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S&P Global — 19 Dec, 2022

Daily Update: December 19, 2022

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By S&P Global

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Labor Markets Defy Expectations

As economists warn of a likely recession in the new year, something unexpected is happening in the labor markets. 

Employers who fought hard to find and train workers in 2022 are proving reluctant to let some of those workers go in layoffs — even as overall business output falls. 

“Regional trends show that resilience is particularly pronounced in the eurozone and other developed economies, where firms appear to have been hoarding labor,” S&P Global Market Intelligence economists wrote in an analysis of November Purchasing Managers’ Index data. 

In eurozone countries such as Germany, Italy, Ireland and France, employment remains higher than expected given that business output is falling in those countries, the economists wrote.  

Elsewhere, in places such as Russia, the U.S., Brazil and India, the data indicates falling employment that is more in line with historical patterns. The U.S. tech sector, for instance, shed thousands of jobs in 2022. 

Yet, even in the U.S., employment seems to be stronger than expected because employers have had such difficulty filling job openings. This is particularly apparent for small businesses, which cannot compete as well with the wages and benefits offered by larger entities, S&P Global Market Intelligence Senior Reporter Brian Scheid wrote in a recent article.

That could change soon. U.S. Federal Reserve officials’ most recent gross domestic product projections for 2023 indicate “an even higher pain threshold” for unemployment as the Fed works to tame inflation, Aneta Markowska, chief financial economist at Jefferies, said in a Dec. 14 note. 

S&P Global Market Intelligence economists expect that the U.S. will enter a recession sometime this winter — likely in early 2023, based on strong payroll data for November — with a return to growth in the second half of 2023. 

“The softening of demand will relieve pressure on tight labor markets over time,” the economists wrote, adding that the Fed’s determination to bring down inflation, coupled with a recent easing in financial conditions, make an imminent recession likely. 

It’s a prediction that many Wall Street investors do not seem to have fully accepted — at least not yet. 

"There are significant pressures here that are not easy to fix," Dec Mullarkey, managing director of investment strategy and asset allocation at SLC Management, said in an interview with S&P Global Market Intelligence’s Scheid following the Fed’s December rate hike. "The restrictive range is going to continue, I think, a lot longer than anybody's expecting in the market right now," Mullarkey said.

Today is Monday, December 19, 2022, and here is today’s essential intelligence.

Written by Christina Mitchell.


November U.S. Retail Sales Fall More Than Expected

U.S. shoppers spent less than economists expected in November. Retail and food services fell 0.6%, according to U.S. Census Bureau data released Dec. 15. Economists expected that figure to fall just 0.2%, according to a consensus estimate compiled by Econoday. U.S. retail and food services sales came in at $689.44 billion in November, according to the seasonally adjusted Census Bureau preliminary estimate. The decline came after an increase in October.

—Read the article from S&P Global Market Intelligence

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Capital Markets

Putting Private Equity's Slowdown In Context; Food And Beverage Deals Plummet

Deceleration in just about every metric used to judge private equity performance is one of the most prominent storylines of 2022. But it is not the whole story. Widen the view just a little bit — and ignore, for a moment, the near-complete absence of private equity-backed IPOs — and private equity's 2022 slowdown may look more like a return to business as usual. Start here: There was yet another big year-over-year decline in private equity and venture capital dealmaking in November, according to S&P Global Market Intelligence data. The value of global entries fell 53.5% compared to the same month in 2021, to a total of just $63.51 billion.

—Read the article from S&P Global Market Intelligence

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Global Trade

Commodities 2023: IMO To Bring Carbon Intensity Rules Online Despite Ongoing CII Controversies

The International Maritime Organization, UN's global regulatory body for shipping, will soon introduce its first set of emission regulations despite controversies surrounding its Carbon Intensity Indicator which comes into force in 2023. From January 2023, companies operating ships of 5,000 gross tons or more will need to collect voyage and fuel consumption data to calculate the carbon intensity of their vessel operations.

—Read the article from S&P Global Commodity Insights

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New Zealand Updates Carbon Price Settings, Falls Short Of Climate Body Recommendations

The New Zealand government updated Dec. 15 the country's Emissions Trading Scheme carbon allowance price and volume settings for 2023 to levels significantly lower than as advised by its national climate body. The Climate Change Commission, an independent body tasked with advising the government on climate policy, had recommended in July a steep increase in carbon auction price settings to align with the country's climate goals.

—Read the article from S&P Global Commodity Insights

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Energy & Commodities

Africa — Mining By The Numbers, 2022

Currency volatility, policy revisions, agreement cancellation and deteriorating infrastructures are some of the risks facing investors in Africa. But investor interest is getting stronger with the green energy transition at full steam and turmoil outside the region due to the Ukraine invasion. Exploration budgets targeting Africa continued to grow year over year in 2022, maintaining their 10% share of the global budget.

—Read the article from S&P Global Market Intelligence

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Technology & Media

Snapchat Parent Signals Plans For APAC Growth In 2023 With New Leader In India

Snap Inc. will soon have a new leader overseeing its Asia-Pacific operations from India, and analysts expect the executive to direct fresh investment for Snap in the region. Former Meta Platforms Inc. executive Ajit Mohan will join Snap as president of its Asia-Pacific business in February 2023. Before that, Mohan worked for four years as head of Meta's business in India, during which the executive guided the company's operations through a challenging regulatory environment in the country.

—Read the article from S&P Global Market Intelligence

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