertaken a series of blockbuster interest rate hikes to squelch demand.

As 2022 draws to a close, inflation metrics show some of that may have worked: Consumer prices are cooling, home sales have ground to a halt, and some of America’s best-known companies have made plans to slow their roll and pull back on capital investment.

However, inflation within the services sector has been a little “sticky,” and not abating as quickly. The services index was up 0.4% a month in October but it was down more than 9% a year later, Faucher noted.

While much of the services inflation is due to housing costs, which are rapidly reversing, the Fed is concerned that strong wage growth could fuel persistent increases in services prices and overall inflation, he added.

Manufacturing Activity in the U.S. After the December 13 Great Recession, the Center for Consumer Research at the Fermilab Tevatron

The Commerce Department reported Friday that new orders for manufactured goods plunged in November, the largest monthly drop since the beginning of the pandemic.

The decline was driven by new orders for transportation equipment, according to the report. New orders increase.

The report said core durable goods orders slowed but did not contract, whichDiane Swonk said reflected growing unease about the economy. The prelim reading for December suggests that manufacturing activity will contract further in the year end. A cold winter expected for the manufacturing sector.

The final December reading for the index of consumer sentiment came in at 59.7 in December, up slightly from a preliminary measurement of 59.1 and November’s final reading of 56.8, according to data from the university’s Surveys of Consumers.

Earlier this week, the Conference Board’s consumer confidence index – another measure of how consumers are feeling about the economy – landed at its highest measurement since April 2022.

America’s central bank found its name in the eye of the beholder for much of this year, as Federal Reserve Chairman Powell used blunt tools of interest rates and quantitative tightening to curb rising inflation.

However, a “structural labor shortage” remains a major headwind, Powell noted in December, attributing the lack of workers to early retirements, caregiving needs, Covid illnesses and deaths, and a plunge in net immigration.

As such, employers are hesitant to lay people off, and other areas of the economy are showing such strength that those who are unemployed are able to get rehired quickly, Mayfield said.

“It’s been pretty impressive how well the consumer has held up over the past 18 months, and not pulling the rug out from under the consumer is pretty much how you get to the soft landing,” Mayfield said.

How Well Do Wall Street and Gas Prices Go? The 2008-2009 US Open Market Committee Report on the Bounce and Fall of the Stock Market

The Federal Open Market Committee, the central bank’s policymaking arm, holds eight regularly scheduled meetings per year. During the course of the two days the group looks through economic data, watches financial conditions, and evaluates monetary policy actions as well as a press conference by Chair Powell after the conclusion of the meeting.

It was a brutal period for the stock market, with roughly one-fifth of the value of the S&P 500 vanishing and the Nasdaq dropping by more than one-third. The US major markets have suffered their worst years since 2008.

The number of first-time applications for unemployment benefits increased last week. That is still low historically and the same as when unemployment claims were a year ago.

Moody’s Analytics chief economist Mark Zandi told CNN on Thursday that he was optimistic that the economy could skirt a recession. Consumers will stop spending and the economy will suffer a downturn without mass layoffs.

After spiking above $5 a gallon for the first time ever in June, gas prices have plunged. The national average for regular gasoline recently dropped to $3.10 a gallon, an 18-month low, though it has crept higher in recent days to about $3.22 a gallon.

The Latest Economic Results from Silicon Valley: What Have We Learned? How Wages and Inflation Are Predicting The Future of the US Economy

The key risk to the economy is not if the Fed continues to keep rates low, but if they do. It isn’t likely that keeping rates up would lead to a very sharp or lengthy downturn. Rather, the key risk is if inflation stops declining. It would require substantial further monetary tightening in order to get it under control, which will have serious implications for the US economy and financial markets.

Since the latest inflation figures have come out, traders have been paying more attention to the economic reports, and the stock market has been choppy as well.

The report on manufacturing health was less than expected and the report about labor turnover were better than expected, which led to more market volatility.

That’s why investors will also be poring over the weekly jobless claims numbers that come out Thursday morning as well as a report from payroll processing company ADP

            (ADP) about the private sector job market. Further strength could set off more alarm bells about inflation and Fed rate hikes.

The level of wage growth will also be under scrutiny. An increase in worker compensation historically tends to lead to more inflation. If people have more disposable income, they will be able to afford the higher prices companies charge.

Wage growth, which is defined as average hourly earnings, rose just 4.7% over the previous 12 months in October. Wage growth went back up to 5.1% in November. Wages are expected to rise 5% annually in December.

