In an era where algorithms predict the next big stock surge and downturns alike, the role of artificial intelligence in finance is more pronounced than ever. As we edge into the final weeks of 2023, a pivotal moment for the U.S. economy draws near. This blog post lays out the hard facts on upcoming economic indicators — from GDP growth rates to Federal Reserve interest rate decisions — without the spin. It’s all about the numbers here: cold, hard financial data served straight up for your analysis. So, whether you’re mapping out your next financial move or simply staying informed, let’s dive into the figures that will shape the rest of the year and beyond.
On a personal note: I wanted to reach out and say sorry for missing our usual update last week. Some personal commitments came up unexpectedly and needed my attention. I know many of you count on our weekly chats to stay on top of the financial world, and I truly missed our conversation. Rest assured; I’m doubling down on efforts to ensure we keep the lights on here without a hitch. Thanks for sticking with me.
Exciting news for our savvy readers! Coming in 2024, we’re unveiling a brand-new Economic Scorecard, a tool designed to keep you a step ahead in the financial game. Imagine having a dashboard that not only tracks the pulse of the U.S. economy but also decodes the twists and turns of market trends for you. Stay tuned for this revolutionary feature that will become your go-to resource for making sense of economic changes. Get ready to transform the way you monitor and respond to the economic landscape, all thanks to this upcoming addition to our financial toolkit. Watch this space!
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The Hot Zones this Week
Each week there are zones where trading can get wild. I call these the hot zones.
Tuesday, Nov 14: A key day for inflation data as the Consumer Price Index (CPI) for October is released. Experts forecast a monthly rise of 0.2% in headline CPI and a 0.3% increase in core CPI, excluding food and energy.
Wednesday, Nov 15: The Empire Manufacturing Index, a measure of New York State’s manufacturing activity, is expected to slightly improve but remain in negative territory, indicating a contraction. Advance retail sales are forecasted to show a modest 0.1% increase, while the Producer Price Index (PPI) is predicted to have a subdued 0.1% growth for the month.
Thursday, Nov 16: The week continues with fresh data on the labor market, with jobless claims expected to increase slightly to 222k. In terms of trade, import prices are expected to decrease by 0.3%, reflecting lower energy costs. The Philadelphia Fed Manufacturing Index is forecasted to further dip into contraction, and industrial production is also projected to decline by 0.2%.
Friday, Nov 17: The housing sector will be in focus, with housing starts predicted to slightly decrease from September’s figures to 1.34 million at an annualized rate, and building permits are also expected to decline to 1.45 million at an annualized rate, reflecting the impact of higher mortgage rates.
This week’s economic releases will provide fresh insights into the inflation trajectory, manufacturing health, consumer spending, and the housing market’s response to recent economic pressures.
Macro Market
Assessing Growth: Predicting a Gentle Ebb, I expect the U.S. economy to experience what many would call a ‘soft landing’ in the coming years. Although I foresee growth dipping below trend levels in 2024, I remain optimistic about a positive trajectory throughout the forecast horizon. My current estimates peg GDP growth at a hearty 2.7% this year, which I predict will mellow to 0.7% in the following year, before picking up to 1.8% in 2025 — figures that outshine my earlier projections.
Projecting Inflation: A Slow Retreat In my view, the path of inflation will gradually level off, with the PCE inflation rate settling down to 2.2% by the second half of 2025 — a slightly more protracted descent than I previously thought. For the coming periods, I project a core PCE inflation of 3.5% for this year, with a deceleration to 2.8% next year and a further easing to 2.2% the year after that.
Forecasting Federal Reserve Moves: A Balanced Approach I predict a careful tightening by the Federal Reserve, with an additional quarter-point rate increase in December, aiming for a terminal rate range of between 5.50% and 5.75%. It’s a tightrope walk, but I believe the Fed will commence rate cuts in June 2024. I’m expecting a 75-basis-point decrease over the course of that year and a further 100 basis points in 2025 as the economic landscape shifts.
