Week of Dec 2, 2022 Weekly Recap & The Week Ahead
“I skate to where the puck is going to be, not where it has been.” … Wayne Gretzky
1. Home Prices Drop for Third Straight Month as US Market Cools — the US housing market pulled back even more in September, with prices slipping 1.2% from a month earlier.
It was the third straight decline for the seasonally adjusted measure of prices in 20 large US cities, according to the S&P CoreLogic Case-Shiller index. The housing market suddenly started to cool this year, driven in part by higher borrowing costs as the Federal Reserve hiked its benchmark rate to tamp down inflation. The more-than-doubling of mortgage rates this year has sidelined potential buyers and slowed demand, leading sellers to list fewer properties.
2. U.S. GDP grew 2.9% in third quarter — Gross domestic product, the official scorecard for the economy, was revised up from a 2.6% rate of growth in the preliminary reading issued last month. GDP had shrunk in the first two quarters of the year. The economy is forecast to expand again in the fourth quarter running from October to December, but estimates vary from as much as 4% to less than 1%. All figures are adjusted for inflation. The main engine of the economy, consumer spending, increased at a solid 1.7% annual clip in the third quarter, the government said. Previously the increase was put at a softer 1.4%.
— Business spending was weak, however. Investment fell sharply in large structures such as office buildings and oil rigs. The housing market also slumped due to soaring interest rates.
— Corporate profits also fell 1.1% in the third quarter. Adjusted pretax earnings declined to an annualized $2.97 trillion.
3. Powell Says the Fed Is Prepared to Slow the Pace of Rate Hikes in December — Fed Chair Powell emphasized that the Fed would be focused on slower but steadier interest rate increases in the coming months, likely reaching a higher terminal, or peak, rate than had previously been expected and keeping rates elevated for some time.
“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said in a speech at the Brookings Institution. “The time for moderating the pace of rate increases may come as soon as the December meeting.” Powell’s remarks come after the Fed has already raised interest rates by 3.75 percentage points this year over the course of six meetings. In each of the last four meetings, the Fed raised rates by 75 basis points, or three-quarters of a percentage point. The goal for the central bank in slowing its pace is to get a feel for what will be an appropriate level after seeing the impact on the broader economy of this year’s rate hikes, Powell said.
4. US Inflation Indicator Rises by Less Than Forecast as Spending Increases — the personal consumption expenditures price index excluding food and energy, which Fed Chair Jerome Powell stressed this week is a more accurate measure of where inflation is heading, rose a below-forecast 0.2% in October from a month earlier, Commerce Department data showed Thursday. The overall PCE price index increased 0.3% for a third month and was up 6% from a year ago, still well above the central bank’s 2% goal.
The week ahead — Economic data from Econoday.com:
