11/23 - Weekly Economic Highlights

Economic data was light in this U.S. holiday-shortened week. Monday’s release of the Chicago Fed National Activity Index (CFNAI) supported a weakening economic picture as the index declined to -0.05 in October versus 0.17 in September, indicating below trendline growth. Of note, employment related indicators in the October CFNAI declined to -0.02, from the prior reading of 0.10. The three-month average declined as well to 0.09 in October from a 0.19 reading in September.

Durable goods orders or orders made to last more than three years expanded more quickly than expected last month. According to the U.S. Department of Commerce, orders were up 1.0% versus 0.4% in September. So far, American manufacturers continue to benefit from a resilient consumer although it should be noted that saving rates continue to decline and credit card debt was up 15% in the third quarter, the sharpest increase in 20 years.

The University of Michigan Consumer Sentiment index moved up to 56.8 in early November, higher than the survey of economist’s expectations and up from 54.7 in October. Nevertheless, the survey showed 40% of consumers reported their living standards being negatively affected by inflation and it is likely that the end of month drop in gasoline prices buoyed the sentiment number. Consumer inflation expectations in November only changed slightly from the prior month. The 1-year measure was 4.9% in November down from 5.1% in October, and the 5-year measure unchanged from the prior month at 3.0%.

A weakening housing market unexpectantly got a surprise in the form of a positive October new home sales report. New home sales rose 7.5% to a seasonally adjusted rate of 632,000 from a revised 588,000 in the prior month. Regionally, sales rose sharply in the south rebounding from a decline in September when Hurricane Ian swept across Florida and parts of Georgia and South Carolina.  Overall, the trends in housing data continue to deteriorate under the weight of mortgage rates that have doubled since the beginning of the year, the average 30-year fixed rate mortgage now stands at 6.61%, according to Freddie Mac.

Treasury yields declined this week; the 2-year treasury is down 7 basis points to 4.48% after starting the week at 4.55%, and the 10-year is down 11 basis points to 3.72% as of Wednesday morning. In addition, the yield inversion deepened between the 2-year and 10-year treasury to 76 basis points. The Chandler team continues to believe the FOMC will tighten monetary policy to a restrictive stance and hold rates at that level for a period of time. In this challenging environment we continue to remain disciplined with our strategies and take advantage of higher rates to invest into our client’s portfolios.

Next Week:

Nonfarm Payrolls, Unemployment, ISM Manufacturing, S&P Case Shiller 20-City Home Price Report, Consumer Confidence, Personal Consumption Expenditures (PCE), Federal Reserve Beige Book, S&P Global US Manufacturing PMI, JOLTS Job Openings

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© 2022 Chandler Asset Management, Inc. An Independent Registered Investment Adviser. Data sources: Bloomberg, Federal Reserve, the U.S. Department of Labor, and the U.S. Department of Commerce. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.