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Economic Research: U.S. Real-Time Data: High Prices Dampen Economic Activity And Moods


Global Economic Outlook Q4 2023: Nearing The Rate Plateau


Economic Outlook Canada Q4 2023: Sluggish Growth Ahead


Economic Outlook U.K. Q4 2023: High Rates Keep Growth Muted


Economic Outlook Emerging Markets Q4 2023: The Lagged Effects Of Monetary Policy Will Test Resilience

Economic Research: U.S. Real-Time Data: High Prices Dampen Economic Activity And Moods

Summary Of Indicators
Indicator How the data looks
Virus and mobility
COVID-19 cases As of Jan. 24, new cases (seven-day moving average) decreased by almost 9% to an average 731,149 from its recent peak (Jan. 15), after surging by 89% since Dec. 31. New deaths (seven-day moving average) increased by 19% for the same period. New deaths increased by 70% since Dec. 31, 2021, the highest level in nearly a year, surpassing the daily average during the delta variant. Around 76% of the population received at least one dose of the vaccine, while 63.3% is fully vaccinated. Another 25.6% of the population also received a booster dose. On an average, 0.8 million people are getting vaccinated every day down from 1.1 million for the week ended Jan. 15.
Google mobility As of Jan. 18, overall mobility remained 19% below pre-pandemic levels as new cases tied to omicron surged. However, mobility remained well above the spring 2020 level, when it dipped sharply as the pandemic hit the country and authorities imposed strict lockdowns.
People-facing COVID-19-sensitive
Open Table As of Jan. 23, overall bookings were 25% below the comparable period in 2019. There is a modest improvement in Open Table bookings since our last report published on Jan. 15 as new cases seem to have leveled off.
Air traffic The airline industry also witnessed a fall in activity as COVID-19 cases in the country increased. As of Jan. 23, traffic is almost 25% below its pre-pandemic levels. This remains significantly above the April 2020 level, when air traffic fell by nearly 90%.
Hotel occupancy The hotel occupancy rate reached 48.8% for the week ended Jan. 15, around 17 percentage points below the pre-COVID-19 levels and six percentage points lower than Dec. 25. The rise in COVID-19 cases has affected both leisure and business travel. While current rates are much higher than rates seen in the first wave, according to an American Hotel and Lodging Assn. report, business travel is likely to remain more than 20% down for 2022.
Current and future activity
Weekly Economic Index (WEI) The Weekly Economic Index came in at 5.14% year over year, for the week ended Jan. 22. The increase in the WEI is due to a drop in initial claims and an increase in electricity consumption offsetting a decrease in tax withholding and fuel sales.
PMI measures The Taiwan Manufacturing PMI backlog orders and new orders subindices inched up in December from the previous month, but they're well below the April highs. While this is still above the 50-point neutral rate, it suggests some improvement in semiconductor production shortages.
Raw steel capacity Raw steel capacity utilization inched up to 83% for the week ended Jan. 19, an increase by almost 2 percentage points after falling to 80.9% for the week ended Jan. 5. Strong demand from pandemic recovery has kept utilization above its 2019 average since June 2021.
Home mortgage applications The purchase index declined by almost 6% for the week ended Jan. 21 compared with last week as mortgage rates continued to rise, with the 30- year fixed rate increasing for the fourth consecutive week to its highest level since March 2020. Real estate activity will likely pick up in the near term as people get ahead of higher interest rates through the year. The Federal Reserve is expected to raise rates in March, with at least three rate hikes this year and five more by year-end 2024.
Johnson Redbook Index For the week ended Jan. 14, the same-store sales index increased by almost 18% on a year-over-year basis (four-week moving average) and stayed well above pre-COVID-19 levels as consumer demand remained strong.
Consumer confidence The Conference Board’s January consumer confidence indicator fell by 1.4 points to 113.8 in January, after University of Michigan consumer sentiment fell to a 10-year low of 67.2 for the month. The Ipsos-Forbes Advisor biweekly consumer confidence index fell to 52.3 on Jan. 28, the lowest since Feb. 11, 2021, indicating that monthly consumer confidence readings have further to fall.
Lumber futures Lumber futures prices, at $1,144 per 1,000 board feet on Jan. 21, are 1.5x higher than their Sept. 15 low, on stronger new home sales amid continued supply chain constraints and higher U.S. tariff rates on Canadian softwood lumber. They are 32% below the May 2021 all-time high.
Industrial metal price index The industrial metal price index continued to increase on the back of limited supply and high demand spurred by the recovery, reaching its all-time high on Jan. 20. As of Jan. 24, the metal price index is 55% above its 2019 average.
Baltic Dry Exchange The Baltic dry index declined by 75% from its multidecade high in October 2021 and returned close to its 2019 average on Jan. 24. A drop in freight rates was partly attributed to a slowdown in iron ore stockpiling in China.
Gasoline prices Gasoline prices remained elevated. The gasoline price per gallon was at $3.32 the week of Jan. 24, 38% higher than its pre-pandemic level and near its seven-year high the Nov. 22 week. It is a major attributing factor of soaring inflation.
Forward inflation expectations Long-term inflation expectations and medium-term inflation expectations eased slightly though remain at their highest rates in almost 10 years. This modest easing is against the backdrop of upcoming policy tightening, with a rate hike as soon as March.
Labor market
Initial jobless claims versus Indeed Job postings Initial jobless claims for the week ended Jan. 22 came in lower than expected, a decrease by 30,000 from the previous week to 260,000. Although a rise in COVID-19 cases has put upward pressure on claims, we expect claims to hover around 200,000 as cases decline amid tight market conditions. Relative to Feb. 1, 2020, levels, Indeed job postings hit another high.

The U.S. economy continues to decelerate in January as omicron slows economic activity and inflation takes a bite out of purchasing power. Since our real-time economic report on Jan. 14, new COVID-19 cases have moderated though are still at extremely high levels. Although it's still a workers' market, initial unemployment benefit applications and absenteeism picked up since late December, weighing on productivity and economic activity this quarter. Fortunately, real-time mobility and economic indicators we track appear to have stabilized at their recent low levels.

While our measures of long-term inflation expectations moderated slightly, they remain remain close to their multiyear highs reached in late November. High prices have crippled consumer purchasing power and weighed on consumer confidence in January. With long-term inflation expectation indicators around a decade high, the Fed has reason to be concerned that inflation expectations have proven "persistent." We expect at least three rate hikes this year, with the first in March. Five more rate hikes are in our forecast through 2024. This leaves the U.S. now bearing the impact from continued high prices, or the cure--higher interest rates later on.

New COVID-19 Cases Moderate As Mobility Slows

COVID-19 cases in the U.S. moderated to a still-high 731,000 per day (seven-day moving average) on Jan. 24, near the record high of over 802,000 on Jan. 15 and over 8.5x the Dec. 1 rate. Daily deaths climbed to 2,188 as of Jan. 24, over twice Dec. 1 though 29% below the Dec. 22, 2020, peak (see chart 1). Omicron reportedly causes less severe illness than other variants, particularly for fully vaccinated people. As of Jan. 24, 63.7% of the population are fully vaccinated, 76.3% have at least one dose, and 25.7% have received booster shots (versus 60.6%, 71.4%, and 14.4%, respectively, on Dec. 1). The omicron variant is already in retreat nationwide, according to White House Chief Medical Adviser Dr. Anthony Fauci. If cases continue to subside, the economic impact from omicron will likely be transitory.

Chart 1


Chart 2


While the extremely high caseload has noticeably discouraged mobility for retail and recreation, the indicators we track appear to have stabilized at their recent low levels. According to Google Community Trends data, mobility in the U.S. held at 19% below pre-pandemic levels on Jan. 18 from its recent low of -21 on Jan. 7. New York still has the lowest mobility among major states we track, at 31% below the 2019 average (see chart 3). The national average of seated diners improved modestly, up 3.5% from our Jan. 14 report, to 24.5% below the pre-pandemic level as of Jan. 23 (see chart 4) and much higher than in April 2020, which dropped to 100% below the pre-pandemic level.

Meanwhile, held back by restricted business travel and cautious households, the hotel occupancy rate, now at 48.8%, has continued to decline from its 71.4% peak in July 2021 (see chart 5). Not surprisingly, air traffic drifted down by 6.2% since our last report to around 24.5% below the 2019 level (see chart 6). This remains significantly above April 2020, when air traffic fell by nearly 90%.

