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Consumer confidence: Omicron plays holiday Grinch

noreply@blogger.com (Unknown) — Thu, 23 Dec 2021 17:48:00 +0000

Although consumers were slightly more optimistic about economic conditions in the December survey, nearly all the data were collected prior to the rapid spread of Omicron in the U.S., according to the University of Michigan Surveys of Consumers.

While it is likely that confidence will decline in the month ahead, it is simply too early to judge the eventual impact of Omicron on prices, incomes and employment, said U-M economist Richard Curtin, director of the surveys. The most positive change recorded in December was that the gain was entirely due to rising optimism among households in the bottom third of the income distribution.

Their renewed optimism was due to higher expected income gains during 2022, Curtin said. Those anticipated gains may be vulnerable to the impact of the rapidly spreading Omicron variant on hours worked, he said.

Moreover, inflation has already eroded living standards, with lower income households suffering the biggest relative setbacks. Declining inflation-adjusted incomes, lower savings balances and potential post-holiday spending cutbacks are likely to slow the pace of growth in the overall economy in the first half of 2022, according to Curtin.

“The best news was the anticipated growth in incomes among households in the bottom third of the distribution,” he said. “It was due to a 5.9% boost in 2022 Social Security payments as well as higher expected income gains among the youngest workers.

“Unfortunately, the extremely regressive nature of inflation has also meant that even these gains will leave these households without inflation-adjusted income gains. Moreover, Omicron is likely to continue to put upward pressure on prices as well as weaken the pace of economic growth. The Fed must rebalance policies to both reduce inflationary pressures and to counter any overall weakness in the economy.”

Larger income gains expected by bottom third

Incomes among the bottom third were expected to rise by 2.8% in 2022, up from 1.8% last December, and the highest level since 2.9% was recorded in 1999. There have only been five surveys in the past half century that income expectations among low-income households have exceeded the December level.

The announced increase in Social Security payments of 5.9% in 2022 was partly responsible for the gain as well as the expected wage increases among the youngest workers of 5.0%, Curtin said. Unfortunately, he said, these gains will be offset by inflation.

Inflation more serious than unemployment

When asked whether inflation or unemployment was the more serious problem facing the nation, three-quarters of all consumers picked inflation. Just 15% of all consumers anticipated that their household’s income would rise faster than inflation in the year-end survey. This was the lowest figure recorded in eight years.

Complaints that rising prices had lowered their living standards were voiced by 27% of households, the highest in nine years.

Consumer Sentiment Index

The Consumer Sentiment Index rose to 70.6 in the December 2021 survey, up slightly from last month’s 67.4, but substantially below last year’s 80.7. The Expectations Index rose to 68.3, up from last month’s 63.5, and well below last year’s 74.6. The Current Conditions Index rose to 74.2, up from last month’s 73.6, and significantly below last year’s 90.0.

New home sales jump 12.4% in November, highest in 7 months

noreply@blogger.com (Unknown) — Thu, 23 Dec 2021 17:47:00 +0000

Sales of new single-family homes rose 12.4% in November, the fastest pace in seven months, as the housing industry continued to benefit from low mortgage rates and strong demand.

The November increase pushed the seasonally adjusted annual sales pace to 744,000 last month, the best showing since reaching 796,000 in April.

The median sales price of a new home sold in November hit $416,900, 14.1% higher than a year ago.

Demand has surged this year as many Americans cooped up by the pandemic seek out larger homes.

The sale of previously occupied homes rose for a third straight month in November to a seasonally adjusted annual rate of 6.46 million units, the fastest pace since January, according to a report this week from the National Association of Realtors.

Extraordinarily low mortgage rates have intensified demand.

Freddie Mac reported Thursday 30-year fixed rate mortgages averaged 3.05% this week, down from last week’s 3.12%.

Mortgage rates are likely to move higher next year as the Federal Reserve phases out the monthly bond purchases it has been making since the pandemic hit nearly two years ago. The Fed has already signaled that it expects to start raising interest rates as early as next spring to check sharply rising inflation.

But interest rate increases are expected to be modest and the shift higher may actually intensify demand as Americans try to lock in rates before they head even higher.

“Anticipation of higher mortgage rates as the Fed tapers should be supportive of sales over coming months,” predicted Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

For November, sales were up in every region of the country except the Midwest, which saw a 25.4% drop. New home sales surged 53.2% in the West and were up 15.6% in the Northeast and 2.7% in the South.

