The numbers to watch this week

This week brings a slew of #employment-related data releases for February. After January’s payrolls and wage growth handily beat expectations, #markets - and the Federal Reserve - will be watching the latest batch of numbers closely for any clues on their potential inflationary impact. We think there’s a good chance #job creation will again surprise to the upside, as the consensus forecast of +190,000 is well below the +244,000 average over the past 12 months. For more information on our views, subscribe to my weekly market commentary: https://lnkd.in/gSduisBi #litrendingtopics

#Economists?continue?to lower their odds for #Fed rate cuts in the near term. Many now expect fewer rate cuts for the year than they had originally forecast. On Friday, one prominent economist even predicted?the Fed “will not cut rates this year and rates are going to stay higher for longer.” A?popular view?is that rate cuts would be bullish for risk assets like #stocks. So developments that lower the odds of rate cuts in the near term would therefore be bearish. All other things being equal,?this view makes sense. Yet the #stockmarket has trended higher amid these developments, with the S&P 500 rising to?another record high on Friday?— its?15th record high?this year. These diverging trends confirm the argument we advanced in the Jan. 28 TKer: Whether or not the Fed cuts rates is not the right question. In a nutshell, we argued that the prospect for fewer rate cuts is not necessarily bearish for stocks if inflation continues to cool and economic activity remains strong. More here: https://lnkd.in/gQA_dq-v

?? This week, expect big market moves as speeches by a couple of Federal Reserve officials and the February #jobs report set the stage for a firecracker #CPI inflation report next week… ?? ?? The week begins with remarks from Federal Reserve Bank of Philadelphia President Harker (non-FOMC voter) who has been vocal that the #Fed will be looking for more evidence that disinflation isn’t stalling. “We are in the final mile of the marathon to get #pce #inflation down to 2 percent… however like in every marathon, the final mile tends to be the hardest,” Harker said in his last speech. Meanwhile the Philadelphia Fed Business Conditions Index now points to just slightly worse than average real economic activity. Fed chair Powell is also expected to testify to congress while FOMC voters Daly, Mester, Williams are also expected to make public comments this week. They are all likely to echo the sentiment that policy is sufficiently restrictive and that three rate cuts are still likely later this year - but that the Fed is in no rush since economic activity remains strong and there are no “imminent threats” ? ?? Factory orders are expected to show a decline. While the #manufacturing sector is still in contraction territory, the Institute for Supply Management is expected to show a slower but continued expansion of the services sector. ?? The main event comes on Friday with the Bureau of Labor Statistics #employment situation. Hiring is slowing and continued unemployment claims have moved higher. Despite progress, the labor market remains very tight. Labor shortages are particularly acute in the #construction sector. Markets and the Fed will be paying particular attention to the change in average hourly #earnings. Wage growth accelerated to 4.5% y/y in January, up from 4.3% y/y in December. Without persistent improvements to productivity (supply), inflation could prove difficult to tame if #wage growth (demand) remains this high. Construction sector wage growth accelerated to 5.2% y/y in January from 4.8% y/y in Dec ?? ?? Markets now expect the Fed funds rate to ease in June. After a sharp increase, #treasury yields ended last week lower. The global economy is slowing down with a couple of major economies sliding into #recession territory. Without a surprise in this Friday’s jobs report, we should see yields continue to ease slightly. #mortgage rates should also ease somewhat ahead of this year’s home shopping season ?? https://lnkd.in/gWjfM7Jx

One of the best “leading indicators” to help you with business and investing: Released on a monthly basis, the ISM Services numbers provide insights into the economy's services sector. This includes industries like banking, healthcare, and retail—essentially, the places where most of us spend our money. ISM Services are a “Leading Indicator” giving us a hint at what is coming next in the economy. How to use the numbers: Business Planning: Market Demand Insight - High ISM Services numbers suggest strong consumer spending in services sectors. This can be a green light for businesses to expand or increase inventory. Conversely, lower numbers might suggest caution and focusing on efficiency. Strategic Decisions - Use the trends indicated by these numbers to plan for expansion, contraction or status quo.? Investment Planning: Sector-Specific Investments - High ISM Services numbers can indicate which sectors are thriving, guiding investors to potentially profitable areas such as technology, healthcare, or retail. Risk Management - Lower ISM Services numbers signal caution, advising investors to reassess risk levels and possibly shift towards more conservative investments or diversify their portfolios to include more stable sectors. By staying attuned to these signals, you can better anticipate market movements, manage risks, and seize opportunities in a timely manner. What other leading indicators are you currently using? #marketcommentary #markets #news

