Shipping costs/Banking conditions/Autos/PMI's

Here is a chart of the World Container Index to see it pre Covid, the spike, the comedown and the move higher over the past few weeks. Lori Ann LaRocco at CNBC in a piece yesterday quantified the dollar amount of trade that is being impacted and she said "To avoid attacks by Iran-backed Houthi militants based in Yemen, carriers have already diverted more than $200 billion in trade from the Red Sea." Of note, and contributing to the shipping price increase, "Adding to the strain, about 20% of vessel capacity isn't being used due to a massive drop in manufacturing orders, according to industry experts."

Now we of course hope the war in Gaza ends soon and this shipping situation will clear up but it's just another supply disruption that will result in higher prices of goods after the recent disinflation. The Fed can't do anything about this but it does give them reason to stay on their toes with regards to inflation and not to get complacent by notably cutting interest rates. 

WCI

I forgot to mention the Tuesday release of the December Dallas Fed Banking Conditions survey. Things eased up a bit in terms of lending standards, the demand for loans and the cost of capital but loan nonperformance continued to mostly soften.