Monthly Market Updates

Inflation Starting to Fall, Employment Still Strong

• • Gross Domestic Product (4Q22 GDPNow): The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2022 was 4.0% as of November 9.
  • Employment (November): Total nonfarm payroll employment increased by 263,000 in November, and the unemployment rate was unchanged at 3.7%. The labor force participation rate was little changed at 62.1%. Notable job gains occurred in leisure and hospitality, health care, and government.
  • Inflation (October): The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4% in October on a seasonally adjusted basis after rising 0.4% in September. Over the last 12 months, the all-items index increased 7.7% before seasonal adjustment (vs. 8.2% in September). The index for all-items less food and energy rose 0.3% in October, after rising 0.6% in September. The all-items less food and energy index rose 6.3% over the last 12 months.
  • The Producer Price Index (PPI) (October) for final demand increased 0.2% in October, seasonally adjusted. On an unadjusted basis, final demand prices advanced 8.0% for the 12 months ended in October.
  • Retail and Food Services Sales (October): Advance estimates of U.S. retail and food services sales for October 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $694.5 billion, up 1.3% (±0.5%) from the previous month, and 8.3% (±0.7%) above October 2021.
  • Personal Income and Consumer Spending (October): Personal income increased $155.3 billion (0.7%) in October, according to estimates released by the Bureau of Economic Analysis. The PCE price index increased 0.3% in October on a month-over-month basis. Excluding food and energy, the PCE price index increased 0.2% from September. From the same month one year ago, the PCE price index for October increased 6.0%. Prices for goods increased 7.2% and prices for services increased 5.4%. Food prices increased 11.6% and energy prices increased 18.4%. Excluding food and energy, the PCE price index increased 5.0% from one year ago.

World Growth Expected to Slow Further

The Organisation for Economic Co-operation and Development (OECD) updated its Economic Outlook, noting that the global economy is facing mounting challenges. Global real GDP growth is forecast to slow from 5.9% in 2021 to 3.1% in 2022 and 2.2% in 2023. Annual inflation for the G-20 is forecast to fall from 8.1% in 2022 to 6.0% in 2023 and 5.4% by 2024.

Organization for Economic Co-operation and Development (OECD) GDP for 2022 (November 2022):
Americas:

• U.S.:           +1.8%
• Canada:    +3.2%

Asia:

• China:       +3.3%
• Japan:       +1.6%

Emerging Markets:

• Turkey:      +5.3%
• India:         +6.6%

Europe:

• U.K.:           +4.4%

Euro-zone:         +3.3%

• Germany: +1.8%
• France:      +2.6%
• Italy:          +3.7%
• Spain:        +4.7%

Latin America:  

• Brazil:       +2.8%
• Mexico      +2.5%

TOTAL World:   +3.1%

The 34th OPEC and non-OPEC Ministerial Meeting was held on December 4

The 34^th OPEC and non-OPEC ministerial Meeting took place by videoconference on Sunday, 4 December 2022. In line with the decision of the OPEC and non-OPEC Participating Countries in the Declaration of Cooperation at the 33rd OPEC and non-OPEC Ministerial Meeting on 5 October 2022, which was purely driven by market considerations and recognized in retrospect by the market participants to have been the necessary and the right course of action towards stabilizing global oil markets; and adhering to the approach of being proactive and pre-emptive, the Participating Countries reiterated their readiness to meet at any time and take immediate additional measures to address market developments and support the balance of the oil market and its stability if necessary. No changes were made.

Fed Still Raising Rates, but at a Slower Pace

The final FOMC meeting of 2022 is scheduled for December 14. The release will include an update to the Summary of Economic Projections (SEP).

Highlights of the November FOMC Meeting Minutes include:

• Monetary Policy: “In discussing potential policy actions at upcoming meetings, participants reaffirmed their strong commitment to returning inflation to the Committee’s 2% objective, and they continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate in order to attain a sufficiently restrictive stance of policy to bring inflation down over time.”
• On Track for 50 bps at December Meeting: “A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee’s goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate. In addition, a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.”
• Rates Moving Higher: “Various participants noted that, with inflation showing little sign thus far of abating, and with supply and demand imbalances in the economy persisting, their assessment of the ultimate level of the federal funds rate that would be necessary to achieve the Committee’s goals was somewhat higher than they had previously expected.”

Highlights of the Beige Book include:

• Prices: “Consumer prices rose at a moderate or strong pace in most Districts. Still, the pace of price increases slowed on balance, reflecting a combination of improvements in supply chains and weakening demand.”
• Labor Markets: “Hiring and retention difficulties eased further, although labor markets were still described as tight.”
• Overall Economic Activity: “Economic activity was about flat or up slightly since the previous report, down from the modest average pace of growth in the prior Beige Book period.”

Monthly and YTD returns

Definitions:

Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).

• GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
• The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earnings of workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
• Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
• The Consumer Price Index (CPI):Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
• The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a percentage of the labor force. Source: Bureau of Labor Statistics (BLS).
• The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work. Source: Bureau of Labor Statistics (BLS).
• Advance Monthly Sales for Retail and Food Services: Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
• Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
• The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
• The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).

Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO).

Financial Markets – Monthly and YTD returns (Table): Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (JPM EMBI Global), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond), and Developed Markets Sovereign (excl. US) (JPM GBI Global Ex US). Source: Morningstar.

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