Year: 2023

Business Inflation Expectations Unchanged at 3.0 Percent

• How do your current sales levels compare with sales levels during what you consider to be “normal” times?

• How do your current profit margins compare with “normal” times?

• How do your unit costs compare with this time last year?

Short-Term Inflation Expectations Decline, Household Spending Expectations Fall Sharply

Median one-year-ahead inflation expectations declined to 5.0 percent, its lowest reading since July 2021, according to the [NY Fed] December Survey of Consumer Expectations. Medium-term expectations remained at 3.0 percent, while the five-year-ahead measure increased to 2.4 percent.

Household spending expectations fell sharply to 5.9 percent from 6.9 percent in November, while income growth expectations rose to a new series high of 4.6 percent.

US Posted Wages Continued to Slow In December Though wages and salaries advertised in job postings on Indeed grew at a quick pace in December, they continued to decelerate from their rapid pace earlier in the year.

The latest data from the Indeed Wage Tracker shows that wages and salaries advertised in Indeed job postings continue to grow quickly, but the slowdown that started last spring continues. Posted wages grew 6.3% year-over-year in December 2022, a pace more than twice December 2019’s measurement of 3%.

Fewer than one in five occupational categories had faster posted wage growth in December than six months prior. That represents a tremendous decline from December 2021, when advertised wages were accelerating in almost nine out of every 10 categories.

Lower-wage sectors continue to show a sharper wage growth decline than other sectors. Overall posted wage growth declined by 0.2 percentage points from November to December, but fell by 0.4 for lower-wage categories. Compare that to a 0.2 point decline for middle-wage categories and a flatlining for the high-wage group.

PC Shipments Drop Sharply, With Slump Expected to Last Until 2024 Worldwide shipments dropped nearly 29% in the fourth quarter from a year earlier, the largest quarterly decline since the mid-1990s, as the end of pandemic-era demand mars the industry’s outlook.

(…) “Enterprise buyers are extending PC life cycles and delaying purchases, meaning the business market will likely not return to growth until 2024,” Mr. Kitagawa said. (…)

PC makers shipped between 65.3 million and 67.2 million PCs in the fourth quarter of 2022. Worldwide PC shipments totaled 286.2 million units in 2022, a 16% decline from the prior year, according to Gartner. (…)

Average selling prices have fallen over the past few months as discounts were offered to reduce overstocked inventories, IDC said. Falling sales have caused many sellers to cut prices for devices. (…)

Amazon Union’s Win in New York Is Upheld Amazon contested election results after workers formed first U.S. union at the company in April last year

(…) Amazon can contest Mr. Overstreet’s ruling to the NLRB governing board in Washington, D.C. The company could eventually bring the case to court, labor attorneys say. Andy Jassy, Amazon’s chief executive officer, last year said he believed the case is “going to take a long time to play out.” (…)

The Amazon Labor Union lost in two other elections in New York state. A majority of workers at a company site in Bessemer, Ala., also voted against unionizing. (…)

• Coinbase’s CEO, Brian Armstrong, announced yesterday that the crypto-exchange would be cutting 20% of its workforce. As a bellwether for the sector, Coinbase’s second round of cuts — following an 18% reduction in headcount back in June 2022 — suggests the “crypto winter” is yet to show any signs of thawing.

Inflation, ‘uncertain economy’ are making home buyers more cautious, KB Home says

(…) KB Home still has a “large” backlog of more than 7,600 homes, equal to about $3.7 billion in future revenue, supporting its projections for 2023, Mezger said. (…)

“Depending on market dynamics and backlog levels in each community, we are getting more aggressive with our pricing ahead of the spring selling season, in order to generate new orders,” Mezger said.

KB Home is also looking for cuts in costs and in building time, which would help to offset any impact of lower prices, he said.

The number of homes delivered rose 3% to 3,786, while the average selling price rose 13% to $510,400, KB Home said.

Reflecting a “sharply lower demand stemming from higher mortgage interest rates, inflation and other macroeconomic and geopolitical concerns,” gross orders for the quarter hit 2,169 units, down 47% on-year.

Cancellation rates as a percentage of gross orders jumped 68%, compared to 13% a year ago.

KB Home guided for first-quarter 2023 housing revenue in a range between $1.25 billion and $1.40 billion, average selling price between $490,000 and $500,000, and profit margins between 20% and 21%.