Chart 3


Chart 4


Chart 5


Chart 6


Economic Activity Moderates On High Prices

U.S. advanced real GDP posted a 6.9% growth rate in the fourth quarter, on healthy consumer spending and substantial inventory accumulation, as businesses play catch up with final demand. Real GDP reached a 37-year high of 5.7% in 2021. The GDP chain price index surged to a 6.9% rate in the fourth quarter from 6.0% the quarter before, the highest pace since the 8.0% rate in third-quarter 1981. Excluding food and fuel, the core rate climbed to 4.9%, its highest since third-quarter 1983, from 4.6% in the third quarter.

In other words, economic output in current prices has far surpassed the precrisis growth rate. But when adjusted for inflation, GDP is still below its pre-pandemic trend as those dollars are not worth as much as before the crisis.

The New York Fed's Weekly Economic Index (WEI), an index of real economic activity using high-frequency data, scaled to align with the four-quarter GDP growth rate, was 6.3% the week of Dec. 25, indicating that GDP for that quarter would be 6.3% higher than a year ago (see chart 7). (Fourth-quarter 2021 GDP over fourth-quarter 2020 GDP was 5.5%, according to the Bureau of Economic Analysis.) The WEI has since moderated to a still-healthy 5.1% as of the Jan. 22 week, higher than our December forecast of 4.7% for first-quarter 2022 over first-quarter 2021.

It is very likely that these first-quarter GDP figures will dip lower. Based on the Census Household Pulse Survey, more than 8.7 million people didn't work in late December/early January because they had COVID-19 or needed to take care of someone who did, pointing to lost productivity and economic activity. Assuming absenteeism continues into the first quarter, one can expect further weakness in productivity and economic activity measures.

Long-term inflation expectations edged down from multiyear highs in late November, while prices are still uncomfortably high (see chart 8). With long-term inflation expectation indicators advancing to a decade high, the Fed has reason to be concerned that inflation expectations have proven "persistent."

While the Fed will likely be sensitive to the flattening yield curve, on concerns of unintended consequences, current inflation pressures indicate that more rate increases from the Fed this tightening cycle are a real possibility. Depending on the data, balance-sheet normalization will likely start in early 2023, with chances of an earlier start.

Chart 7


Chart 8


Higher Prices Continue To Weigh On Consumer Confidence

On extremely high prices at the checkout denting wallets, consumer confidence measures fell further this month. The Conference Board's January consumer confidence indicator fell by 1.4 points to 113.8 in January, joining the drop in the University of Michigan sentiment to a 10-year low in January (see chart 9). The Ipsos-Forbes Advisor U.S. Consumer Confidence Biweekly Tracker also fell, by 4.4 points on Jan. 27 to 52.3 (Jan. 13 was 56.7), 7.8 points below its pre-pandemic high in March 2020 and well below its 2021 high of 62.4 in June (see chart 10).

A strong jobs market--with initial jobless claims falling to 260,000 in the Jan. 22 week (near its 52-year low of 188,000 in the Dec. 4 week), the unemployment rate under 4%, and job openings still at record highs--supports consumer spending this year (see chart 11). Although, higher prices will crimp purchasing power as real wage gains remain in negative territory.

The Johnson Redbook Same-Store Sales Index stayed buoyant the week of Jan. 14, increasing by over 18% year over year, though this likely reflected higher prices for items bought (see chart 12). The index remains well above pre-COVID-19 levels as consumer demand remained strong, helped by healthy balance sheets. Cumulative average household savings edged down through November but remain more than $2.5 trillion over their 2019 average, suggesting spending activity will continue through 2022. Acknowledging the damage higher prices did to their pricing power over the holidays, consumers will likely be less forgiving of higher prices this year and will look for deals or trade down when available.

Chart 9


Chart 10


Chart 11


Chart 12


A Pickup In Housing Activity Lifts Lumber Prices

The mortgage applications purchase index held at around 300. While 16% off its Jan. 15 high of 348, it has risen since dipping to 247.50 in the July 30 week (see chart 13). New home sales help explain the recent pickup in lumber prices. Lumber futures prices, at $1,144 per 1,000 board feet on Jan. 21, are down from recent highs but remain elevated on a still-hot housing market, despite continued supply chain constraints and higher tariffs on Canadian softwood lumber (see chart 14). They are 32% below the May 2021 highs.

