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By

Joseph Khoury

Global business sentiment remains weak.

S&P Global Flash PMI data for November was mixed in terms of m/m changes, but the broader contractionary trend remains in place. Of the seven countries reported so far, only the U.S. and U.K. are above the contraction line at 50.7 and 50.1, respectively. Activity mostly improved on the services side from weak levels, while...
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Credit card delinquency rates increased in 3Q23.

The Household Debt & Credit Report from the Federal Reserve Bank of New York for 3Q23 included further evidence that the consumer debt setup has continued to move in a negative direction. Credit card balances that transitioned into 30+ day delinquency increased to 8.01%, its highest level since 2011. Similarly, credit card balances that transitioned...
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Payroll growth and weekly earnings slowed in October.

When it comes to analyzing the labor market, we are focused on private-sector payroll growth in conjunction with real earnings growth (i.e. do more people have more spending power). For the month of October, private nonfarm payrolls decelerated to 1.7% y/y. Another way to monitor payroll growth is through various rates of change and over...
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Spending accelerated in September while income and savings declined.

Real personal consumption expenditure accelerated 0.38% m/m in September. At the same time, real disposable personal income decelerated -0.08% m/m, its fourth month in a row registering a decline, and the personal saving rate fell 60 basis points to 3.40%. Looking back on the third quarter, the spending, income, and saving data would suggest consumers...
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Retail sales accelerated in September, but the inflation-adjusted growth rate remains weak.

Nominal retail sales accelerated to 3.8% y/y in September, as reported by the U.S. Census Bureau. In terms of the read-through to GDP for 3Q23, the recent re-acceleration of headline retail sales has been a positive development. However, underneath the headline number, the drivers of that growth have come from categories that are more related...
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Asset market volatility has been accelerating since mid-September.

The level and direction of interest rate volatility can have broader impacts on asset markets. Since the end of July, Treasury volatility remained elevated, and Treasury yields and oil prices moved higher, while equities and gold moved lower. More recently, volatility across rates, oil, gold, and equities has started to accelerate again. One of the...
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Tracking gasoline prices and consumer demand.

The direction of consumer spending has implications for broader economic activity. If income growth slows while gasoline prices rise, overall spending could be negatively impacted as less money becomes available for more discretionary categories. Source: Macrobond. Since the start of the year, the average retail price for regular gasoline has risen from $3.22 to $3.84...
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Existing single-family home sales continue to decline.

The two main reasons we monitor the housing market are for insights into the rates of change in prices and what it could mean for the Shelter component of CPI (which could impact Fed policy) and more broadly as a view into the consumer demand setup (price/rate sensitivity) through transaction volume. Both indicators should help...
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Consumer spending headwinds

Following the onset of pandemic, outside of the three large fiscal transfer payments sent to U.S. households, there were several temporary programs to help support the consumer, including student loan forgiveness. However, most of the pandemic-related programs have rolled off and student loan payments resume on October 1st. From a macro perspective, we are viewing...
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Reviewing the direction of the S&P 500 index around rate cuts.

To simplify the complex, theoretically rate hikes should occur in expansionary periods and rate cuts should occur in contractionary periods. In the eyes of the Fed, higher rates can restrict growth and inflation when the economy gets too hot and lower rates can induce growth and inflation when the economy gets too cold. While that...
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