KB Home shied away from a larger set of full-year guidance “due to significant uncertainty and limited forward visibility regarding 2023 housing market, macroeconomic and geopolitical conditions,” guiding only for housing revenue in a range of $5 billion to $6 billion for the year.

• Wholesale used vehicle prices are down almost 15% from a year ago.

Source: Daily Shot

China Inflation Picks Up as Covid-19 Restrictions Fall Rising Chinese demand for global commodities could offset easing inflationary pressures.

Consumer prices rose 1.8% in December compared with a year earlier, faster than the 1.6% annual rate recorded in November, China’s national statistics bureau said Thursday. (…)

The acceleration in inflation was driven by gains in food prices, data shows. Food prices rose 4.8% on year in December, compared with November’s 3.7% increase. Nonfood prices increased 1.1 % on year, matching November’s gain. (…)

In the first five days of the traditional peak-travel period, which began on Jan. 7, nearly 38 million passengers were traveling over national railways, highways, waterways and airways—a 41% increase from the same period a year earlier though still 49% lower than the level in the same period in 2019, according to official data released Thursday. (…)

Prices charged by companies at the factory gate fell 0.7% in December on the year, albeit at a slower pace than a month earlier. (…)

Core CPI inflation was +0.7% YoY in December (+0.6% in November).

Where Will the Chinese Splash Their Extra $827 Billion? Investors are waiting to see if consumers engage in a spending frenzy, or keep their cash for a rainy day.

Forced to stay home because of the government’s Covid-Zero policy, Chinese consumers saved one-third of their income last year, depositing 17.8 trillion yuan ($2.6 trillion) into banks. That’s extreme, even for the famously thrifty nation. Before the pandemic, households put away roughly 17% of their earnings. (…)

Over the last three years, excess savings reached 5.6 trillion yuan ($827 billion), according to JPMorgan Chase & Co estimates. (…)

A big chunk of the extra savings during the Covid era could have been made out of precaution. With consumer confidence at a record low, people might be saving for a rainy day. According to the latest central bank survey, over 60% of urban depositors preferred risk-free deposits, while only 15.5% braved investment products. (…)

• This is the U.S. experience per JP Morgan (via The Daily Shot)

Chip Giant TSMC Plans to Cut Spending to Offset Falling Near-Term Sales

(…) “Demand is softer than we thought three months ago,” Chief Executive Officer C.C. Wei said on a conference call. TSMC and its customers will be “more prudent” about their expectations for demand and supply over the coming months, he said. (…)

TSMC said its capital expenditure is set to decrease to $32 billion to $36 billion this year from $36.3 billion in 2022. (…)

• Biden plans new China controls

President Biden plans a new escalation in the U.S.-China relationship, with an executive order imposing new controls on China projects by U.S. companies and investors, Axios’ Hans Nichols reports.

Final language hasn’t been approved. But it appears the executive order will focus on quantum computing, artificial intelligence and semiconductors — and not include biotechnology or batteries.

Officials are unlikely to unveil the order before Secretary of State Tony Blinken makes his first visit to China, currently penciled in for February.

The Biden administration has taken several steps to check Chinese ambitions in AI and quantum computing, with the aim of slowing the development of China’s military capabilities.

Last October, Biden imposed expansive restrictions on semiconductor technology and equipment that can be shared with China.

An analyst with the Center for Strategic Studies described the new policy as “strangling with an intent to kill.”

• COVID-19 brought the number of patents issued in the U.S. down, but only slightly. While the number of patents issued is strong, less than half go to U.S. residents. 

   

• Chinese innovators apply for roughly two-thirds of all patents. The U.S. and Japan have almost all the rest of the applications. (U.S. Chamber of Commerce)

USMCA Panel Rules Against U.S. in Auto Dispute With Mexico, Canada The U.S.’s neighbors had challenged the way it calculates regional content required for tariff-free access under the trade pact.

(…) The minimum regional content requirement was raised to 75% under USMCA from about 62% under Nafta.

Canadian Trade Minister Mary Ng said the ruling reaffirms “our understanding of the negotiated outcome on the rules of origin for automotive products.” Canada joined Mexico’s initial complaint, warning the U.S. interpretation could inhibit the ability of domestic manufacturers from qualifying for duty-free trade in North America. (…

The ruling means that the U.S. must use Mexico’s and Canada’s methods to calculate regional content, or face retaliatory tariffs. (…)

The U.S. Chamber of Commerce said the ruling could provide certainty for the North American motor-vehicle industry, and called on the Biden administration to implement the report’s findings.