?? As we await this week's U.S. trade balance data, it's key to note the U.S.-China trade war's role in elevating Mexico as a primary U.S. supplier. This major shift from the Far East to our "Near South" signifies a transformative phase in North American trade, spotlighting Mexico's pivotal role in the evolving trade landscape of the 21st century. The U.S.-China trade war, marked by a 21% drop in Chinese exports to the U.S. since July 2018, has significantly reshaped global trade, leading to a "bystander economy" with Mexico emerging as a key victor. By leveraging its proximity and diversifying its economy, Mexico has surpassed China as the U.S.'s leading goods supplier, showcasing its strategic navigation through these economic shifts. In 2023, Mexico's exports to the U.S. rose by 4.5%, in stark contrast to declines from China (20.4%) and Canada (3.8%). This growth, fueled by the "China Plus One" strategy, seeks to navigate U.S.-China trade tensions while capitalizing on emerging opportunities. Mexico's dominance in sectors like medical instruments, electrical machinery, and electric vehicles demonstrates its agile response to U.S. market shifts, leading to remarkable growth. For example, its share of U.S. medical instrument imports jumped to 31.4% in 2023 from 25.6% in 2018. Similarly, its market share for spark-ignition engines skyrocketed from 0.52% to 26% in the same period, significantly surpassing China. The shift towards electric vehicles further underscores Mexico's evolving industrial landscape, with significant investments from companies like Tesla and General Motors in Mexican manufacturing facilities. This pivot to sustainable transportation is facilitated by the Inflation Reduction Act (IRA) in the U.S., which mandates that EVs must be assembled in North America to qualify for full tax credits, further cementing Mexico's role in the North American automotive industry. Beyond Mexico, nations like Taiwan, Vietnam, Thailand, South Korea, and Germany have capitalized on the U.S.-China trade war to enhance their economic profiles, demonstrating the global nature of supply chain diversification and the search for competitive advantage. As we anticipate the U.S. trade balance numbers this week, it's clear that the global trade landscape is undergoing a profound transformation. Mexico's ascendancy, alongside the rise of other "bystander economies," highlights the importance of adaptability, strategic specialization, and the ability to turn political tensions into opportunities for economic expansion. The U.S.-China trade war, while disruptive, has undeniably paved new pathways for growth and innovation across the globe, reshaping the future of international trade and economic policy. #GlobalTrade #USChinaTradeWar #MexicoEconomy #SupplyChainDiversification #EconomicPolicy #TradeDynamics #Innovation #ElectricVehicles #MedicalInstruments #SectorGrowth Read the full story here: https://lnkd.in/em7karux

Just came across an interesting read from the Federal Reserve Bank of New York that looks at how Buy Now, Pay Later (BNPL) use varies with a consumer’s financial situation. [1] As suspected, more-fragile households tend to use BNPL to make frequent, relatively small, purchases that they might have trouble affording otherwise, embracing BNPL as a regular payment option. [2] Meanwhile, for the financially stable, BNPL use appears to be more centered on a few purchases and seems to be largely driven by a desire to avoid paying interest on high-priced items. [3] Across levels of financial stability, it is rare for people to use BNPL just once. However, financially fragile users are almost three times as likely as financially stable users to use BNPL five or more times. While this is not surprising in many ways, it does reinforce the idea that we need to make more tools available for consumers to manage the multiple BNPL relationships that they might have — else, we risk trapping those from more fragile households in debt. I remember reading a different report last year that talked about a rising trend of consumers paying off their BNPL loans with credit card ... that's not encouraging at all. "How and why do consumers use BNPL" is an interesting and important trend to track over time. https://lnkd.in/ernxvrt5 #BNPL #Fintech #FinancialServices #PersonalFinance

