USA Outlook, December 5 to 9, 2022

U.S. services industry regains steam; factory

orders accelerate

U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recessionnextyear.

The survey from the Institute for Supply Management (ISM) on Monday followed on the heels of news last Friday that the economy continuedtocreatejobsatasolidclipinNovember, with wage growth accelerating. Consumer spendingalsorosestronglyinOctober.

The flow of strong data raises the risk that the Federal Reserve will continue hiking interest rates and lift its policy rate to a higher level than the recently projected 4.6%, where it could stay for sometime. The U.S. central bank's rate-hiking cycle isthefastestsincethe1980s.

Thirteen services industries including construction, healthcare andsocialassistance, retailtradeas well as professional, scientific and technical services reported growth last month. But information, wholesale trade and management of companies andsupportservicesreportedadecline.

Source: https://www.reuters.com/markets/us/us-service-sector-activity-picks-up-novemberism-survey-2022-12-05/

Renewables will overtake coal by early 2025, Energy Agency says

In a new report, the International Energy Agency saidthatsolar, windandotherrenewablesources will expand much more swiftly than forecast last year.

Overthenextfiveyears, theglobalenergycrisisis expected to accelerate renewable energy growth as countries embrace low-emissions technology in response to soaring fossil fuel prices, including wind turbines, solar panels, nuclear power plants, hydrogen fuels, electric vehicles and electric heat pumps. Heating and cooling buildings with renewable power is one of the sectors that needs toseelargerimprovement,thereportsaid.

The United States passed the Inflation Reduction Actthisyear,alandmarkclimateandtaxlawthat, among many investments to reduce planetwarming greenhouse gas emissions, made an “unforeseen” expansion in long-term tax credits for solar and wind projects extending through 2032. Previously, these tax credits had been revisedafewyearsatatime.Extendingthecredits until 2032 provides better certainty for investors, which is important in the energy industry, said FatihBirol,theI.E.A.executivedirector

Source: https://www.nytimes.com/2022/12/06/climate/iea-renewable-energy-coal.html

Photo: REUTERS/Rachel Wisniewski/File Photo/File Photo

Photo: Chip Somodevilla/Getty Images

economy. Applications for unemployment benefits rose to 230,000 for the week ending Dec. 3, up by 4,000 from the previous week’s 226,000, the Labor Department reported Thursday. The four-week moving average of claims,whichsmoothsoutweek-to-weekvolatility,rose by1,000to230,000.

About1.67millionpeoplewerereceivingjoblessaidthe week that ended Nov. 26, up 62,000 from the week before.That'sthemostin10months,butstillhistorically low.

Home prices,

sales to drop for first time in decade, Redfin predicts

TheSeattle-basedrealestatebrokeragereleasedits 12predictionsfor 2023, andsaid itanticipates fewer home sales in 2023 than there were in 2022, which would mark the first year-over-year decline in a decadeashomesalescouldfalltotheirlowestlevel since2011.

Mortgage rates will continue to decrease and sit under6%bytheendof2023.Redfindoesn'tbelieve a foreclosure wave is coming, despite the dip in home sales and prices, because "homeowners who’ve hadtheirhome foratleastafew years have fixed low mortgage payments and plentiful home equity after values skyrocketed during the pandemic."

Other predictions included rent prices dropping due to supply and high mortgage rates, meaning "many prospective first-time homebuyers may insteadbecomemove-uprenters,upgradingfroma small urban apartment to a larger apartment or a single-familyrentaltofittheirgrowingfamilies."

Builders will continue to focus on multifamily rentals, investors will purchase about 25% fewer homes than a year earlier and buyers' agent commissionrates willriseslightlyafter seeinga dip in2022.

Source: https://komonews.com/news/local/seattle-real-estate-housing-market-homeredfin-mortgage-rates-washington-state-pacific-northwest-pnw-price-salespandemic-outlook-predictions

Jobless claims are seen as a proxy for layoffs, and combined with other employment data, show that American workers are enjoying extraordinary job security at the moment. That's despite an economy some see in danger of tipping into a recession due to the aggressive actions of the Federal Reserve, which is tryingtocooltheeconomybyraisinginterestrates.

The Federal Reserve has raised its benchmark interest ratesixtimessinceMarch,sendingthehousingmarket intoadownturnunderthestrainofmortgageratesthat havemorethandoubledfromayearago.

Inspiteofpersistentinflationandrapidlyrisinginterest rates, U.S. employers added 263,000 jobs last month. There are nearly two job openings for every unemployedAmerican.Theunemploymentrateis3.7%, acoupleofticksaboveahalf-centurylow.

Source:

https://www.usnews.com/news/business/articles/2022-12-08/us-jobless-claimsup-modestly-last-week

Photo: KOMO News file photo

US Jobless Claims up modestly, but the labor market remains one of strongest parts of the U.S.

Photo: AP Photo/Nam Y. Huh, File

Wholesale prices rose 0.3% in November, more than expected, despite hopes that inflation is cooling

Wholesale prices rose more than expected in November as food prices surged, dampening hopes that inflationcouldbeheadedlower,theLaborDepartmentreportedFriday.

The producer price index, a measure of what companies get for their products in the pipeline, increased 0.3% for the month and 7.4% from a year ago. Economists surveyed by Dow Jones had been looking for a 0.2%gain.

Excludingfoodandenergy,corePPIwasup0.4%,alsoagainsta0.2%estimate.CorePPIwasup6.2%from ayearago,comparedto6.6%inOctober.

Services inflationacceleratedforthemonth,rising0.4%after beingupjust0.1% thepreviousmonth. Onethird of that gain came from the financial services industry, where prices surged 11.3%. That was offset somewhatbyasharpdeclineinpassengertransportationcosts,whichfell5.6%.

On the goods side, the index rose just 0.1%, steep decline from its 0.6% October gain. That modest gain came despite a 38.1% acceleration in prices for fresh and dry vegetables. Prices moved higher across multiplefoodcategoriesevenasthegasolineindextumbled6%.

Source: https://www.cnbc.com/2022/12/09/wholesale-prices-rose-0point3percent-innovember-more-than-expected-despite-hopes-that-inflation-is-cooling.html

Photo: CNBC