Retail Sales Exceeded Expectations, Fed Governors Reiterated Rates Would Be Higher for Longer… Kansas City, MO, Federal Reserve President Esther George said that it was unlikely the central bank could defeat inflation without a recession.
What it means— George lent her voice to that of other Fed governors and presidents when she threw cold water on the idea that the central bank might be softening its stance. Their words, along with the higher-than-expected retail sales, sent the markets lower mid-week. Consumers paid up last month for consumer goods even without including autos and gasoline. Sales were up 8.3% over the last year, outpacing inflation at 7.7%. Restaurant sales were an outlier, up 1.6%, showing that consumers still want to congregate even as prices climb. It looks like as long as they have jobs, consumers want to meet at the bar to complain about high prices.
Producer Price Index (PPI), Considered Wholesale Inflation, up Just 0.2% in October… The PPI eased to 8% over the last year after peaking at 11.7% in March.
What it means— Equity investors loved the idea of falling wholesale inflation on Tuesday before retail sales jumped on Wednesday, but it seemed too convenient. Anyone relying on easing PPI to convince central bankers to pause in raising rates hasn’t been paying attention. The bankers want unemployment up and GDP down, period. They have to make it known that they will slay inflation, no matter what. Unfortunately, they might not have the equipment. OPEC+ again cut its demand forecast for 2023 and might cut its production quotas. If the oil-producing states push energy prices up, they might create inflation no matter what the Fed does.
Housing Starts Fell 4.2% Last Month, Were Down 9% Over This Time Last Year… Housing starts hit a record of 1.8 million units in April and have since fallen 20.6%.
What it means— In statistics that will surprise no one, both housing starts and permits each have fallen like a rock as mortgage rates more than doubled this year. Builders are doing what they can to preserve capital as the flow of potential buyers slows to a trickle. We’ll find out next week how many new homes are sitting in inventory when the industry reports new home sales. Still, the problem remains that we have a housing shortage across the country. More than half of Generation Z lives with their parents, a situation no one will like for long. Expect new-home building to pick up again once mortgage rates fall under 6%.
Existing Home Sales Fell 5.9% Last Month, Were Down 28.4% From October 2021… The housing inventory dipped by 10,000 units to 1.22 million.
What it means— The median existing home sale price has fallen from a peak of $413,800 in June to $379,100 last month (a drop of about 8.4%) but is still 6.6% higher than at this time last year. It’s interesting that even though mortgage rates are almost 120% higher than the 2021 average, prices are still higher and inventory is scarce. Even with sales down dramatically, inventory is just 3.2 months’ worth at the current pace. This is a standoff between people who want houses but either can’t or refuse to pay such high mortgage rates and owners who aren’t motivated to move at anything below sky-high prices.
Houston Man Dies After Falling off of 18-Wheeler While Dancing in Traffic… A 25-year-old man filmed himself dancing on top of an 18-wheeler trailer on a Houston freeway on Wednesday, November 15, around 11:30 AM. The man ducked as the vehicle went under an overpass and then emerged from the other side, still dancing, but he wasn’t so lucky the second time. The man fell off the truck when it emerged from another overpass and died of his injuries. A Houston Police Department spokesperson said, “We haven’t had a case like this in quite some time.” It’s interesting that they’ve ever had one at all.
Data supplied by HS Dent Research
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