Succinct Summation of the Week's Events

Succinct Summation of the Week's Events:

Positives, 

1)Headline PPI has now fallen for 3 straight months m/o/m thru December with the one tenth drop this past month. The estimate was for a rise of one tenth. The core rate was flat m/o/m where the forecast was for an increase of 2 tenths. Taking out trade too in addition to food and energy saw a gain of 2% m/o/m as expected. Versus last year, headline wholesale prices are up 1%, by 1.8% ex food and energy and by 2.5% ex food, energy and trade. On the goods side, half of the drop was due to a 12.4% fall in diesel fuel with overall energy prices down by 1.2% m/o/m while food prices were lower by .9% m/o/m. Prices for services were flat driven by a .8% m/o/m fall in trade and a .4% decline in 'transportation and warehousing' while ex the above, service prices were up by .4%. The main drag here was the 1.6% fall in the price of 'truck transportation of freight' and down 9% y/o/y. Prices for air freight fell by .4% m/o/m, though up 5% y/o/y.

2)Initial jobless claims remained low at 202k vs 203k in the week prior but we're still dealing with pre and post holiday data. The estimate was 210k. Continuing claims, less influenced by the holidays fell by 34k w/o/w to 1.834mm but still above 1.8mm for the 11th straight week.

3)The December Atlanta Fed's Wage Growth Tracker held at 5.2% y/o/y for the 4th straight month, still running almost double the pre covid trend. 

4)The NY Fed's Consumer Expectations December survey saw a continued drop in expectations for inflation at the one, three and five yr time frames and driven by lower price guesses for rent, college, and food. They were unchanged for gasoline and medical care. Also of note, "Perceptions of credit access compared to a year ago were largely unchanged" but with the drop in interest rates over the past few months, "Expectations about credit access a year from now instead improved."

5)The weekly mortgage applications again is reflecting its poor seasonal adjustment record around new years. They rose 9.9% w/o/w for the week ended 1/5 after falling by 10.7% in the week before.

6)Lower mortgage rates helped to lift the monthly Fannie Mae Home Purchase Sentiment index to 67.2 pts in December, up 2.9 pts m/o/m. "In December, a survey high 31% of consumers indicated that they expect mortgage rates to go down, while 31% expect them to go up, and 36% expect rates to remain the same." Also, "Although consumer perceptions of homebuying conditions remain overwhelmingly pessimistic, that particular component ticked up slightly m/o/m, with 17% of consumers now indicating it's a good time to buy a home, compared to 14% last month, a survey low."

7)The NFIB small business optimism index for December rose to 91.9 from 90.6 and that is the best level since it touched here in July but still well below the 50 yr average of 98. The NFIB chief economist continued to sound grumpy. "Small business owners remain very pessimistic about economic prospects this year. Inflation and labor quality have consistently been a touch complication for small business owners, and they are not convinced that it will get better in 2024."

8)From KB Homes: "As our new fiscal year gets underway, market conditions are improving with rates having declined and consumer confidence increasing, all while resale inventory remains low...As interest rates have now declined since the end of our fiscal year, demand has improved significantly...Our orders in December were higher than November, which is unusual, given that December is typically a slower sales month. To us, this speaks to the pent up demand for home ownership."