Rover's Weekly Market Brief - 01/06/2023

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Economy

The ISM® (Institute for Supply Management®) Manufacturing PMI® reported in at 48.4% for December as business activity fell 0.6 points from the previous month, this marks the first contraction after 30 consecutive months of expansion. A value below 50% is indicative of a shrinking economy. “The past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for December 48.4% corresponds to a 0.1% decrease in real gross domestic product (GDP) on an annualized basis,” said Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee. The Manufacturing PMI® figure is now at its lowest level since May 2020, when it registered 43.5%. Of the six biggest manufacturing industries, only Petroleum & Coal Products showed moderate growth. The index for new orders contracted for the fourth straight month reaching its lowest level since the pandemic, declining 2.0 points to 45.2%. The prices index which measures what companies pay for raw materials and other supplies fell 3.6 points to 39.4%, this is the lowest reading since April 2020. Over the past nine months, the index has decreased by 47.7 points. The Employment Index returned to expansion territory up 3 points to 51.4% after contracting in November.

The Commerce Department reported that the U.S. trade deficit shrank 21% in November to $61.5 billion, the lowest deficit reading since September 2020. The percentage decline was the largest seen since February 2009. A shift in consumer spending from services to goods contributed to the contraction as imports dropped 6.4% to $313.4 billion. Imports for pharmaceutical preparations, cell phones, household goods, and automotive all saw decreases. Exports fell 2.0% to $251.9 billion, with goods shipments sinking 3.0% to $170.8 billion, as the stronger US dollar has made exports more expensive. A drop in exports of natural gas, crude oil, and civilian aircraft was partially offset by an increase in pharmaceutical preparations. Demand for U.S. exports has weakened as the trade deficit with China decreased $5.8 billion to $20.4 billion in November and the European Union decreased $3.6 billion to $19.5 billion. Year-to-date goods imports from the European Union ($662.6 billion) have exceeded those of China ($499.4 billion).

The U.S. Bureau of Labor Statistics reported 223,000 jobs were added as the unemployment rate fell to 3.5% in December. November’s reading was revised (-7,000) to 263,000 as the unemployment rate was also adjusted to 3.6% from 3.7%. The number of unemployed workers edged lower to 5.7 million from the previous month’s 6 million. Some 4.5 million new jobs were added in 2022, an average of (+375K) per month. Leisure and hospitality (+67K) led the way in job gains, but it is still some 932K short of pre-pandemic levels. Job gains were also reported in healthcare (+55K), construction (+28K), social assistance (+20K), retail trade (+9K), and manufacturing (+8K). There were 10.46 million job openings in November – about 1.7 job openings for each person looking for a job. The labor force participation rate increased slightly to 62.3% from 62.1%, leaving it still below the pre-pandemic level of 63.4%. Average hourly earnings increased by 0.3% in December. At $32.82 average hourly earnings are up 4.6% from a year ago.

Upcoming Economic Reports:

Wednesday January 11 – EIA Petroleum Status Report

Thursday January 12 – CPI (MoM) (December)

Earnings Calendar:

 

Monday	Tuesday	Wednesday	Thursday	Friday
Jefferies Financial Group (JEF)	Albertsons Companies (ACI)	KB Home (KBH)	Seven & i Holdings Co (SVNDY)	Bank of America (BAC)
Pricesmart (PSMT)	TD Synnex (SNX)	Shaw Comms (SJR)	Taiwan Semiconductor (TSM)	Delta Air Lines (DAL)