John Authers: Is 2% Inflation in View? Be Careful What You Wish For

(…) The question certainly seems to have moved on from whether inflation will cool — to how fast the rate will come down. The path to that is more nuanced, as many may expect. Domestically, there are the US labor and housing markets to consider, pockets of the economy that will likely be key. Internationally, there are global supply chains and China’s big reopening. But economists polled by Bloomberg remain confident that inflation will be down around target by the end of this year. That’s encouraging — although it’s important to point out that they were equally confident that inflation would be under control by the end of last year:

(…) Equally, there are calls that inflation will not stabilize obediently at 2%, but will likely overshoot back into the familiar territory of deflation. Just look at the bold call by Jeffrey Gundlach of DoubleLine Capital, who in his annual “Just Markets” webcast this week said it was “absurd” to believe that inflation would drop from 9.1% to 2% and “magically stop there.” If, in fact, inflation goes to 2% over the course of 2023, it will turn negative, he added. So, if we do have an encouragingly low inflation number in our immediate future, we should remember that it’s possible to have too much of a good thing.

• Enormous dispersion in Q4 revenue growth

Energy, Industrials and Consumer Discretionary are all expected to show revenue growth exceeding inflation. A few sectors do have a valid explanation for showing less revenue growth than inflation. This is due to their currency exposure, since the dollar was up 8.8% in Q4 versus a year ago. Technology and Materials are the only 2 S&P sectors with more than 50% non-US revenues (55 and 58% respectively). It therefore makes sense that they would have trouble matching US inflation rates.

Data Trek

• S&P 500 22Q4 Earnings Preview: A Reset in Growth Expectations

2022 Q3 saw the lowest percentage of companies beat earnings expectations since 2020 Q2.  70.7% of constituents posted a earnings beat which is a nine-quarter low and below the prior-four quarter average beat rate of 75.5%.

Similarly, the aggregate earnings surprise factor last quarter was also at a nine-quarter low (3.4%) and below the prior-four quarter average surprise factor of 5.3% and below the long-term average of 4.1%.

While Energy is contributing the lion share of earnings growth from a year-over-year perspective, the sector is expected to post a quarter-over-quarter decline in earnings growth (-17.0%), which would mark the second consecutive quarterly decline and put further pressure on the breadth of earnings growth.

Net profit margins peaked in 2021 Q2 (12.9%) and have declined for five consecutive quarters to 11.6% last quarter.

Based on analyst expectations, net margin is expected to decline again this quarter to 11.1%.  The forward four-quarter (23Q1-23Q4) net margin is currently 11.7%.

World Bank warns global economy could tip into recession in 2023

The development lender said it expected global GDP growth of 1.7% in 2023, the slowest pace outside the 2009 and 2020 recessions since 1993. In its previous Global Economic Prospects report in June 2022, the bank had forecast 2023 global growth at 3.0%. (…)

The bank said major slowdowns in advanced economies, including sharp cuts to its forecast to 0.5% for the United States and flat GDP for the euro zone, could foreshadow a new global recession less than three years after the last one. (…)

The bleak outlook will be especially hard on emerging market and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years — less than half the pace of the past two decades. (…)

It predicted a [China] rebound to 4.3% for 2023, but that is 0.9 percentage-point below the June forecast due to the severity of COVID disruptions and weakening external demand. (…)

• ECB will keep raising rates ‘significantly’ at sustained pace, De Cos says

The European Central Bank expects to continue raising interest rates “significantly” at future meetings, at a sustained pace, to ensure that inflation returns to the 2% target over the medium term, ECB policymaker Pablo Hernandez de Cos said on Wednesday.

“Keeping interest rates at tight levels will reduce inflation by dampening demand and will also protect against the risk of a persistent upward shift in inflation expectations”, De Cos told a financial event in the evening.

His stance was in line with the ECB’s guidance and comes after ECB policymaker Mario Centeno said on Tuesday the current process of interest rate increases was approaching its end. (…)

In any case, he said it was crucial to continue to stress the importance of taking into account the “extraordinary uncertainty we are experiencing,” adding that the institution’s future interest rate decisions would continue to be data-driven.

• ECB needs several more significant rate hikes, Rehn says

Did you miss yesterday’s EQUITY MARKETS: SEEKING FAIR VALUE

Fed Official: ‘We Have a Lot More Work to Do’ to Bring Inflation Down Governor Michelle Bowman said the labor market will likely need to soften this year to better control inflation.

