Weekly Market Commentary January 16th to January 20th 2023

Continuing with last week’s Consumer Price Index (CPI) release hinting towards slowing inflation, the Headline Producers Price Index (PPI) came in lower than expected at -0.5% for December with November also being revised down from 0.3% to 0.2%. The Core PPI, which excludes food and energy, was down to 0.1% in December from November’s original print of 0.4% which was revised to 0.2%. This is encouraging as decreasing production prices should translate to less costs being passed through to consumers. We would still expect the Fed to continue its battle with inflation with a rate increase in February.

Retail Sales -1.1%, Retail Sales ex Auto -1.1%, and Retail Sales ex Auto and Gas -0.7% were all lower than estimated in December and lower than the prior month. The largest components contributing to the decrease were Gasoline Sales down 4.6%, Motor Vehicle and Parts Sales down 1.2%, and Electronics and Appliance Stores Sales down 1.1%. Although Retail Sales have declined this does not mean consumer demand has waned. Rather, consumers have transitioned from demanding goods, such as household items, to demanding services, such as restaurant dining, attending concerts, etc.

Housing slowed in December with Starts, Building Permits and Existing Home Sales all lower on the month relative to revised (lower) previous month figures.

The stock market had mixed results for the week. The S&P 500 was down 0.7% finishing the week at 3,972, while the Nasdaq increased 0.6% to 11,140 and the Dow Jones Industrials down 2.7% at 33,375. Yields have fallen across the curve, with the 10-year falling to 3.48% from 3.51% in the past week.

Key economic releases next week include revisions to 4th quarter GDP, Personal Income-Spending, and Personal Consumption Expenditures (PCE).