Lauren went on to say that labor supply and demand are both putting upward pressure on wages.

The number of jobs added is likely to be more important than the number of worker paychecks in the jobs report on Friday. Wall Street may do the same.

The jobs market is in very good shape. But you can’t know what’s going on in Silicon Valley. The software giant is also the component. The company said Wednesday that it was laying off 10% of its workforce.

The hope was that the economy would continue to recover from a brief recession in 2020 and that consumers and businesses would keep buying tech products and services.

Now, though, recession alarm bells are sounding once more as inflation and rate hikes take their toll…and tech companies realize that they may have not factored that in to their budgeting plans.

“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing,” said Salesforce chair and co-CEO Marc Benioff in a recent note to employees.

Companies that last a long time go through different phases. According to a memo shared by employees, Andy Jassy said that they are not in heavy people expansion mode every year.

Source: https://www.cnn.com/2023/01/05/investing/premarket-stocks-trading/index.html

The Global Economy Isn’t Out of the Woods, but It’s Still Possible: CNN’s Anna Cooban Revisited

The global economy is not out of the woods. Many, including the head of the International Monetary Fund, are still concerned about a looming downturn that could hit China and emerging markets particularly hard.

But CNN’s Anna Cooban notes that investors in Europe appear to be growing more hopeful that the pace of consumer price increases is starting to slow in France and Germany. A drop in energy prices is leading to a retreat.

The British Retail Consortium said in a report Wednesday that food prices surged 13.3% in December. According to a report by Kantar, UK grocery sales hit a record in four weeks, despite the number of items that consumers bought falling 1%.

Steven Kamin is a senior fellow at the American Enterprise Institute who studies international macroeconomic and financial issues. He served as director of the international finance division of the Federal Reserve from 2011 to 2020. His opinions are not a reflection of the rest of the world. View more opinion on CNN.

The Fed Committee on Fed-Motor Policy and Wage Growth in the Light of the Post-Pendulum Outcome

Wage gains have also eased in recent months, despite the tight job market. There were concerns about wage gains putting upward pressure on prices, as happened in the 1970s.

Measures of inflation expectations, both those derived from financial markets and those based on household surveys, remain above pre-pandemic levels, but have moved down since earlier last year. Wages have barely kept up with inflation and labor productivity has risen 4% since the start of the epidemic.

Workers did not get any compensation for increases in productivity. The Fed Vice Chair acknowledged that the earnings share of the labor force has fallen over the past two years and that they appear to be at or below pre-pandemic levels. This suggests that, going forward, wages may rise faster than prices as workers regain their share of corporate income. Firms should be able to absorb wage hikes by reducing profit margins so that the Fed won’t have to increase prices.

After raising interest rates large enough to cause a cooling economy, the Fed decided to return to a more traditional rate policy at the conclusion of its first meeting in 2023.

Wednesday’s statement included language that made it clear policymakers expect that more hikes will be necessary to temper inflation. “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” they wrote. The “extent” of these “future increases,” they said will depend on a number of economic and financial factors.

Powell echoed that sentiment Wednesday, saying: “I continue to think that it is very difficult to manage the risk of doing too little, and finding out in six or 12 months that we actually were close but didn’t get the job done.”

Implications of Inflation for the Stock Markets and the Fed, Energy and Food Prices in the Greatest Valentine’s Day Ever

The markets increased after the press conference when investors assumed a dovish Fed going forward. The S&P 500 closed the first day of February higher by 1.1% after having its best January in four years.

The core prices in December were higher than a year ago, despite the volatile food and energy costs. That’s down from a 5.2% annual rate in September.

The Fed governor said two weeks ago that they don’t want to be fake. We had low readings of the core inflation before it went up in our faces.

If your heart goes quiet when Central bankers talk about inflation, then this may be the best Valentine’s Day ever. Four members of the Federal Reserve spoke about the economy.

First up was Richmond Fed President Thomas Barkin, who is not a voting member on the interest-rate setting Federal Open Market Committee this year. Barkin said in an interview with Bloomberg TV Tuesday morning that there is “more persistence to inflation than maybe we’d all want,” adding that “inflation is normalizing, but it is coming down slowly.”

The problem is trying to predict future economic data. It is hard to have confidence in a outlook when inflation is consistently higher than expected or the jobs report shows hundreds of thousands of more jobs than expected.

NABE Survey of the Economic Outlook: Does the Economy Go Inflationary to Strong Growth, or Does It Go All-State?

Philadelphia Fed President Patrick Harker sounded a little more dovish (i.e. less concerned about inflation) than Logan. He is also a voting member of the central bank. Harker said in Tuesday’s speech that the rate hikes are still not done and that they are likely close. Harker noted that “at some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place.”

Last up was New York Fed President John Williams, another FOMC member and also someone whose name has been mentioned as a possible successor to Lael Brainard as Fed vice chair now that President Biden is expected to name Brainard as his new top economic adviser.

In a time when the economic data has delivered mixed messages or flat out busted expectations, economists’ predictions for the year ahead are growing increasingly opaque.

The president of the organization said that the survey shows a large divergence among respondents about where the economy is going in the next few years.

“Estimates of inflation-adjusted gross domestic product or real GDP, inflation, labor market indicators, and interest rates are all widely diffused, likely reflecting a variety of opinions on the fate of the economy — ranging from recession to soft landing to robust growth,” Julia Coronado, NABE’s president, said in a statement.

“Panelists’ views are split regarding how high the Federal Reserve may raise interest rates, how long rates might stay at the peak, when cuts would begin, and what would signal the central bank’s actions on each of these fronts,” Dana M. Peterson, NABE Outlook Survey chair, and chief economist at the Conference Board, said in the report. The impact of China’s reopening on global inflation and the looming debt ceiling is what many respondents are worried about, but they are not all that concerned about it.

In terms of the labor market, which remains strong and tight, panelists’ median projections for monthly payroll growth this year was 102,000, a significant upward revision from projections in December for 76,000 jobs per month.

On the housing front, they expect home prices and new home construction to continue to fall this year, projecting that housing starts could see their largest decline since 2009.

But they don’t anticipate the downturn to swing into “bust” territory. A mere 2% of respondents said that a “housing market bust” was the greatest downside risk to the US economy in 2023.

The respondents said that the biggest risk was too much monetary tightening. The broadening of war in Ukrainian was one of the factors that trailed far behind.

Wall Street investors are preparing for a huge amount of data coming over the next couple of days which could cause market swings.

What to expect: ADP’s private payroll report for February and the JOLTS job openings, hires and quits report for January are expected Wednesday. Challenger, Gray and Christmas are scheduled to release their job cuts numbers for February, and the Labor Department is expected to give a monthly employment report on Friday.

The Unrest in Congress: Biden’s Budget Predictions for the Joint Economic Committee of the United States and the Working Class of the US Economy

“We’re stuck in the messy middle.” said Josh Hirt, senior US economist at Vanguard. The most interest rate-sensitive sectors of the economy have weakened, but the core areas are still showing resilience. The impact of rates is not fully working through the economy.

The unemployment rate is currently at a 54 year low and is expected to go up by the end of the year.

The Joint Economic Committee will hear testimony from the Federal Reserve Chair and Christine Lagarde, the president of the European Central Bank.

On Thursday, President Joe Biden is expected to present his annual budget to Congress. There is a lot of fiscal unrest among lawmakers as arguments over the debt ceiling rage on. The limit will not be raised until deep spending cuts are made in the federal government. The White House is not willing to negotiate.

Biden’s budget intends to raise taxes on the ultra-wealthy to help offset rising costs for Medicare, Social Security and health care. The president had also proposed a tax last year. Other Biden proposals, like increased tax on capital gains and on corporate stock buybacks, have roiled Wall Street.

Wall Street and Main Street Panic: Why the Fed Is It Wrong, and What the Phenomenology Says about the Roadrunner

Daly acknowledged that high inflation and the aggressive policy action taken by the Fed to bring it down have caused panic on Main Street and Wall Street. She said the responses ranged from fearing a recession to fearing they won’t get the job done.

High inflation levels in goods, housing and other sectors along and strong economic data, she said, has led her to question the momentum of disinflation.

Atlanta Fed President Raphael Bostic also said Wednesday that he believes the Fed needs to raise its policy rate by half a percentage point at the next meeting.

The governor of the Fed warned that interest rates could go higher than anticipated, after recent stronger than expected economic data.

And for the US economy, it could likely mean a “Wile E. Coyote moment,” Summers said, referencing the cartoon canine’s relentless — yet futile — pursuit of the speedy Roadrunner off a cliff and into mid-air.

There were lots of strong data in the weeks after the meeting, showing a lot of job gains, consumer spending and inflation.