• San Francisco Fed President Mary Daly at WSJ Live Q&A Event

Interesting chat between Nick Timiraos and San Fran Fed President Mary Daly. Some extracts with my emphasis:

(…) But I will say, right at the top of our time together, that the Fed is very data dependent. We’re completely data dependent. (…)

It is the core services inflation, excluding housing services, shelter services, that just has shown no sense that it’s coming down. And that is particularly, historically, been persistent and very highly related to the progression of the labor market and wage growth. So that’s why my own forecast for inflation rose in the December SEP; it’s because we see more persistence in some of the aspects of inflation that are just harder to bring down quickly. And I think what you’re seeing is an agreement across FOMC [Federal Open Market Committee] participants that the inflation data have just come in more persistent than we had expected, and we have to build that in.

D.O. here: the data says that CPI-services ex-shelter only rose in 2 of the last 5 months and none of the last two. Last 5 months a.r.: +3.6%, last 3 months a.r.: +3.2%. The sequence of 3-m % changes since June: +3.1%, +2.1%, +1.9%, +1.7%, +1.4%, +0.8%.

Ultimately, policy makers are risk managers. We have to have a modal outlook, the most expected outlook, but then we also have to manage the risks, and right now the biggest risk out there that would be very hard to entangle is that inflation expectations, which have held steady—so far—would start to drift in response to more persistent inflation. And so we’re determined, dedicated, united, resolute—you can use any of the words you’ve probably heard one of us say—to just remind people that we are committed to bringing inflation down to our price stability target of 2%. But it isn’t going to happen quickly and it won’t be complete, in all likelihood, in the coming year. (…

MR. TIMIRAOS: Now, money markets have reacted strongly to these revisions to average hourly earnings, and also on Friday there was a sizable drop in a widely watched survey of business purchasing managers for the service sector, especially in the leading new orders component. The market has an assessment right now that you’ve basically done your job and that you don’t need to tighten as much as you projected just a few weeks ago. Now, when you and I did this conversation a year ago, you told me that those interest rate projections, the dots, are only good on the day that they’re submitted. So why shouldn’t the wage data and some of these other reports we’ve seen lead now to a downward revision in your rate forecast, closer to where the market is?

MS. DALY: Well, there’s really two, maybe three reasons. Let me start with one and see how many numbers I get to.

So the first one—and you’re absolutely right; the dots are only as good as the day that we print them. So the question is, to what extent do the—do my dots, as we call them, do my projections change as the incoming information came in? And so for me what I see is it’s one month of data. You said that right out of the gate. It’s one month of data. I don’t want us—I don’t think we should declare victory on inflation, on the labor market, on any of the things that we’re seeing based on one month of data.

D.O. again: the data says that, since May 2021, the sequence of 5-month annualized growth rates in hourly earnings was +5.7%, +5.2%, +5.1%, +4.1%. Last 3 and 2 months: +4.0% a.r..

Second is if I asked us all to do this thought experiment, so I’m going to ask us all to do it. Imagine you don’t know anything about where we’ve come from. You just know—you look at the data we have today and you see unemployment’s historically low, jobs are being created a—we’re adding about a hundred thousand more jobs per month than we actually can sustain with new entrants and re-entrants to the labor force, and we have inflation at high rates and, you know, painfully injuring millions of Americans—low, moderate, middle-class Americans—who really are strapped to find ways to substitute across to continue to live their lives and, you know, increase their well-being, you would—most people—would say: Wow, the Fed’s really got to do something. The economy’s out of balance and we need to fix that.

And so I think that, importantly, we need to separate the fact that, yes, we do have good news [data] coming in. Yes, we are seeing monetary policy transmission working. But it’s really too soon to declare victory on this. And if you declare victory early and stop, you can find yourself with a much worse situation down the road. And that’s what happened in the 1970s and we found ourselves with the need to do the [Paul] Volcker disinflation, which was necessary, of course, but painful. And I don’t want to put the economy in that situation again.

And I would return us all to the level of the economy is still out of balance. Demand for labor still outstrips supply by quite a lot. Demand for goods and services is still outstripping supply. So we still need to bring those two things back in balance so that we can have 2% inflation. And ultimately—this is really how I think about it—we want to return the economy to a place where Americans—businesses, consumers, you know, communities—they don’t have to think about inflation every day. When I’m out there in the community, that’s the No. 1 topic on people’s mind: inflation. It beats out recession by quite a lot.