Personal Income and Outlays Increase

noreply@blogger.com (Unknown) — Thu, 23 Dec 2021 14:56:00 +0000

Personal income increased $90.4 billion (0.4 percent) in November according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $70.4 billion (0.4 percent) and personal consumption expenditures (PCE) increased $104.7 billion (0.6 percent).

Real DPI decreased 0.2 percent in November and Real PCE increased less than 0.1 percent; spending on services increased 0.5 percent and spending on goods decreased 0.8 percent (tables 5 and 7). The PCE price index increased 0.6 percent. Excluding food and energy, the PCE price index increased 0.5 percent.

The estimate for November personal income and outlays reflected the continued economic recovery and government response to the COVID-19 pandemic. Government social benefits increased in November, reflecting an increase in the Provider Relief Fund (extended by the American Rescue Plan) that was partly offset by declines in many other pandemic-assistance programs. The full economic effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays estimate because the impacts are generally embedded in source data and cannot be separately identified.

The increase in personal income in November primarily reflected increases in compensation of employees and government social benefits (table 3). Within compensation, the increase reflected increases in both private and government wages and salaries. Within government social benefits, an increase in "other" benefits (notably, an increase in the Provider Relief Fund to health care nonprofits) was partly offset by a decrease in unemployment insurance.

The $104.7 billion increase in current-dollar PCE in November reflected an increase of $97.4 billion in spending for services and a $7.4 billion increase in spending for goods (table 3). The increase in services was widespread, led by housing and utilities. Within goods, an increase in nondurable goods (mainly gasoline and other energy goods) was partly offset by a decrease in durable goods (led by recreational goods and vehicles as well as motor vehicles and parts).

Personal outlays increased $106.3 billion in November (table 3). Personal saving was $1.25 trillion in November and the personal saving rate-personal saving as a percentage of disposable personal income-was 6.9 percent.

The PCE price index for November increased 5.7 percent from one year ago, reflecting increases in both goods and services (table 11). Energy prices increased 34.0 percent while food prices increased 5.6 percent. Excluding food and energy, the PCE price index for November increased 4.7 percent from one year ago.

U.S. Durable Goods Orders Increase More Than Forecast

noreply@blogger.com (Unknown) — Thu, 23 Dec 2021 14:54:00 +0000

Orders placed with U.S. factories for durable goods rose in November by the most in six months, exceeding forecasts and pointing to steady demand that will help drive production growth in early 2022.

Bookings for all durable goods -- or items meant to last at least three years -- increased 2.5% from the prior month, partly reflecting a sharp rise in commercial aircraft orders.

The value of core capital goods orders, a proxy for business investment in equipment that excludes aircraft and military hardware, fell 0.1% after an upwardly revised 0.9% increase in October, Commerce Department figures showed Thursday.

The median estimate in a Bloomberg survey of economists called for a 0.7% increase in core capital goods orders and a 1.8% rise in total durables bookings.

Despite the softer results in business equipment orders, the strength in prior months illustrates a robust pattern of private investment aimed at bolstering productivity and production capacity. Amid lean inventories, near-record job vacancies and a challenging supply network, companies are looking to enhance efficiency.

Meantime, inflation-adjusted household spending stagnated in November as the fastest price gains in nearly four decades eroded purchasing power. Purchases of goods and services, after adjusting for higher prices, were little changed following a 0.7% gain in October, separate Commerce Department figures showed Thursday.

The durables data showed bookings for commercial aircraft increased 34.1%. Boeing Co. reported 109 orders in November, up from 10 a month earlier. The government data on aircraft orders don’t always align exactly with the corporate figures.

Orders for motor vehicles rose 1%. Durable goods orders excluding transportation equipment increased 0.8%.

Outside of the more volatile transportation categories, the report was mixed. Bookings for metals and communications equipment increased, while those for machinery, electrical equipment and computers eased.

Unfilled orders for manufactured durable goods, a measure of backlogs, rose 0.7%. Inventories, meantime, increased 0.6%.

Core capital goods shipments, a figure that will be used to calculate investment in the government’s fourth-quarter gross domestic product report, rose 0.3% in November.

