- Manufacturing production edged up 0.1% in October, increasing for the fourth straight month. Encouragingly, the manufacturing production index reached its highest level since July 2008. With that said, the pace has been more sluggish than we would prefer, up just 0.5% over the past three months. The sector has continued to grapple with soaring costs, supply chain bottlenecks, workforce shortages and geopolitical and economic uncertainties.
- Despite those obstacles, manufacturing production has risen a very modest 2.4% year-over-year. In addition, manufacturing capacity utilization remained unchanged at 79.5% in October and not far from April’s rate (80.0%), which represented the highest level since July 2000.
- At the same time, regional surveys from the Kansas City and Philadelphia Federal Reserve Bank districts reflected contractions once again at paces not seen since the start of the pandemic, with declining new orders. Pricing pressures were seen moderating but at still-elevated paces.
- Producer prices for final demand goods and services rose 0.2% in October. Over the past 12 months, producer prices for final demand goods and services have risen 8.0%, down from 8.4% in September and the lowest level in 15 months. Core producer prices increased 5.4% year-over-year, down from 5.6% in August and September and continuing to decelerate since hitting a record 7.1% in March.
- After four straight 75-basis-point hikes in the federal funds rate, the Federal Open Market Committee will likely step back to a 50-basis-point increase at the upcoming December 13–14 meeting.
- The FOMC will possibly do another 50-basis-point hike at its Jan. 31–Feb. 1, 2023, meeting. However, depending on the data, it could step back to a 25-basis-point increase. I currently expect a 25-basis-point increase at the March 21–22, 2023, meeting. Thus, the FOMC could enact at least another 100 or 125 basis points of federal funds rate growth before the Federal Reserve hits the pause button.
- Retail sales jumped 1.3% in October after being flat in September, growing solidly to begin the fourth quarter. The data were encouraging overall and another sign of resilience in the U.S. economy despite lingering challenges and worries in the outlook. On a year-over-year basis, retail sales have soared 8.3%, albeit in nominal terms.
- At the other end of the spectrum, new housing starts fell 4.2% to 1,425,000 units at the annual rate in September. Single-family housing starts declined 6.1% to 855,000 units, the slowest pace since May 2020. New housing starts have plummeted 20.8% year-over-year.
- Higher mortgage rates and issues with affordability have sharply lessened demand in the housing market, which has fallen into a recession in recent months. Indeed, builder sentiment remained negative for the fourth straight month, falling to post-pandemic lows in November, according to the National Association of Home Builders and Wells Fargo.
- Existing home sales fell 5.9% to 4.43 million units at the annual rate in October, declining for the ninth straight month to the slowest pace since May 2020. On a year-over-year basis, existing home sales plummeted 28.4% from 6.19 million units in October 2021. Yet, the median sales price was $379,100 in October, up 6.6% over the past year.
- California created the most net new manufacturing jobs in October, adding 6,400 workers, and Texas had the most manufacturing employment growth year-over-year, with 48,300 more workers since October 2021. At 2.1%, Minnesota and Utah had the lowest unemployment rates nationally.
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