MR. TIMIRAOS: What does being mindful of the lags mean for you in concrete terms? Does it mean, for example, that the Fed can slow down or stop raising interest rates absent clear signs of economic weakness in the data? I mean, people ask me all the time: If you wait to see signs that the economy is rolling over, doesn’t that mean you’ll have gone too far, that you’ll have overshot?

MS. DALY: So that’s a terrific question. So I look at this many, many ways, try to get empirical information about lags but also just you have to use the data that are incoming.

So let’s start with there are lags in monetary policy. We don’t actually know how long they are. What we do know is that the speed of transmission from when we talk about our policy to where markets price in the policy rates has sped up tremendously. It’s almost immediate. We say something, markets put it in. (…) So that piece of the transmission mechanism is very fast.

But there’s still this piece between when rates go up and when it starts to impact the real economy, and we’ve seen it evolve but it comes with lag. So we raised the interest rate starting March of ’21 and we saw the housing sector respond almost immediately. It’s interest-sensitive. Other interest-sensitive sectors respond. But only now are we seeing that trickle through to a slower growth in the economy that would mean slower employment growth and slower wage growth and, you know, slower demand growth more generally. So that’s what the lags are. You could hear just by my description of them we don’t know a precise number of quarters, so it requires intense study on a regular basis. I would say that’s basically the definition of data dependence.

But the other thing that I use—and I found this very helpful—is San Francisco Fed researcher Andrew Foerster, along with some other colleagues of his, have done something they call the proxy funds rate. And it just recognizes that not only is our funds rate that adjusts that’s important for policy, it’s also our forward guidance and our balance-sheet policy. And his own estimates would put the proxy rate well above the funds rate we have in place right now. And so I’m mindful that right now the funds rate is actually higher, and it’s why we’re seeing the economy slow, in my judgment.

So what I’m looking at is we don’t need to see inflation get to 2%. We don’t need to see inflation even get necessarily down to something within a stone’s throw of 2% before we would stop raising and simply hold. (…)

The December CPI is out tomorrow.

• Fed’s No-Rate-Cut Mantra Rejected by Markets Seeing Recession

Federal Reserve officials are making a full-court-press effort to convince investors they won’t be slashing their benchmark interest rate before year’s end.

It’s not working.

Money markets are pricing a rate peak around 4.9%, followed by nearly half a percentage point of rate cuts by the end of 2023. That’s despite multiple officials in recent days delivering a sharply contrasting message: Rates are heading above 5% and will stay there all year. (…)

“The market thinks the Fed is playing without a playbook, since their forecasts have been wrong before and they’ve downplayed them in the past,”’ said Marc Chandler, chief market strategist at Bannockburn Global, who’s been working in financial markets since 1986. Investors judge that the US is “headed for a recession, and that the Fed doesn’t quite yet get it.” (…)

“Fed officials have turned more hawkish because investors aren’t listening to their warnings,” Ed Yardeni, the veteran watcher of the bond market who heads his namesake research firm, wrote in a note to clients. “Perhaps, Fed officials should listen to the bond market.”

One problem is that Powell and his predecessors have each downplayed the relevance of the so-called dot plot of policymakers’ forecasts for the benchmark rate. Another issue is that the Fed’s 2021 forecasts proved woefully wrong in failing to anticipate the rate hikes of 2022. [Actually, the median dot plot for the end of 2022 a year ago was 0.9%…](…)

Swaps traders see the Fed boosting its policy rate — now in a 4.25% to 4.5% target range — to just under 5% by June and then cutting it to around 4.5% by the end of December. While traders’ pricing of the terminal funds rate, as it’s known, has ebbed and flowed through recent months, cuts have consistently been priced in for before the end of 2023. (…)

Minutes of the Fed’s Dec. 13-14 meeting showed participants worried about any “misperception” about monetary policymaking fueling optimism in financial markets that would then “complicate the committee’s effort to restore price stability.” (…)

Economic data such as Friday’s surprise contraction in the Institute for Supply Management’s services gauge back the view that a recession in the offing and inflation has peaked, she says. “The Fed’s ultimately going to have to catch up.”

