Weekly Market & Economic Recap (Week of January 16, 2023)

• Retail spending fell in December at the sharpest pace of 2022, marking a dismal end to the holiday shopping season as rising interest rates, still-high inflation and concerns about a slowing economy pinched American consumers. (Wall Street Journal, January 18, 2023, https://www.wsj.com/articles/us-economy-retail-sales-december-2022-11673990047?mod=economy_more_pos6)

• Producer price increases decelerated in December. Supplier prices rose 6.2% last month from a year earlier, the slowest pace since March 2021 (Wall Street Journal, January 18, 2023 https://www.wsj.com/articles/producer-price-increases-decelerated-in-december-11674050147?mod=economy_more_pos9)

• Jobless claims declined last week to the lowest level since September, suggesting the labor market remained tight at the start of the year. Initial jobless claims, a proxy for layoffs, fell by 15,000 to a seasonally adjusted 190,000 last week, the Labor Department said Thursday. (Wall Street Journal, January 19, 2023 https://www.wsj.com/articles/jobless-claims-fell-by-15-000-last-week-11674136017?mod=economy_more_pos5)

• Fed set to slow rate hikes again and debate how much further to go. Officials poised for quarter-point move with inflation cooling. Tight labor market makes some uneasy about pausing increases (Bloomberg, January 20, 2023, https://www.bloomberg.com/news/articles/2023-01-20/federal-reserve-to-slow-pace-of-interest-rate-hikes-and-debate-how-high-to-go?srnd=economics-v2)

• Central bankers from around the advanced world warned against complacency about the fading of the global inflation shock, saying they’ll keep raising interest rates to ensure their job is done. Amid a collective sigh of relief among the business and political elite in Davos, monetary officials there and elsewhere cautioned that falling headline consumer-price gauges might yet prove a false dawn. They cited threats ranging from China’s reopening to resurgent wages. (Bloomberg, January 20, 2023 https://www.bloomberg.com/news/articles/2023-01-20/davos-latest-news-global-inflation-scare-vexes-central-banks?srnd=economics-v2)

• U.S. existing-home sales fell again in December, concluding the weakest year for sales activity since 2014. Sales of previously owned homes, which make up most of the housing market, slid 17.8% in 2022 from the prior year to 5.03 million, the National Association of Realtors said Friday. (Wall Street Journal, January 20, 2023 https://www.wsj.com/articles/u-s-existing-home-sales-slid-last-year-as-interest-rates-surged-11674227468)

• The US and other industrialized countries may be able to bring inflation down without triggering the huge jumps in unemployment that economists may have predicted prior to the pandemic, according to new research from the Federal Reserve Bank of Chicago. If correct, that might improve the chances for a soft landing of the US economy as the Fed raises interest rates to cool price pressures. (Bloomberg, January 20, 2023 https://www.bloomberg.com/news/articles/2023-01-20/us-can-slow-inflation-without-unemployment-spike-fed-study-says?srnd=economics-v2)

• Treasury has about $500 billion of headroom after debt limit hit. Department still at risk of running out of cash later in 2023. Yellen began extraordinary steps Thursday to avert US default. (Bloomberg, January 20, 2023 https://www.bloomberg.com/news/articles/2023-01-20/treasury-department-has-about-500-billion-in-debt-limit-extraordinary-measures?srnd=economics-v2)

• The European Central Bank wants Half-Point Hikes at Next Two Meetings at Least. No 25-bp moves at upcoming meetings, possibly in second half of the year. (Bloomberg, January 21, 2023 https://www.bloomberg.com/news/articles/2023-01-22/ecb-s-knot-wants-half-point-hikes-at-next-two-meetings-at-least?srnd=economics-v2)

• China’s reopening comes with a $720 billion inflation bomb. Poring over Chinese bank-account and income data, Nomura Holdings Inc. calculated that Chinese households have indeed built up excess savings, to the tune of $720 billion. (Bloomberg, January 21, 2023 https://www.bloomberg.com/news/newsletters/2023-01-21/china-s-reopening-comes-with-a-720-billion-inflation-bomb-new-economy-saturday?srnd=economics-v2)