A potentially busy, newsy week is ahead for the economy and markets. Here are some things that I’ll be watching: -The February employment report is due Friday. This important update from the U.S. Labor Department is expected to show the nation’s unemployment rate was unchanged last month while hiring cooled.??This comes after 353k jobs were added in January while the unemployment rate remained at 3.7%. That level of job creation appears unsustainable, but we've been surprised before. -JOLTS, or the job openings and labor turnover summary, is due Wednesday. Job openings are down sharply from their pandemic-era peak but still elevated compared to early 2020.? This is watched closely to try to understand the relationship, or balance, of labor supply and demand. -Testimony by Federal Reserve Chairman Jerome Powell is set for this week before congressional panels. Two weeks before the next announcement, Powell will be asked about the status of the economy and interest rates and probably about financial stability. The Fed is not expected to adjust rates at the upcoming meeting. The timing and the magnitude of future potential key rate cuts are key questions. -Stocks are still on a roll. This past week, the Nasdaq Composite finally joined the Dow and the S&P 500 in record territory. Is the air getting too thin or is there more room to run? Investors have seen solid gains in the first two months of the year. Concerns about the stability of small or community banks and exposure to commercial office space have also been reignited but haven't undermined the broader rally. -With the link below, I also share a recap of our widely-followed survey on the factors standing in the way of housing affordability with home prices rising and the average 30-year fixed rate mortgage back above 7%. What might that mean for the remainder of the year? I look at that in my latest newsletter here. Please let me know about your thoughts regarding markets and the economy.

?? This Week's Economic Highlights & Market Movements ?? In the latest economic data releases, we've seen a mix of performances across North America: - Canada's S&P Global Manufacturing PMI rose to 49.7 from 48.3, showing signs of resilience in the manufacturing sector. - The U.S. ISM Manufacturing PMI dipped to 47.8, falling short of the expected 49.5 and previous 49.1, indicating contraction in the sector. - Employment and pricing within U.S. manufacturing sectors also witnessed changes, with the ISM Manufacturing Employment Index dropping to 45.9 and Prices Paid Index slightly rising to 52.5. - Additionally, U.S. consumer sentiment has declined to 76.9, missing expectations and matching previous figures, reflecting consumer apprehension. Market responses have been equally intriguing: - The USDCAD pair showed fluctuations, reflecting the mixed economic signals and impacting trade and investment decisions. - Canadian GDP data surpassed expectations, influencing the CAD, while U.S. inflation data continued to align with the Fed's target, affecting the USD. - Stock markets and commodity prices also reacted, with notable movements in oil prices and precious metals. Looking ahead, the focus remains on key indicators such as the BOC interest rate, employment figures, and various PMI data, which will further shape market sentiments and strategies. In these fluctuating times, staying informed and adaptable is crucial. Let's discuss how these developments are impacting your strategies and outlook for the markets. #EconomicUpdate #MarketTrends #FinanceProfessionals

ISM Purchasing Managers' Index Shows Continued Manufacturing Weakness. But representative anecdotal comments are more upbeat. The Manufacturing PMI? fell to 47.8 in February from 49.1 in January, according to the Institute for Supply Management (ISM?) Report on Business. The Manufacturing PMI? has been in negative territory now for 16t straight months. The PMI? is a diffusion index, where numbers above 50 indicate that more survey respondents reported expanding activity than contracting activity. Areas of weakness included new orders and production and employment. Export orders rose after a very weak January, and declining inventories suggest future expansion in production. As one might expect in the current strong economy, more respondents reported growing imports than last month. The negative, but mixed data picture, is illustrated by the anecdotal comments included in the report, with some respondents reporting increasing sales after what looks to be a weak first quarter or simply a steady order environment. (Some cited poor January weather as one reason for a weak start to the year.) Others reported weakness abroad as a concern and some lingering supply challenges. Overall, the report is consistent with other indicators we have had of a fairly stagnant manufacturing industry, waiting for a reason to ramp up production. Given the improving macroeconomic picture, perhaps that will come later this year. #ism #PMI #purchasingmanager #orders #manufacturing #macrobond

Recent inflation data increasingly suggests a scenario leaning more towards a "no landing" rather than a hoped-for soft landing. Various inflation measures are consistently registering above the 2% mark, not only remaining well above their pre-pandemic levels but also, and most critically, showing no signs of embarking on a downward trajectory. This persistent elevation in inflation rates points to strong economic and job growth, still tight labor market, sustained wage pressures, and somewhat elevated inflation expectations, casting shadows on the prospect of achieving a gentle easing of inflationary pressures. As a result, markets are gradually stepping back from their earlier predictions of imminent rate cuts. #inflation #labormarket #wages #wagegrowth #federalreserve #softlanding #nolanding