Orders for defense capital goods, a volatile component, jumped 16%, while total durable goods bookings minus military equipment rose 2%.

Jobless Claims Remain Steady

noreply@blogger.com (Unknown) — Thu, 23 Dec 2021 14:52:00 +0000

The number of Americans filing first-time claims for unemployment benefits was unchanged last week at 205,000, the Labor Department reported on Thursday.

The number was in line with estimates and compares to a revised 205,000 last week. The measure has trended near the 200,000 mark for a few weeks as the labor market steadily improves.

The four-week moving average ws 206,250, an increase of 2,750 from the prior period.

The health of the job market is one of the factors that prompted the Federal Reserve last week to announce a further reduction in its purchases of Treasuries and mortgage-backed securities. The Fed is now buying $60-billion-per-month worth of assets, down 50% from what it began buying when the coronavirus first struck the country in March of 2020.

Fed Chairman Jerome Powell said last week that the central bank expects the unemployment rate, now at 4.2%, to fall to 3.5% by the end of next year, the record level it reached just prior to the onset of the pandemic. Meanwhile, employers have 11 million job openings to be filled.

“The nation’s jobless rate, recently at 4.2%, is seen falling further over the next year, as more Americans attain employment and others seek to upgrade their compensation and/or lifestyles by switching jobs,” Bankrate senior economic analyst Mark Hamrick wrote ahead of the report’s release.

Existing home sales miss consensus, rising 1.9% in November

noreply@blogger.com (Unknown) — Wed, 22 Dec 2021 16:49:00 +0000

Sales of previously owned homes in November rose 1.9% from October to 6.46 million units, according to the National Association of Realtors’ seasonally adjusted count. Sales were 2.0% lower than November 2020.

These sales reflect home closings, so contracts that were likely signed in September and October.

Regionally, month-to-month, sales in the Northeast were unchanged. In the Midwest, they rose 0.7% and in the South they rose 2.9%. In the West, sales increased 2.3%.

Sales likely increased due to a strengthening job market and concerns among potential buyers that mortgage rates will be significantly higher next year, according to the NAR’s chief economist Lawrence Yun.

There were 1.11 million homes for sale at the end of November, down 13% year over year. At the current sales pace that represents a 2.1-month supply.

“New listings are coming on the market, but they are being snatched up quickly,” said Yun, who added that he expects to see a further decline in inventory in December.

That tight supply continued to put upward pressure on home prices. The median price of an existing home sold in November was $353,900. That is a 13.9% gain from November of 2020. Price gains are slowing from earlier annual gains of about 20%.

Sales were stronger in the more expensive categories, with homes priced between $750,000 and $1 million rising 37% year over year and those priced above $1 million rising 50%. Comparatively, homes priced between $100,000 and $250,000 fell 19%. Supply is leanest on the lower end of the market.

The market is also moving very quickly, with the average days a home stays on the market just 18 days.

The share of sales to first-time buyers was just 26%, down from 32% in November of 2020. The share of sales to investors was 15%, up from 14% the year before.

Mortgage rates did not help buyers much either. While rates are still low historically, the average rate on the popular 30-year fixed mortgage started September at 2.92% and ended October at 3.22%, according to Mortgage News Daily. That took away significant purchasing power, especially for entry-level or first-time buyers.

“The prospect of higher interest rates in 2022 is accelerating the decision for buyers in an otherwise slower season,” said George Ratiu, senior economist at Realtor.com. “However, the low number of homes for sale remains the principal challenge, stumping both existing homeowners looking for their next house and first-time buyers seeking a place to call their own.”

CFNAI improves in November

noreply@blogger.com (Unknown) — Wed, 22 Dec 2021 15:08:00 +0000

November Chicago Fed National Activity Index: +0.37 vs. +0.75 prior (unrevised).

Production-related indicators slowed in November.

Three of the four broad categories of indicators used to construct the index made positive contributions in November, but all four categories deteriorated from October.

The index’s three-month moving average, CFNAI-MA3, moved up to +0.37 in November from +0.25 in October

Consumer Confidence Improved Again in December

noreply@blogger.com (Unknown) — Wed, 22 Dec 2021 15:04:00 +0000

Economic Expansion Likely to Continue into 2022, Despite Serious Headwinds

he Conference Board Consumer Confidence Index® increased again in December, after an upward revision in November. The Index now stands at 115.8 (1985=100), up from 111.9 (an upward revision) in November. The Present Situation Index—based on consumers' assessment of current business and labor market conditions—was relatively flat at 144.1, down from 144.4 last month. The Expectations Index—based on consumers' short-term outlook for income, business, and labor market conditions—rose to 96.9 from 90.2.

