2023 CFO Outlook: Weak Growth; Wages Trail Inflation U.S. financial executives are generally pessimistic about next year’s economy, saying they expect price growth to subside some in 2023 but still remain high. They also report that wages at their firms have not kept pace with inflation.
The CFO Survey panel includes firms that range from small operations to Fortune 500 companies across all major industries. The survey closed on December 2.
- CFOs expect real GDP to grow by only 0.7 percent in 2023, with 31 percent of CFOs expecting negative real growth.
- Most companies reported including a cost-of-living adjustment in the wages they pay their own employees. Among companies that include an explicit cost-of-living adjustment to wages, this adjustment will average 3.3 percent, in addition to merit increases [averaging 3.1%].
- CFOs anticipate their companies’ revenues to grow by only 5 percent in 2023, which is down from last quarter’s 2023 forecast and also less than anticipated 2022 revenue growth.
If revenues rise 4.7% and prices 5.2% = volume down 0.7%. With unit costs up 6.7% including a 6.9% increase in the wage bill, operating profits are set to decline.
Philly Fed: December 2022 Nonmanufacturing Business Outlook Survey
Nonmanufacturing activity in the region remained weak this month, according to the firms responding to the December Nonmanufacturing Business Outlook Survey. The index for general activity at the firm level turned positive but remained low. The new orders and sales/revenues indexes were negative, and the full-time employment index declined to a low but positive reading this month. The prices paid and prices received indexes both fell. Expectations for growth over the next six months were more widespread.
- Special question:How will your firm’s total sales/revenues for the fourth quarter of 2022 compare with that of the third quarter of 2022?
- 36.3% expect sales/revenues to decline YoY in Q4, 21.8% by more than 5%. Only 21.8% expect sales/revenues to rise by more than 5%.
U.S. Home Sales Post Record 10th Straight Month of Declines November existing-home sales fell 7.7% as Fed keeps raising interest rates
November sales fell 35.4% from a year earlier. The streak of declines is the longest on record in data going back to 1999, NAR said.
Existing-home sales have dropped about 37% from their recent peak in January. (…)
Excluding the early months of the Covid-19 pandemic, November’s existing-home sales rate was the lowest since November 2010, Mr. Yun said.
The median existing-home price rose 3.5% in November from a year earlier to $370,700, NAR said. Prices fell month-over-month for the fifth straight month after reaching a record $413,800 in June. (..)
Mortgage applications for home purchases rose 4% on a seasonally adjusted basis in the week ended Dec. 9 from the prior week, according to the Mortgage Bankers Association. Real-estate brokerage Redfin Corp.’s seasonally adjusted measure of home-buying demand, which tracks buyer inquiries, rose 5% in the four weeks ended Dec. 11 compared with a month earlier. (…)
The number of homes for sale has risen from a year ago because homes are sitting on the market longer, but prospective sellers are reluctant to list their homes. Many homeowners have rates on their mortgages below 4% and are unwilling to give up their current rate for a higher one on a new home.
The typical home sold in November was on the market for 24 days, up from 21 days from the prior month, NAR said.
Nationally, there were 1.14 million homes for sale or under contract at the end of November, down 6.6% from October and up 2.7% from November 2021, NAR said. (…)
The share of first-time buyers in the market was 28% in November, up from 26% a year earlier. About 26% of November existing-home sales were purchased in cash, up from 24% in the same month a year ago, NAR said. (…)
As low as it gets? Charts from CalculatedRisk:
One year later at Starbucks: This month marks the one-year anniversary of the first U.S. Starbucks restaurant vote to unionize, Axios’ Hope writes.
Data: Starbucks Workers United; Chart: Erin Davis and Thomas Oide/Axios Visuals
High Commodity Prices Feed a Boom in the U.S. Farm Belt Net farm income is on track for a near 50-year high, thanks to increased prices for goods ranging from wheat to milk.
Tesla Dangles $7,500 Discount in Rare Move to Boost Deliveries The company is offering sales on the Model 3 and Y for US customers.
Tesla Inc. is offering US consumers $7,500 to take delivery of its two cheapest models before year-end, a move likely to foment more debate over the extent of the carmaker’s struggle with demand.
The discount Tesla is dangling on new Model 3 sedans and Model Y sport utility vehicles is double what the company was offering earlier this month, and likely has to do with changes to US tax credits that take effect in 2023.
Teslas were expected to be eligible for $3,750 credits starting in January as part of changes to federal electric vehicle incentives made by the Inflation Reduction Act. That changed this week when the US Treasury Department announced it was delaying guidance on how to meet new battery content requirements, which may make certain consumers eligible for a full $7,500 credit early next year.
It’s highly unusual for Tesla to offer such a perk, as Elon Musk has enforced a no-discount policy going back years. The incentive is the latest indication that the chief executive officer’s prediction for an “epic” end of the year isn’t panning out. Tesla has cut prices and production in China, and Musk has repeatedly criticized the Federal Reserve for raising interest rates.
Tesla already has said it expects to come up just short of its target to increase deliveries by 50% this year. The carmaker’s production exceeded deliveries by more than 22,000 vehicles during the third quarter, and it’s braced investors for there to be another mismatch at the end of the year.
I received this offer yesterday but it also included a 10,000 miles supercharger credit. The credit is available in the U.S. and also in Canada, a first.
Unrelated but eventually related (charts from the EIA FYI:
Notice the year axis on this chart:
Capex still below 2017-18 levels while cashflows are up 2.5x:
Canada’s Inflation:
Headline CPI inflation edged down to +6.8% yoy in November. Six out of eight categories accelerated on a year-over-year basis while transportation, and clothing and footwear slowed. CPI ex food and energy edged up to +5.4% yoy, and the average of the BoC-preferred CPI-trim and CPI-median edged up by one tenth to +5.15% yoy.
On a seasonally adjusted monthly basis, the CPI moved up by 0.4% in November. Seasonally adjusted CPI ex food and energy inflation edged up to +0.3% mom.
Sequential durable goods inflation slowed further to -0.4% mom GS sa (vs. -0.1% in October), but services inflation reaccelerated to +0.5% mom GS sa (vs. +0.3%). Within services, wage-sensitive categories were particularly strong. Rent inflation accelerated to +1.2% mom GS sa (the fastest pace since the current methodology was adopted in 2019) and boosted sequential services inflation by roughly 15bp, while inflation in other wage-sensitive categories—including personal care services and services related to household furnishings and operations—also increased. (Goldman Sachs)
This NBF Economics and Strategy’s chart illustrate that inflation is broadly receding in Canada…
…faster than in the U.S.:
David Rosenberg: “If there is an asset class that has faced “capitulation,” it is the bond market: investors yanked $10.9 billion from fixed income mutual funds in the December 14th week — the 17th consecutive week of net outflow (and bringing the year-to-date redemption to nearly $500 billion!).”
History rhymes:
- ARKK vs QQQ: as low as it gets?
Source: Daily Shot
- “I think there could be a little more contagion from FTX. But my hope is that [everything moves] through the system in the next couple of months, or quarters at most. (…) I hope that FTX is a catalyst — just like after Enron we saw Sarbanes-Oxley, and after the 2008 financial crisis we saw Dodd-Frank.” (Brian Armstrong — co-founder and CEO of Coinbase, reported by Axios)
Taliban Ban All Education for Girls