Real Estate Transactions Are Up, (PPI) Inflation Figures, & White Collar Criminals (Alleged) Can Not Seem To Keep Themselves Off The Internet Despite Being On $250M Bail | (1.18.23)
“Great things are done by a series of small things brought together.” - Vincent Van Gogh
What You Need To Know Today:
• This morning the Bureau of Labor Statistics published updated month-over-month figures for the Producer Price Index (PPI), which measures the change in the price of finished goods and services sold by producers and is a leading indicator of consumer inflation. The report showed that overall producer inflation declined by (-0.5%) which was much steeper than the pre-release market expectation of (-0.1%).1 On a year-over-year basis, inflation now sits at 6.2% — also much lower than the pre-report market expectation of 6.8% and a 1.1% decrease from last month’s reading of 7.3%. As we sit today, inflation is coming down and is moving at a relatively fast pace (due to the very hawkish monetary policy we have seen from the Fed over the last 9 months). For context, at its peak, this reading was ~11.7% and is now sitting at nearly half of that.
TL;DR — Inflation continues to head in the right direction. The question now is, do we need more hawkish policy action (rate hikes) or just more time for the already executed rate hikes to play out?
• The Federal Reserve Bank of New York released an updated reading for the Empire State Manufacturing Survey which surveys approximately 200 manufacturers in New York state and asks respondents to rate the relative level of general business conditions. When interpreting the data, a reading above 0.0 indicates improving conditions, while a negative reading indicates worsening conditions. This reading came in at (-32.9) which was far below the pre-release market expectation of just (-8.7) and last month’s reading of (-11.2) — indicating that general conditions have deteriorated more than anticipated.2 According to the report, much of this decline can be attributed to substantial declines in new orders and shipments, as well as stalling employment growth and a shortened average workweek. Right now, these businesses are indicating that they expect little improvement in general business conditions over the next six months. Surveys like this one are important because they provide an inside look at sentiment within large businesses — which often quickly react to market conditions and can provide early signals of future economic activity such as hiring, investment, and spending.
TL;DR — Sentiment among manufacturers in New York is much worse than the market anticipated.
• According to the Mortgage Bankers Association (MBA), The Market Composite Index (measuring mortgage loan application volume) increased by 27.9% week over week on a seasonally adjusted basis.3 Meanwhile, the Refinance Index increased 34% from the week prior and sits down 81% from the same week in 2022. Lastly, the Purchase Index indicated that purchases were up 25% week over week and sit 35% below the same week last year. When considering these figures, especially from a year-over-year perspective, it’s important to remember that at this time last year, the average 30-year fixed rate mortgage was ~3.625%. Today, we sit in the context of ~6.25% (considerably higher, but still off of mid-2022 peaks).
TL;DR — Purchases are up, Refis remain down.
White Collar Criminal (Allegedly) Who Continues To Publish Long Form Content On The Internet While Out On $250M Bail Post Of The Day:4
Link to post — FTX US Balance Update 2023-01-17
Source: U.S. Bureau of Labor Statistics — Producer Price Index News Release summary.
Source: Federal Reserve Bank of New York — Empire State Manufacturing Survey.
Source: Mortgage Bankers Association (MBA) — Mortgage Applications Increase in Latest MBA Weekly Survey.