"Consumer confidence improved further in December, following a very modest gain in November," said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. "The Present Situation Index dipped slightly but remains very high, suggesting the economy has maintained its momentum in the final month of 2021. Expectations about short-term growth prospects improved, setting the stage for continued growth in early 2022. The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased."

"Meanwhile, concerns about inflation declined after hitting a 13-year high last month as did concerns about COVID-19, despite reports of continued price increases and the emergence of the Omicron variant. Looking ahead to 2022, both confidence and consumer spending will continue to face headwinds from rising prices and an expected winter surge of the pandemic."

Present Situation
Consumers' appraisal of current business conditions was more favorable in December.

19.9% of consumers said business conditions were "good," up from 17.9%.
26.8% of consumers said business conditions were "bad," down from 27.3%.

Consumers' assessment of the labor market was moderately less favorable.

55.1% of consumers said jobs were "plentiful," down from 55.5%; still a historically strong reading.
12.5% of consumers said jobs are "hard to get," up from 10.8%.

Expectations Six Month Hence
Consumers' optimism about the short-term business conditions outlook increased in December.

26.7% of consumers expect business conditions will improve, up from 25.6%.
17.9% expect business conditions to worsen, down from 19.6%.

Consumers were also more optimistic about the short-term labor market outlook.

25.1% of consumers expect more jobs to be available in the months ahead, up from 22.8%.
14.8% anticipate fewer jobs, down from 19.0%.

Consumers were slightly less positive about their short-term financial prospects.

18.0% of consumers expect their incomes to increase, down from 18.9%.
11.5% expect their incomes will decrease, down slightly from 11.7%.

Q3 GDP figure revised up to 2.3% from 2.1%

noreply@blogger.com (Unknown) — Wed, 22 Dec 2021 15:03:00 +0000

The U.S. economy expanded at an annual 2.3% pace in the third quarter, up from the prior estimate of 2.1%, according to updated data released by the Commerce Department Wednesday. Economists polled by The Wall Street Journal had forecast that third-quarter gross domestic product would remain unrevised.

Growth in the first half of the year averaged a 6.5% annual rate. The economy slowed in the third quarter as a result of the delta variant of the coronavirus that causes COVI-19.

Consumer spending was revised to a gain of 2.0% annual rate in the second quarter from the prior estimate of 1.7%. That was the slowest since the depths of the pandemic in the same quarter of 2020.

At the moment, economists are forecasting a pickup in growth in the fourth quarter. Household spending is expected to pick up sharply. GDP data for the fourth quarter won’t be released until the end of January.

The big unanswered question is how much the rapid spread of the omicron variant will slow the economy in the final weeks of December and into the first quarter. Answers remain illusive but economists are cautious, noting that the U.S. has not done a stellar job eradicating the delta variant.

Mortgage applications flat in the last week

noreply@blogger.com (Unknown) — Wed, 22 Dec 2021 15:01:00 +0000

Mortgage applications decreased 0.6 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending December 17, 2021.

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index increased 2 percent from the previous week and was 42 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 9 percent lower than the same week one year ago.

The refinance share of mortgage activity increased to 65.2 percent of total applications from 63.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 3.4 percent of total applications.

The FHA share of total applications remained unchanged to 9.6 percent from 9.6 percent the week prior. The VA share of total applications increased to 11.5 percent from 10.6 percent the week prior. The USDA share of total applications decreased to 0.4 percent from 0.5 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.27 percent from 3.30 percent, with points increasing to 0.41 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.31 percent from 3.32 percent, with points decreasing to 0.27 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.34 percent from 3.37 percent, with points increasing to 0.36 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.59 percent from 2.58 percent, with points decreasing to 0.32 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs increased to 2.79 percent from 2.75 percent, with points remaining unchanged at 0.28 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

Q3 current account deficit widens by $16.5B

noreply@blogger.com (Unknown) — Tue, 21 Dec 2021 17:58:00 +0000

Q3 Current Account:-$214.8B vs. -$204.8B consensus, -$198.3B previous (revised from -$190.3B).

