Macro Report

Last Week’s Takeaway:

The overall economy continues to hold up remarkably well given the consensus expectation from this time last year. This week’s data showed green shoots in housing and a stable labor market, while manufacturing data continues to gave a mixed view.


The most important, albeit least timely, data from this week was the final revision for 3Q23 GDP QoQ, which came in at 4.9%, slightly below the second estimate but is the highest level of growth since 4Q21.

Housing data showed an encouraging signal overall with housing starts coming in 15.8% compared to October and significantly above expectations of a slight dip. Building permits were slightly below expectations, and down 2.5% MoM. We will closely watch permits over the coming months for insight into the pipeline of new construction.

Existing home sales also beat expectations for November, up 0.8% compared to the consensus estimate of -0.3%, and new home sales told the opposite story, coming in surprisingly under expectations, down 12.2% versus an expectations of up 1.6%.

The PCE Deflator also showed a positive signal of further cooling in price pressure. The topline MoM data printed negative and showed deflationary pressure for the first time since the pandemic, while Core PCE rose 0.1% on the month and is up 3.2% YoY, below expectations of a 3.3% increase.

Initial and continuing jobless claims both came in below expectations as well, as data consistently shows a resilient yet cooling labor market. Initial claims were sticky just above the 200k level and continuing claims printed down to 1,865k on the week (from 1,876k).

Fed manufacturing survey data came in mixed, but both of this week’s releases show further contraction. Philadelphia printed down to -10.5, below expectations of a -3 print. Kansas City printed up to -1, above last months -2 print, but not yet in positive territory.

Next Week’s Notes:

This upcoming week, we anticipate new housing market data that will shed light on the ongoing affordability issues. These are the October FHFA House Price Index MoM, expected to reflect a marginal slowdown to 0.5% growth from September’s 0.6%, and the Pending Home Sales NSA YoY for November, which has seen an upward trend since August, with the latest figure, -6.6% in October, being the year’s peak so far. This datapoint also serves as a leading indicator for Existing Home Sales, which outperformed expectations in November and are likely to maintain this growth trajectory, especially considering the recent easing in mortgage rates and potential interest rate cuts, the prospects for housing affordability appear increasingly favorable.

We will also receive some comprehensive December manufacturing data, including all five key manufacturing surveys. To date, we have the Philadelphia survey showing an unexpected steep decline to -10.5, notably below the forecasted -3, and the Kansas City survey, which outperformed predictions by rising to -1 against an anticipated fall to -4. Meanwhile, the NY Empire survey plunged to a four-month low of –

14.5. Despite these varied outcomes, there are indications of a positive outlook in business activity, which the upcoming Dallas and Richmond surveys will further clarify. Additionally, the MNI Chicago PMI for December is set to be released, with market expectations of a modest decrease to 50, following the previous month’s substantial rise to 55.8, which substantially beat forecasts and revealed the first month of growth in Chicago’s economic activity since August 2022.

Finally, we will obtain the latest update on unemployment claims, which have consistently demonstrated remarkable resilience. Initial Jobless Claims are expected to slightly rise to 210k from the previous 205k, which significantly surpassed the forecasted increase to 215k from 202k. Meanwhile, Continuing Claims, for which a market consensus is yet to be established, also exceeded expectations in the latest report, decreasing to 1865k from 1876k, against an anticipated rise to 1880k. These figures consistently highlight the robustness of the labor market. The forthcoming data will offer further insights into the labor market’s dynamics amidst the backdrop of subsiding inflation.