The week in review
- Housing starts fell 0.5% m/m
- New home sales decreased to 600k
- Initial claims increased to 216k
- Consumer confidence increased to 108.3
The week ahead
- S&P/Case-Shiller composite
Thought of the Week
The story for the U.S. economy this year has largely been about battling record-high inflation, which has left both equity and fixed income markets bumpier than a ride on Santa’s sleigh. While we do expect a steady deceleration in inflation next year, the rate of inflation is still elevated relative to history, even after coming in below expectations for the second consecutive month in November.
The bottom line is that shoppers will pay the price this holiday season…in the form of costlier gifts. PNC’s Christmas Price Index, which closely mirrors U.S. CPI, has risen 10.5% from 2021 and 16.8% from pre-pandemic levels. PNC conducts an analysis to calculate the current cost for one set of each of the gifts of “true love” in the song “The Twelve Days of Christmas.” Higher commodity prices have been a key driver of higher inflation this year. With livestock producers facing higher feed costs, prices for a turtle dove or a French hen rose 33.3% and 25% y/y, respectively. Similarly, higher precious metal prices boosted the cost of a gold ring by 40% y/y, representing the largest increase in the index. Settling for a calling bird or a swan-a-swimming may be a jollier option, as these goods managed to maintain their 2021 price tags.
Despite the Fed’s efforts to tame inflationary pressures, average hourly earnings, which increased 5.1% y/y in November, still remain strong due to a too-tight labor market. As a result, ladies dancing, pipers piping and drummers drumming all received a pay raise, which is unfortunate news for consumers looking to ring in the new year with some holiday entertainment. All in all, while spreading cheer may cost 9.8% more than it did in 2021, revelers may get some relief from an inflation cold front as we head deeper into the winter season.
Originally Posted December 26, 2022 – Weekly Market Recap
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