Chief Economist Scott Brown discusses the latest market data.
In his renomination hearing, Fed Chair Jerome Powell stressed that the key to maximum sustainable employment and financial stability was keeping inflation low. However, he didn’t appear as hawkish as financial market participants had feared.
The Fed’s Beige Book noted that economic growth expanded at “a modest pace” in the final week of 2021. However, demand for materials and labor “remained elevated.” Omicron led to “a sudden pullback in leisure travel, hotel occupancy and patronage at restaurants.” Contacts reported “solid growth in prices charged to customers, but some also noted that price increases had decelerated a bit from the robust pace experienced in recent months.”
The Consumer Price Index (CPI) rose 7.0% in 2021. The largest increase in nearly 40 years. Ex-food and energy, the CPI rose 5.5% y/y. The monthly increase was led by higher prices of new and used motor vehicles. Shelter costs are trending higher. Retail sales fell 1.9% in December (+16.9% y/y), down 2.3% ex-autos (+17.0% y/y). The drop likely reflects earlier holiday shopping, an omicron impact and reduced purchasing power for the average consumer. Industrial production slipped 0.1% in December (+3.7% y/y), held back by a 1.3% decline in motor vehicle output (-5.9% y/y).
Next week: The economic calendar is thin. December is not a critical month for housing. The drop in jobless claims will lead the LEI higher.
|Last||Last Week||YTD return %|
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.353||1.361|
|Dollars per Euro||1.129||1.232|
|Japanese Yen per Dollar||115.850||103.040|
|Canadian Dollars per Dollar||1.272||1.267|
|Mexican Peso per Dollar||20.506||19.649|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.75||1.62|
As of close of business 1/13/2022
|January 17||—||MLK Day (markets closed)|
|January 18||—||Homebuilder Sentiment (January)|
|January 19||—||Building Permits, Housing Starts (December)|
|January 20||—||Jobless Claims (week ending January 15)|
|—||Existing Home Sales (December)|
|January 21||—||Leading Economic Indicators (December)|
|January 25||—||CB Consumer Confidence (January)|
|January 26||—||FOMC policy decision|
|January 27||—||Real GDP (4Q21, advance estimate)|
|January 28||—||Personal Income and Spending (December)|
|—||Employment Cost Index (4Q22)|
|February 4||—||Employment Report (January)|
|January 10||—||Consumer Price Index (January)|
|March 16||—||FOMC policy decision|
All expressions of opinion reflect the judgment of the author and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
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