Chart 13


Chart 14


Inflation Has Eased Somewhat But Remains Extremely High

U.S. inflation, as measured by the Fed's preferred inflation index, the core Personal Consumption Expenditures (PCE) Price Index, climbed to 4.9% on a year-over-year basis in December, up from November's core PCE inflation rate of 4.7%. Real-time pricing data suggests that inflation may have moderated in January, though at still extremely high rates.

High-frequency pricing data moderated slightly since our Jan. 14 report, though its remains near 2021 highs. The industrial metal price index ticked higher since our Jan. 14 report, on the back of limited supply and high demand spurred by the recovery, reaching a record high of $1,710.52 on Jan. 21 (see chart 15). The bipartisan infrastructure package helped keep prices high. As of Jan. 24, the metal price index is 55% above its 2019 average. Raw steel capacity picked up through Jan. 19 and is now 3.1% above its 2019 average though is 2.5% below its high of 85.3 the week of Oct. 20 (see chart 16).

Gasoline prices, at $3.32 the week of Jan. 24, are 9 cents lower than their seven-year high of $3.41 the week of Nov. 8 (see chart 17). The Baltic exchange dry index has drifted down further through Jan. 24 (see chart 18). At 1,391, it's now above the 2019 average of 1,344. The Baltic dry index is tied to trade in commodities such as coal, iron ore, and grain--so more closely linked to China, Brazil, and India.

Chart 15


Chart 16


Chart 17


Chart 18


Chart 19


Economic Release Calendar
Date Release For Forecast Consensus Previous
31-Jan Chicago PMI (%) 61.0 62.1 64.3
1-Feb ISM (manufacturing) (%) Jan 57.0 57.9 58.8
Construction spending (%) Jan 0.6 0.7 0.4
Auto sales (mil.) Dec 12.8 12.6 12.4
2-Feb ADP Employment Survey (000s) Jan 100 210 807
3-Feb Q4 nonfarm productivity (prelim) (%) Q4 3.0 3.5 (5.2)
Q4 unit labor costs (prelim) (%) Q4 1.3 1.0 9.6
Initial claims, week of 1/29/22 (000s) 250 245 260
Factory orders Dec 0.2 (0.3) 1.6
ISM-NMI Jan 58.0 60.0 62.3
4-Feb Nonfarm payrolls (000s) Jan 125 175 199
Private nonfarm payrolls (000s) Jan 135 185 211
Manufacturing payrolls (000s) Jan 15 21 26
Unemployment rate (%) Jan 3.9 3.9 3.9
Average hourly earnings Jan 0.5 0.5 0.6
Hours worked Jan 34.8 34.8 34.7
7-Feb Consumer credit (bil. $) Dec 20.0 20.0 40.0
8-Feb Trade balance (bil. $) Dec (79.5) 81.0 (80.2)
Goods and services exports (bil. $) Dec 229.0 227.0 224.2
Goods and services imports (bil. $) Dec 308.5 310.1 304.4
9-Feb Wholesale sales (%) Dec 1.1 0.9 1.3
10-Feb CPI (%) Jan 0.4 0.4 0.5
CPI (excluding food and energy) (%) Jan 0.5 0.5 0.6
Treasury budget (bil. $) Jan 25.0 30.0 (21.3)
11-Feb Feb. University of Michigan Consumer Sentiment (prelim) Feb 67.0 67.0 67.2

The views expressed here are the independent opinions of S&P Global's economics group, which is separate from, but provides forecasts and other input to, S&P Global Ratings' analysts. The economic views herein may be incorporated into S&P Global Ratings' credit ratings; however, credit ratings are determined and assigned by ratings committees, exercising analytical judgment in accordance with S&P Global Ratings' publicly available methodologies.

This report does not constitute a rating action.

U.S. Chief Economist:Beth Ann Bovino, New York + 1 (212) 438 1652;
Contributors:Shuyang Wu, Beijing
Joseph Arthur;
Research Contributors:Shruti Galwankar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai
Arun Sudi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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