The Personal Consumption Expenditures Index (PCE) Rose 0.3% in February, 0.1% Less Than Expected… The rise in prices was half that of January, 0.6%, and the year-over-year rate fell from 5.3% to 5.0%.
What it means— Core PCE, excluding food and energy, also rose 0.3% last month but was down from 4.7% to 4.6% over the last year. Prices for non-durable goods are falling, while shelter costs remain high. The numbers are a mixed bag, which is good for investors, who take them to mean that the Fed can pause its rate hikes.
If that happens, then long interest rates should ease, which will give growth stocks a boost and possibly add a little fire to real estate through falling mortgage rates. While we’ve been looking for easing inflation numbers and a Fed pause since the end of last year, we have a long way to go until the May Fed meeting. With the S&P 500 bumping up against 4,100 this morning, now is a great time to consider protecting profits on names that have run higher over the last month.
Dallas Federal Reserve Manufacturing Survey Down for Eleventh Consecutive Month… The survey fell from -13.5 to -15.7, well below the expected improvement to -10.0.
What it means— The survey is meant to capture the outlook of general business activity for the businesses in the region. New orders fell for the tenth straight month, while uncertainty remained elevated at 22. Among the responses, one manager noted that consumers are suffering with falling liquidity and stagflation is taking hold. Another claims he can’t find workers, while still another reported laying off workers for the first time in more than a decade. In the economy, the word of the month seems to be “confusion.” We still seem to be rebalancing between goods and services, which would explain why a manufacturing survey appears to show chaos even as the economy looks stable.
Atlanta Federal Reserve GDPNow Model Shows 3.2% First-Quarter Growth… The model, which updates with each Significant economic release, started the quarter estimating 0.75% growth, and then steadily climbed to 3.5% before easing to 3.2%.
What it means— This is where the economy gets confusing. The Dallas Manufacturing Survey suggests we’re out of steam, and major investors like Jeffrey Gundlach expect a recession by the third quarter. Yet, here we are, with hard data driving a pretty good model to forecast more than 3% growth in the current quarter. There’s no doubt that things could turn lower quickly, but it’s not the only possible path. We could just muddle through, with economic growth remaining positive but not robust, giving the Fed cover it needs to take a break, and then eventually lower rates near the end of the year.
Tesla Model 3 Bought in January 2023 Expected To Depreciate 46% in First Year… Due to price cuts, recent buyers could see their car value drop by almost half in the first 12 months.
What it means— Elon Musk might be causing heartburn for his competitors by cutting prices, but he’s also enraging recent clients. Consumers who bought one of the several Tesla models on which Musk cut prices after their purchases are stuck knowing that more-recent buyers got much better deals. And if the buyers who paid higher prices want to trade in their electric rides anytime soon, they will take huge haircuts. It’s unlikely that Musk will move the prices up and down often. The move in January was timed to allow new buyers to take advantage of government subsidies. But it still will leave bitter the clients who purchased the cars at the higher prices.
Japanese Man Arrested for ‘Sushi Terrorism’ After Licking Soy Sauce Bottle at Restaurant… Japan has many sushi restaurants that operate by putting food on different sizes of plates that are then sent around on a conveyor belt. Patrons select the plates of food they want and then pay based on the number and size of the plates they use. On February 3, 21-year-old Ryoga Yoshino wiped his spit onto a plate of sushi and licked the top of a soy sauce bottle at Kura Sushi in Nagoya City, Japan, while his 19-year-old accomplice filmed him. Yoshino and his friend then posted the prank video on social media. The restaurant owner and police weren’t amused. Both were arrested, with the younger friend put on probation and Yoshino charged with tampering with the restaurant’s conveyor belt, yet another crime in the growing wave of “sushi terrorism.” For his part, Yoshino claims to be at a loss, as he did not realize what he had done was a crime. Right… As if licking and spitting on food and condiments in a restaurant is not a problem.
Data supplied by HS Dent Research
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