Summary
United States: Mixed Housing Data and Upside Inflation Surprise
- Existing home sales declined 0.7% in January, while new home sales leaped 7.2%. Real personal spending shot higher in January, and solid growth in discretionary spending suggests continued consumer resilience. The core PCE deflator surprised to the upside, which could compel the FOMC to go higher for longer.
- Next week: Durable Goods (Mon), Construction Spending (Tue), ISM (Wed/Fri)
International: Improving Sentiment in U.K. and Eurozone, Encouraging Inflation Trends in Canada
- February’s PMI surveys shed some brighter light on sentiment in the U.K. and Eurozone, particularly for the services sector. While we still forecast both economies to fall into recession this year, we expect growth to be more resilient than previously forecast. Meanwhile, Canada’s CPI release showed that the trend of lower consumer prices continued in January, with CPI inflation receding more than expected to 5.9% year-over-year.
- Next week: China PMIs (Wed), Canada GDP (Wed), Eurozone CPI (Thu)
Interest Rate Watch: 50 bps at the Next FOMC Meeting?
- Minutes of the Jan. 31-Feb.1 FOMC meeting show that a “few” FOMC members favored raising rates by 50 bps at that time. Given the run of stronger-than-expected data in recent weeks, could a few more members join them at the next meeting on March 22?
Credit Market Insights: Increasing Delinquency Rates for Young Borrowers
- Due to decades high inflation increasing the costs of everything from groceries to discretionary activities, consumers have been facing increasing pressure on household balance sheets. While the increase in credit card and auto loan delinquency rates for all borrowers is similar to that experienced in the previous two quarters, younger age groups experienced comparably stark increases compared to their older counterparts.
Topic of the Week: Israeli Shekel Detached from Fundamentals
- We have not said this too often. But, the Israeli shekel is underperforming relative to the rest of the emerging market currency complex. We see merit in entering positions at current levels, and we believe a move toward ILS3.40 by the end of Q1-2023 is imminent.
