Summary:
Durable goods orders in the US which measure the cost of orders received by manufacturers for goods that meant to last at least three years, jumped 1% month-over-month in October of 2022, following a downwardly revised 0.3% increase in September and beating market forecasts of a 0.4% rise. It is the biggest rise in four months, led by transportation equipment (2.1%) and military aircraft (21.7%). The data aren’t adjusted for inflation. Excluding transportation, new orders edged 0.5% higher. Other increases were also seen for electrical equipment and appliances (0.4%); machinery (1.5%); capital goods (2.1%); and computers and related (4.7%). Meanwhile, orders for non-defense capital goods excluding aircraft, a proxy for investment in equipment, were up 0.7%, rebounding from a 0.8% drop in September and beating forecasts of a flat reading.
New home sales in the United States rose by 7.5% to a seasonally adjusted annualized rate of 632K in October of 2022, beating market forecasts of 570K sales and defying the recent drawdown in housing demand as the Federal Reserve aggressively tightens monetary policy. Sales rose sharply in the South (16% to 399K) and in the Northeast (+45.7% to 51K), more than offsetting the decline in the Midwest (-34.2% to 50K). The median price of new houses sold was $493,000, while the average sales price was $544,000. There were 470,000 houses left to sell, up 21.4% from one year ago and corresponding to 8.9 months of supply at the current sales rate.
Consumer sentiment (http://www.sca.isr.umich.edu/) fell 5% below October, offsetting about one-third of
the gains posted since the historic low in June. Along with the ongoing
impact of inflation, consumer attitudes have also been weighed down by
rising borrowing costs, declining asset values, and weakening labor
market expectations. Buying conditions for durables, which had markedly
improved last month, decreased most sharply in November, falling back
19% to its September level on the basis of high interest rates and
continued high prices. Long-term business conditions declined a more
modest 6%, while short-term business conditions and personal finances
were essentially unchanged.
Inflation expectations were also little
changed from October. The median expected year-ahead inflation rate was
4.9%, down slightly from 5.0% last month. Long run inflation
expectations, currently at 3.0%, have remained in the narrow (albeit
elevated) 2.9-3.1% range for 15 of the last 16 months. Uncertainty over
these expectations remained at an elevated level, indicating that the
general stability of these expectations may not necessarily endure.
Next week, in the US, the focus will be on the labor report, speeches by several Fed officials, 2nd estimate of GDP growth, ISM manufacturing PMI, CB consumer confidence, and personal income and spending. Also, attention will be given to inflation rate releases, GDP growth rates and manufacturing PMIs worldwide.
Economic data source: Trading Economics
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A Walk Around the Markets
The Dow Jones added more than 150 points in shortened trading on Friday while the S&P 500 was little changed as investors reassessed the outlook for monetary policy while looking for clues on consumer health as Black Friday shopping started. The Nasdaq underperformed, falling roughly 0.5%, as shares of Activision Blizzard closed down more than 4% following news that the FTC was planning to file an antitrust lawsuit to prevent Microsoft from acquiring the videogame publisher. Investors also digested the latest move from China, with the central bank cutting the reserve requirement ratio for banks by 25 basis points to shore up growth in an economy battered by persistent coronavirus-induced restrictions and real estate crises. Investors continued to parse the minutes from the last Fed meeting, with policymakers seeing the case for slower interest rate hikes while recognizing that recession risks are rising. For the week, the Dow gained 1.8%, the S&P 500 1.5% and the Nasdaq 0.7%.
Silver futures rose to over $21.2 per ounce, rebounding from the two-week low of $20.8 touched on November 21st with support from a slight retreat in the dollar ahead of the FOMC minutes release. Besides supporting bullion, hesitancy by the Fed to maintain the pace of its sharp tightening cycle would lift prices due to higher demand for industrial silver usage through electrical conductors. Signs of low supply also lifted prices, as inventories at New York’s COMEX fell 70% in the last 18 months to just over 1 million tonnes. Also during the period, stocks at the London Bullion Market Association fell for the 10th straight month to a record-low 27.1 thousand tonnes.
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