Morning Report: The Conference Board sees a recession in early 2023

Vital Statistics:

 LastChange
S&P futures3,873-33.75
Oil (WTI)79.160.84
10 year government bond yield 3.67%
30 year fixed rate mortgage 6.38%

Stocks are lower this morning on no real news. Bonds and MBS are down small.

Third quarter GDP was revised upward from 2.9% to 3.2%, according to the BEA. The revision was driven primarily by an upward adjustment to consumer spending, primarily in services. The PCE price index was revised upward by 0.1% to 4.8%. The PCE price index (ex-food and energy) was revised upward by 0.1% as well.

The Atlanta Fed’s GDP Now model sees 2.7% GDP growth in Q4.

The index of leading economic indicators declined sharply in November, according to the Conference Board. “The US LEI fell sharply in November, continuing the slide it’s been on for most of 2022 after peaking in February,” said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board. “Only stock prices contributed positively to the US LEI in November. Labor market, manufacturing, and housing indicators all weakened—reflecting serious headwinds to economic growth. Interest rate spread and manufacturing new orders components were essentially unchanged in November, confirming a lack of economic growth momentum in the near term. Despite the current resilience of the labor market—as revealed by the US CEI in November—and consumer confidence improving in December, the US LEI suggests the Federal Reserve’s monetary tightening cycle is curtailing aspects of economic activity, especially housing. As a result, we project a US recession is likely to start around the beginning of 2023 and last through mid-year.”

Purchase application payments (a proxy for mortgage affordability) fell slightly in November as mortgage rates fell. The national median mortgage payment fell from $2,012 to $1,977. The MBA attributed this to a slowing in home price appreciation and a 26 basis point decrease in the mortgage rate.

It is important to understand that affordability is more than just the mortgage payment – it is also a function of incomes. Since incomes are rising at the fastest rate in decades that helps blunt the impact of rising payments. Last October / November almost certainly will be the peak of unaffordability as rates continue to fall and home price appreciation slows. As Keynes discussed about “sticky wages” they generally won’t fall, so higher incomes are baked into the cake already. Falling rates and prices will square the circle.

26 Responses

  1. Interesting to compare the reaction here to the restaurants who won’t serve certain customers:

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    • jnc:

      It is obviously pretty much the same thing. At the very least, I would think that Dolan owes compensation to anyone turned away for their expenses. Offering people tickets to an event which you won’t actually allow them to attend is enticing them to spend money not only on tickets, but also on travel and often accommodations, with a false promise. It seems like fraud to me.

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  2. This made me laugh.

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  3. I read a critique of Hamlet by T.S. Eliot and this sentence popped out at me:

    ”And probably more people have thought Hamlet a work of art because they found it interesting, than have found it interesting because it is a work of art. It is the “Mona Lisa” of literature.”

    https://genius.com/Ts-eliot-hamlet-and-his-problems-annotated

    The turn of phrase just seems so relevant today.

    This line makes me laugh:

    If you examine any of Shakespeare’s more successful tragedies,

    Hamlet is obviously successful insofar as it’s widely read, taught and held up as excellent. I get what he means though, I just love Eliot’s confidence in himself to assert it.

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  4. New Twitter file.

    https://threadreaderapp.com/thread/1606701397109796866.html

    What’s Musk’s motive in publishing this on Christmas Eve? Why is he trying to avoid an audience?

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    • I think Taibbi et al are deciding when to publish. Taibbi wrote an explanation to his subscribers last night, saying that he just wanted to get this out now so he could enjoy the Christmas holiday with his family without thinking about it. He’s apparently been in SF for two weeks looking at the docs.

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      • BTW…merry Christmas everyone! We lost power this morning at 7am, but happily it was back by 11.

        Hope you all are surviving ok!

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        • If you don’t have one and can afford it, I recommend a whole home generator. Now, the natural gas ones that come on automatically are pricey, around $15-$20k. I went a cheaper route and have a 12,000 watt generator and had an electrician install a transfer switch. My unit runs off gas or propane. I save at least $12k on it but I have to go out, start the generator and then effect the transfer at my breaker box. Also, have to prepare with gas to last a couple of days. For this latest freeze I have 15 gallons set up if needed. Luckily, no issues.

          Merry Christmas to you Scott and to all here!!

          That includes you too LMS, if you’re lurking! Let us know how you, Walt and the kids are doing.

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    • Thanks McWing, I rarely lurk here anymore but I did check in tonight to wish you all a happy new year………………all lower case…………….LOL

      These days I spend most of my time trying to help raise the newest generation to be both smart and empathetic……………..I don’t know what else to do in the politics of the day!

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  5. This thread is awesome.

    Still think the taco bowl salad for his Cinco de Mayo celebration is the best.

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  6. Merry Christmas everyone!

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  7. Good piece on Pelosi and the Democrats failure to prepare for the 1/6 protest.

    https://redstate.com/nick-arama/2022/12/25/kinzinger-smears-mtg-over-jan-6-accidentally-exposes-holes-in-dem-narrative-against-trump-n678821

    Plus, the Capital police opened the doors and let them in.

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  8. My wife and I argued over this video. I guarantee I did some variation of this as a kid and watching this makes me reminiscent. She was repulsed.

    I pray boys still do things like this.

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  9. I do admire this guy’s balls.

    https://redstate.com/kiradavis/2022/12/26/liar-liar-pants-on-fire-ny-rep-elect-george-santos-admits-to-lying-about-pretty-much-everything-during-his-campaign-n679490

    I suppose the “proper” thing to do would be for R’s to either force him to resign or expel him. But in this environment, what’s the upside for Republicans in doing that?

    Like

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