Market Week: November 21, 2022

The week in review

  • PPI came in lower than expected, +0.2% m/m and 0.0% m/m ex-food & energy
  • Retail sales jumped 1.3% overall and excluding autos
  • Housing starts declined a further 4.2% after declining 1.3% in Sept.

The week ahead

  • Durable goods orders
  • New home sales
  • Consumer sentiment

Thought of the week

As Americans head to the grocery store this week to stock up on ingredients, they may be frustrated to discover that the cost of a Thanksgiving dinner is a whopping 20% higher than last year, according to a survey by the American Farm Bureau. However, while higher inflation may be pinching consumer wallets, recent economic data still point to a resilient consumer. Following upward revisions to prior months, retail sales jumped by 1.3% in October and on an inflation-adjusted basis, sales still rose by 0.8%. The retail sales control group, which excludes sales on gas, food, autos and materials, also rose a solid 0.7%.

Last year, consumers shopped early and spent more to secure gifts as stores struggled to keep shelves stocked amid shipping delays. This year, major retailers are sitting on excess inventories and potentially facing a more conservative consumer. However, while consumers may be running down their excess savings from the pandemic, down from a peak of $2.0tn to $1.0tn as of September,
softening inflation and low unemployment should lift real wage growth and consumer sentiment in the months ahead, supporting overall consumer spending. Price discounts from major retailers may also help lure consumers back to the storefronts this season. We still anticipate a consumer squeeze in 2023, given a very low personal savings rate and climbing consumer credit balances, but Americans should be able to eat, drink and be merry—at least for the next few months.

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