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Week’s Numbers
Amid recent adjustments to S&P 500 earnings per share (EPS) growth rates, financial analysts urge investors to maintain perspective rather than concern. The Federal Open Market Committee’s (FOMC) cautious stance and subtle labor market shifts are contributing to revised growth estimates. Historically, growth rate forecasts experience regular fluctuations, a trend echoed in the latest revisions.
The S&P 500’s EPS growth for Q3 2023 reflects a resilience in forecasts, aligning with late December 2022 predictions following a period of conservative revisions earlier in the year. Currently, growth stands at a solid +5.6%, having recovered from a significant deceleration to near 1% in May.
Looking ahead, Q4 2023 EPS forecasts are being cautiously adjusted downward, a common pattern preceding quarterly reports. For more detailed analysis, investors are directed to Fact set for commentary on these projections. Additionally, the corporate high-yield credit market serves as a key indicator; widening credit spreads could signal more substantial economic challenges ahead.
On the data front, October’s Consumer Price Index (CPI) and retail sales figures are set to release, with a modest +0.1% increase in overall CPI anticipated. Despite a decrease in crude oil prices, Core CPI is expected to show a slightly higher rate of +0.3%. The housing sector, accounting for a substantial portion of CPI, will be closely watched, as early reports suggest a decline in national rent prices. Confirmation of this trend will be pivotal in understanding inflation’s trajectory and its influence on personal finance strategies.
Review Last week’s numbers here.
Earnings
Aggregate Estimates and Revisions
- 23Q3 Y/Y earnings are expected to be 6.3%. Excluding the energy sector, the Y/Y earnings estimate is 11.6%.
- Of the 455 companies in the S&P 500 that have reported earnings to date for 23Q3, 81.3% have reported earnings above analyst estimates. This compares to a long-term average of 66.5% and prior four quarter average of 73.6%.
- During the week of November. 13, 13 S&P 500 companies are expected to report quarterly earnings.
Source I/B/E/S data from Refinitiv
Global Spotlight
U.S.-China Diplomacy at APEC The APEC summit will host a critical meeting between Presidents Joe Biden and Xi Jinping in San Francisco from November 15-17. Expectations are set on maintaining the status quo rather than achieving significant diplomatic advances. The agenda includes rebuilding military communication lines, counternarcotics collaboration, and discussions on regional security and supply chain fortification. Despite the diverging perspectives on global conflicts, such as those in Ukraine and Gaza, the summit provides a platform for dialogue among Asia-Pacific leaders.
Gaza Talks: Saudi Initiative Saudi Arabia will spearhead discussions on the Gaza conflict by bringing together Arab and Islamic leaders soon. With the prospects of establishing a post-conflict governance in Gaza, the summit aims to strategize on reconstruction aid and political influence. This gathering presents an opportunity for Gulf states to bolster their regional sway and support the Palestinian Authority’s governance aspirations.
Elections: Madagascar and Liberia Madagascar anticipates a tense presidential election on November 16, with President Andry Rajoelina favored to win amidst controversy. The election’s outcome will influence international business contracts and potential mining reforms. Meanwhile, Liberia is preparing for a runoff election on November 14 between George Weah and Joseph Boakai, reflecting a sharply contested political landscape and the subsequent legislative challenges for the incoming leader.
Spanish Political Turmoil Spain faces a decisive political moment on November 16 as the vote of investiture determines whether Pedro Sanchez will continue as Prime Minister. Sanchez’s pact with Catalan separatists, granting amnesty to participants of the 2017 independence referendum, has sparked nationwide protests. Sanchez’s potential reappointment would bring policy stability at the cost of ongoing unrest due to his separatist associations.
U.S. Budget Brinkmanship The risk of a U.S. government shutdown looms if a fiscal agreement is not reached by November 17. A temporary fix in September delayed the shutdown, but political rifts, particularly within the Republican-majority House, have since impeded a consensus. A stopgap measure proposed by Republicans is awaited with its details currently undisclosed, and a shutdown would hinder federal operations and international aid commitments, including to Ukraine.
Stratfor.com
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