The U.S. current-account deficit widened by $16.5 billion, or 8.3 percent, to $214.8 billion in the third quarter of 2021.

The third-quarter deficit was 3.7 percent of current-dollar gross domestic product, up from 3.5 percent in the second quarter.

LEI for the U.S. Increased in November

noreply@blogger.com (Unknown) — Mon, 20 Dec 2021 15:37:00 +0000

The Conference Board Leading Economic Index® (LEI) for the U.S. increased by 1.1 percent in November to 119.9 (2016 = 100), following a 0.9 percent increase in October and a 0.3 percent increase in September.

"The U.S. LEI rose sharply again in November, suggesting the current economic expansion will continue into the first half of 2022," said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. "Inflation and continuing supply chain disruptions, as well as a resurgence of COVID-19, pose risks to GDP growth in 2022. Still, the economic impact of these risks may be contained. The Conference Board forecasts real GDP growth to strengthen in Q4 2021 to about 6.5 percent (annualized rate), before moderating to a still healthy rate of 2.2 percent in Q1 2022."

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased by 0.3 percent in November to 106.7 (2016 = 100), following a 0.5 percent increase in October and no change in September.

The Conference Board Lagging Economic Index® (LAG) for the U.S. decreased by 0.1 percent in November to 107.2 (2016 = 100), following a 0.5 percent increase in October and a 0.9 percent increase in September.

Week Ahead Watch List

noreply@blogger.com (Unknown) — Mon, 20 Dec 2021 14:54:00 +0000

Sentiment readings headline the coming week with declines mostly expected, no surprise given unfolding Covid risks not to mention the withdrawal of monetary stimulus by the Federal Reserve and Bank of England. GfK's consumer climate report will be posted Tuesday as will the Eurozone's consumer confidence flash followed on Wednesday by the US consumer confidence index (this latter report has been moved up from the prior week). Business and consumer confidence in Italy will be posted Thursday. Inflation data will open on Thursday with the PCE price indexes (part of the US personal income and outlays report) where no slowing is expected. And outright gains, though limited, are expected for Japanese consumer prices on Friday. Canada will post retail sales on Tuesday and monthly GDP on Thursday with US data to also include durable goods orders, jobless claims, and new home sales all on Thursday. Expectations for the US data are upbeat. US and UK GDP reports on Wednesday will be revisions.

Mortgage rates inch higher amid shift in monetary policy guidance

noreply@blogger.com (Unknown) — Thu, 16 Dec 2021 17:40:00 +0000

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey^® (PMMS^®), showing that the 30-year fixed-rate mortgage (FRM) averaged 3.12 percent.

“Mortgage rates inched up as a result of economic improvement and a shift in monetary policy guidance,” said Sam Khater, Freddie Mac’s Chief Economist. “While house price growth is slowing, prices remain high due to solid housing demand and low supply. We expect rates to continue to increase into 2022 which may leave some potential homebuyers with less room in their budgets on the sideline.”

News Facts

30-year fixed-rate mortgage averaged 3.12 percent with an average 0.6 point for the week ending December 16, 2021, up from last week when it averaged 3.10 percent. A year ago at this time, the 30-year FRM averaged 2.67 percent.
15-year fixed-rate mortgage averaged 2.34 percent with an average 0.7 point, down from last week when it averaged 2.38 percent. A year ago at this time, the 15-year FRM averaged 2.21 percent.
5-year Treasury (TSRMF)-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.45 percent with an average 0.3 point, unchanged from last week. A year ago at this time, the 5-year ARM averaged 2.79 percent.

The PMMS^® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Kansas city fed composite index steady in December

noreply@blogger.com (Unknown) — Thu, 16 Dec 2021 17:39:00 +0000

December Kansas City Fed Composite Index: +24 vs. prior +24 in November.

Manufacturing Index +10 vs. +17 prior.

“Regional factory activity continued to grow modestly in December,” said Wilkerson. “Materials price increases slowed slightly from a month ago, and most firms expected to raise wages in 2022."

December PMI Composite final print inches marginally lower M/M, comes in above consensus

noreply@blogger.com (Unknown) — Thu, 16 Dec 2021 17:38:00 +0000

December U.S. PMI Composite Index (Final): 56.9 vs. 56.5 consensus and 57.2 prior.

