Morning Report: Activity in the private sector declines again

Vital Statistics:

S&P futures4,024-11.50
Oil (WTI)81.770.15
10 year government bond yield 3.50%
30 year fixed rate mortgage 6.19%

Stocks are lower this morning as earnings continue to come in. Bonds and MBS are up small.

Loans in forbearance were flat at 0.7%, according to the MBA. Fannie and Freddie loans were 0.31%, while Ginnie loans were 1.45%. “For three consecutive months, the forbearance rate has remained flat — an indicator that we may have reached a floor on further improvements,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “New forbearance requests and re-entries continue to trickle in at about the same pace as forbearance exits. The overall performance of servicing portfolios was also flat compared to the previous month, but there was some deterioration in the performance of Ginnie Mae loans.”

The private sector continues to contract, according to the Flash PMI Index.

“The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January. Although moderating compared to December, the rate of decline is among the steepest seen since the
global financial crisis, reflecting falling activity across both manufacturing and services. The worry is that, not only has the survey indicated a downturn in economic activity at the start of the year, but the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which could encourage a further aggressive tightening of Fed policy despite rising recession risks.

Rising wage inflation will be a red flag for the Fed.

In a sign that the labor market is weakening, we are seeing companies cut temporary workers. Some of the cuts were at the bigger tech companies which are all announcing layoffs in general. Smaller companies which struggled to compete for talent during the past couple of years will probably absorb these temp workers relatively quickly. A drop in temporary worker hiring is often taken as a leading indicator for larger changes in the workforce.

About 13% of adults are planning on buying a home, a decrease from 15% in the third quarter of 2022, according to research from the National Association of Home Builders. Respondents are more interested in buying an existing home than a new one. Affordability is a big issue as 87% respondents said that they were unable to afford more than 50% of the homes in their market. This bodes ill for the Spring Selling Season, but rates have fallen substantially over the past few months, so that should help alleviate some of the affordability issue.

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8 Responses

  1. Rather good long form NYT article.


  2. It would be interesting if the Washington Post applied half as much investigative resources to the Bidens as they are to George Santos.


    • It is like expecting the DNC to highlight negative things about the democrats, or Pravda to say something negative about Mother Russia.

      Never going to happen.


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