• Gundlach Says Listen to Bond Market Rather Than Fed on Rates

“My 40 plus years of experience in finance strongly recommends that investors should look at what the market says over what the Fed says,” the DoubleLine Capital LP Chief Investment Officer told listeners on a webcast Tuesday. (…)

Treasury yields have tumbled in the wake of recent data showing a moderation in US wage gains and a contraction in the services sector. Far from pricing in a benchmark above 5%, Treasury yields across the curve are trading below the Fed’s current range, with even the two-year note ending just shy of 4.25% on Tuesday. (…)

Bonds are more attractive than equities, according to Gundlach. That is reflected in his view that investors right now should favor a portfolio that is 60% bonds and 40% equities, rather than the opposite, more traditional 60/40 mix that allocates the bigger share to stocks.

Gundlach’s comments on the Fed echo remarks he made late last week on Twitter in which he said “There is no way the Fed is going to 5%. The Fed is not in control. The Bond Market is in control.” (…)

He also drew attention to the inversion of the Treasury yield curve, which have successfully predicted economic slumps in the past. Inverted yield curves have always led to recession in relatively short order, he said, adding that “there is tremendous upside in many bond strategies.”

BTW, Minneapolis Fed President Neel Kashkari told the New York Times in an interview published this week that the central bank will be proved right. “I’ve spent enough time around Wall Street to know that they are culturally, institutionally, optimistic,” Kashkari said. “They are going to lose the game of chicken, I can tell you that,” he said. (…)

Party to the current game of chicken:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2022 is 4.1 percent on January 10, up from 3.8 percent on January 5. After recent releases from the Institute for Supply Management, the US Bureau of Labor Statistics, and the US Census Bureau, the nowcasts of fourth-quarter real personal consumption expenditures growth and fourth-quarter real gross private domestic investment growth increased from 3.2 percent and 5.8 percent, respectively, to 3.5 percent and 6.8 percent, respectively.

Economist Says His Indicator That Predicted Eight US Recessions Is Wrong This Year

Economist Campbell Harvey has had a winning track record since he showed in his dissertation at the University of Chicago decades ago that the shape of the bond yield curve was linked to the path of US economic activity.

US recessions have been preceded by an inverted yield curve — when short-term rates exceed those of longer tenors — since the late 1960s. Fast forward to 2023, that’s exactly what’s been happening with the Treasury yield curve in the past month and half. Yet, Harvey is saying this time the US economy will manage to avoid a real slump even though it will keep slowing down for a bit longer.

“My yield-curve indicator has gone code red, and it’s 8 for 8 in forecasting recessions since 1968 — with no false alarms,” Harvey, now a professor at Duke University’s Fuqua School of Business, said in a interview Tuesday.  “I have reasons to believe, however, that it is flashing a false signal.” (…)

Despite the curve being inverted for the ninth time since 1968, Harvey said it’s probably not a harbinger for a recession.

One of the reasons is the fact the yield curve-growth relation has become so well known and widely covered in popular media that now it impacts behavior, he said. The awareness induces companies and consumers to take risk-mitigating actions, such as increasing savings and avoiding major investment projects — which bode well for the economy.

Another boost to the economy is coming from the job markets, where the current excess demand for labor means laid-off workers will likely find new positions more quickly than usual. In addition, he said, given the largest job cuts so far have been in the tech sector, those highly skilled recently fired workers are also not apt to be unemployed for very long.

Harvey’s model was linked to inflation-adjusted yields and he said the fact inflation expectations are inverted — meaning traders see price pressures easing through time — also eases odds for a recession ahead.

“When you put all this together it suggests we could dodge the bullet,” Harvey said. “Avoiding the hard-landing — recession — and realizing slow growth or minor negative growth. If a recession arrives, it will be mild.” (…)

Harvey’s view is not the consensus. Many Wall Street firms are calling for a recession some time this year or early 2024 in the aftermath of the Federal Reserve’s most aggressive hiking campaign in decades to rein on inflation.

Former Fed Chair Alan Greenspan said Tuesday a US recession is the “most likely outcome,” a view also shared by former New York Fed President William Dudley.

If the US economy manages to avoid recession, for Harvey, that won’t mean mean his model is now debunked.

Higher Rates Wards Off Small Business Expansion

The National Federation of Small Businesses (NFIB) released its Small Business Optimism Index for December early this morning.  The report showed optimism has begun to fade after a modest rebound in the past few months.  The index fell back below 90.0 to the lowest level since the June of 89.5. (…)

(Bespoke)

@C_Barraud

• Hmmm…

@AndreasSteno

U.S., Allies Prepare New Sanctions on Russian Oil The next round of sanctions will aim to cap the sales prices of Russian exports of refined petroleum products in a step some market watchers warn could squeeze global supply.