U.S. private sector businesses indicated a strong upturn in output at 2021 end, despite the rate of expansion easing to the slowest for three months.

Supporting the upturn in activity was a quicker increase in December new orders, pace of expansion was the sharpest for five months, and largely driven by a faster rise in service sector new business.

Service Index: 57.5 vs. 58.5 consensus, 58 prior.

Business activity upturn remained sharp despite slowing to a 3-month low as demand conditions strengthened at the end of the year.

The pace of new business growth accelerated to the fastest for five months; Foreign client demand also rose.

Employment growth slowed to the softest for three months in December, as pressure on capacity remained substantial.

Backlogs of work rose at the third-fastest pace on record.

Output expectations for the year ahead were the greatest for four months in December, amid hopes of smoother supply flows in 2022.

Industrial production up 0.5% in November

noreply@blogger.com (Unknown) — Thu, 16 Dec 2021 17:36:00 +0000

November Industrial Production: +0.5% M/M vs. +0.7% consensus and +1.7% prior (revised).

Capacity Utilization 76.8% in-line with consensus and 76.5% prior (revised).

Manufacturing Output: +0.7% M/M in-line with consensus and +1.2% prior (unrevised).

Philly fed outlook at 15.4, current prices received index narrows 13 points

noreply@blogger.com (Unknown) — Thu, 16 Dec 2021 17:34:00 +0000

December Philly Fed Business Outlook: 15.4 vs. +30 consensus, +39 prior (unrevised).

The index dropped 24 points; nearly 27% of the firms reported increases in current activity this month, while 11% reported decreases.The current shipments index decreased 17 points, to 15.3, in December.

The prices paid index declined 14 points to 66.1. The percentage of firms reporting increases in input prices (68%) far exceeded the percentage reporting decreases (2%); 27% of the firms reported no change.The current prices received index fell 13 points to 50.4.

Nearly 51% of the firms reported increases in prices received for their own goods this month, none reported decreases, and 49% reported no change.

Fed doubles pace of tapering, warms up to rate hikes in 2022 as inflationary pressures rise

noreply@blogger.com (Unknown) — Thu, 16 Dec 2021 15:30:00 +0000

The Federal Reserve announced that it would move more quickly to pare back its pandemic-era easy money policies as Fed officials grow concerned about the persistence of inflationary pressures.

On Wednesday, the policy-setting Federal Open Market Committee said it would double the pace by which it winds down its asset purchase program.

The FOMC also signaled a strong likelihood of an interest rate hike next year, which would be the first since the central bank slashed short-term borrowing costs to near-zero in March 2020.

Since the depths of the pandemic, the Fed has added trillions of dollars in U.S. Treasuries and agency mortgage-backed securities to signal its support for financing conditions. The Fed had set a course in November to “taper” the pace of those aggregate purchases by $15 billion per month, and will now double that pace — to $30 billion per month.

“In light of inflation developments and the further improvement in the labor market, the Committee decided to reduce the monthly pace of its net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities,” the FOMC statement reads.

The new pacing would bring all asset purchases to a full stop by March 2022, faster than the course set forth in November that originally sought to end purchases by the middle of next year.

The decision was unanimously agreed to.

A quicker taper would allow the Fed to move earlier — and perhaps more aggressively — on interest rate hikes. All of the 18 members of the FOMC said they could see the case for at least one rate hike next year, a noticeable revision up from September projections showing a 50-50 split on a 2022 rate hike.

The updated dot plots, which map out each of the FOMC members’ projections for where rates will be in coming years, shows the median member of the committee projecting three rate hikes next year, another three in 2023, and another two in 2024.

Jobless claims: Another 206,000 individuals filed new claims, rising from 52-year low

noreply@blogger.com (Unknown) — Thu, 16 Dec 2021 15:27:00 +0000

First-time unemployment filings fell sharply to reach their lowest level since 1969 in early December, coming in below 190,000. And even with the latest move higher, the four-week moving average for new claims — which smooths out volatility in the weekly data – came in at the lowest level since November 1969, dropping by 16,000 week-over-week to reach 203,750.

And continuing claims, while still somewhat above pre-pandemic levels, have also come down sharply from their pandemic-era high. This metric tracking the total number of individuals claiming benefits across regular state programs peaked at more than 23 million in May 2020, but came in below 2 million for a third straight week in this week’s report and reached the lowest level since March 2020.

The marked drop in new weekly jobless claims over the course of 2021 — and especially in the past several weeks — has served as one key indicator of the current tightness in the labor market.

But even as the rate of those newly unemployed per week sank to multi-decade lows, labor force participation has remained depressed compared to pre-virus levels, and job openings have held near record highs. The labor force participation rate last came in at 61.8% for November, or short of February 2020’s 63.3%, and the size of the civilian labor force was still down by 2.4 million.

“If we filled every single job opening that's out there right now, we'd have employment that was not just well above where we were pre-pandemic, but well above what anyone predicted pre-pandemic,” Betsey Stevenson, former Labor Department chief economist and professor of economics and public policy at the University of Michigan, told Yahoo Finance Live.

“That recovery and employers wanting to hire workers is there,” she added. “The challenge is that we still have just a lot of uncertainty going on in the labor market. A lot of what economists talk about is churn — people who are exiting jobs more frequently than they used to, exiting the labor market more frequently than they used to.”

Business Inflation Expectations increase slightly to 3.4%

noreply@blogger.com (Unknown) — Wed, 15 Dec 2021 15:34:00 +0000

December Atlanta Fed Business Inflation Expectations: +3.4% vs. +3.3% in November.

Inflation expectations: Firms' year-ahead inflation expectations increased slightly to 3.4%, on average.

Current economic environment: Sales levels "compared to normal" decreased over the month, and profit margins remained unchanged. Year-over-year unit cost growth was also unchanged at 3.6%, on average.

Homebuilder confidence ticks up in December, in line with consensus

noreply@blogger.com (Unknown) — Wed, 15 Dec 2021 15:32:00 +0000

Surprisingly strong housing demand, even in the usually slower season for housing, has homebuilders feeling increasingly confident.

Builder sentiment in the single-family housing market rose one point to 84 in December, on the National Association of Home Builders/Wells Fargo Housing Market Index, or HMI. That is the fourth consecutive increase and ties with February for the highest level of the year. Anything above 50 is considered positive sentiment.

The increase comes despite concerns over inflation, supply-chain disruptions and an ongoing labor shortage. Prices for wallboard, steel, aluminum and plastic construction products rose sharply in November, according to the producer price index.

“While demand remains strong, finding workers, predicting pricing and dealing with material delays” remain challenging, said NAHB Chairman Chuck Fowke, a homebuilder from Tampa, Florida.

Builders continue to benefit from the incredibly lean supply of existing homes for sale. They’re also seeing high demand from investors, as the build-for-rent sector continues to gain steam. The number of single-family built-for-rent construction starts reached its highest quarterly volume on record during the third quarter of 2021.

There are hurdles ahead, especially given how high prices have jumped recently. The cost of a newly built home jumped 17.5% year over year in October, according to the U.S. Census. Mortgage rates are also expected to rise markedly as the Federal Reserve eases its support for mortgage-backed bonds to contend with surging inflation.

“While 2021 single-family starts are expected to end the year 24% higher than the pre-Covid 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability,” said NAHB chief economist Robert Dietz.

Of the HMI’s three components, current sales conditions rose one point to 90, and buyer traffic also rose one point to 70. Sales expectations in the next six months was unchanged for the third consecutive month at 84.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose 4 points to 74, the Midwest increased 2 points to 74 and the South and West each posted a three-point gain to 87, respectively.

Business inventories squeak past estimate

noreply@blogger.com (Unknown) — Wed, 15 Dec 2021 15:30:00 +0000

U.S. business inventory accumulation increased strongly in October, suggesting that restocking could again support economic growth this quarter even as motor vehicle inventories remain depressed because of shortages.

Business inventories rose 1.2% after gaining 0.8% in September, the Commerce Department said on Wednesday. Inventories are a key component of gross domestic product.

Economists polled by Reuters had forecast inventories rising 1.1%. Inventories increased 7.8% on a year-on-year basis in October. Retail inventories edged up 0.1% in October as estimated in an advance report published last month. That followed a 0.1% dip in September. Motor vehicle inventories decreased 1.0% instead of 0.7% as estimated last month.

Retail inventories excluding autos, which go into the calculation of GDP, increased 0.5%, rather than 0.4% as estimated last month.

A moderate pace of inventory drawdown in the third quarter accounted for all of the 2.1% annualized rise in GDP last quarter. Inventories were depleted in the first half of the year, and COVID-19 pandemic-related shortages are making it difficult to rebuild stocks.

The urgent need to restock is keeping manufacturing humming and supporting the overall economy.

"Inventory-to-sales ratios have collapsed throughout the pandemic," said Jonathan Golub, chief U.S. equity strategist at Credit Suisse Securities USA in New York. "While supply constraints have contributed to these declines, robust sales is the primary culprit. Inadequate inventories, and the need to replenish them, should support robust nominal GDP in 2022."

There are concerns from some economists that businesses wary of delays getting stock could over-order and end up with excess inventory, which could put the economic expansion in jeopardy.

Wholesale inventories rose 2.3% in October. Stocks at manufacturers increased 0.8%.

Business sales advanced 2.1% in October after rising 1.2% in September. At October's sales pace, it would take 1.24 months for businesses to clear shelves, down from 1.26 months in September.

Retail sales growth slowed in November

noreply@blogger.com (Unknown) — Wed, 15 Dec 2021 14:58:00 +0000

Retail sales rose slower than economists had expected in November following three straight months of sharp increases, according to data released Wednesday by the Census Bureau.

U.S. retailers and restaurants made $639.8 billion in sales last month, up just 0.3 percent from October and well below the 0.8 percent increase projected by analysts. October’s retail sales gain was revised up to 1.8 percent, a 0.1 percentage point increase from the initially reported figure.

Retail sales have risen steadily throughout the second half of the year despite deep supply chain disruptions and the highest annual inflation rate in more than 30 years. While growth continued through November, the pace of consumer spending slowed considerably in key sectors.

Sales at department stores sank 5.4 percent last month and purchases at electronics stores fell by 4.6 percent, the Census Bureau reported. Sales by online retailers were flat, though sporting goods, hobby, music and book stores saw sales rise by 1.3 percent.

While a retail sales slowdown during the holiday shopping season would typically be cause for alarm, November’s tepid growth followed three straight months of expectations-beating increases.

Retailers and supply chain experts urged consumers to buy their holiday gifts early to ensure they could check off their lists before Christmas. Those warnings may have pulled sales that would have occurred in November forward into October or September.

“I see this more as a sign that Americans started their holiday shopping early, as opposed to bad news for retailers,” wrote Ted Rossman, senior industry analyst at CreditCards.com, in an analysis.

“Even though November 2021 sales were only up 0.3% from October 2021, they were up 18.2% from November 2020. That year-over-year comparison is more significant, and it illustrates robust expansion.”

Steady price growth could also be weighing on consumer spending.

Consumer prices rose 0.8 percent last month and 6.8 percent in the 12 months leading into November, according to the Labor Department’s consumer price index (CPI), the fastest annual inflation rate since 1982. The intense demand for products in short supply, which fueled much of the year’s inflation, could be fading as prices climb.

“Those year-over-year comparisons are most noteworthy, especially given the tough competition from October. But we are seeing some signs that inflation and supply chain woes may have held November sales back a bit, and those issues didn’t show up as much in October,” Rossman wrote.

Import prices climb again and add to high U.S. inflation

noreply@blogger.com (Unknown) — Wed, 15 Dec 2021 14:56:00 +0000

The cost of imported goods increased sharply in November, contributing to the highest rate of U.S. inflation in almost 40 years.

The U.S. import price index jumped 0.7% last month, the government said Wednesday. Economists polled by The Wall Street Journal had forecast a 0.6% advance.

Over the past year import prices has climbed 11.7%. The last time they rose that fast before the pandemic was in 2011.

Import prices minus oil rose 0.5%.

The cost of imported fuel, autos, consumer goods and industrial supplies rose in November.

Those increases offset lower prices for food and drinks.

U.S. export prices rose 1% in November. They are up 18.2% in the past year.

The cost of most goods and services have surged this year to drive inflation to the highest level since the early 1980s, when the U.S. last experienced a bout of soaring prices.

Major shortages of labor and supplies tied to the pandemic are the main culprits.

The Federal Reserve is betting that inflation will slow sharply toward the end of 2022 as the shortages ease, but the central bank is worried enough that it’s speeding up plans to phase out stimulus for the economy.