Government Shutdown was Set for Saturday Night… Until the House authorized spending, the federal government was to shut down at the end of the fiscal year on September 30.
What it means— A 45-day countdown begins before you should expect national monuments to close, longer lines at airports, and a lot of finger-pointing by congressional representatives. Military personnel and some others will be furloughed without pay but will get all their back pay and not charged with vacation time when it is over. A small group of Republicans who won’t vote for certain parts of the spending bill were getting the blame.
Welcome to a representative government, as opposed to a democracy. This situation was temporarily resolved, and unfortunately for us, the approved monies won’t carry us through the full 2023-2024 fiscal year. Instead, expect the solution to be short term so that we can do this all over again just before Thanksgiving. Each time it occurs, the tactic loses power.
August Personal Consumption Expenditures Index (PCE) Rose From 3.4% to 3.5%… The core PCE dropped from 4.3% to 3.9%.
What it means— Investors cheered the numbers, especially the dropping overall number, but they shouldn’t have. Core PCE strips out food and energy, and energy is where the pain will remain for some time. Now that other producers know they can push oil prices to $100 without any blowback, they will, and those prices will wash up on our shores in the form of inflation in everything. This won’t be fun.
And the Bureau of Economic Analysis isn’t helping. The BEA periodically does a “comprehensive update of the National Economic Accounts” resulting in an increase in PCE data from 2020 to date. Revisions upward also occurred in the Core and Services Indexes. This would seem to complicate the Fed and Treasury suggestions that the inflation target is achievable with either no recession or a “soft landing.” Chair Powell probably knew about these revisions at the recent FOMC meeting which explains his “higher for longer” message.
August New-Home Sales Dropped 8.7%, Are Still Up 5.8% Over August of Last Year… The supply of new-home sales increased 11.4% and is up to 7.8 months at the current sales rate.
What it means— In an echo of last week’s building starts, new-home sales lost a bit of momentum, as more shoppers pushed back against mortgage rates over 7%. But, just like those for existing home sales, new-home sales prices are holding steady, down just a bit from $436,700 to $430,300. The builders remain disciplined, so the standoff between buyers and sellers has stayed in place. Barring a huge drop in the economy that compels the Fed to jump in, it looks like we’re in for a long, slow yield-curve steepening, which won’t be pretty. In that scenario, home sellers eventually will lose, but it should be at least six to nine months before we see capitulation.
Durable Goods Orders Up 0.2%, Beating Expectations of a 0.5% Decline…The surprise was due to higher-than-expected defense spending.
What it means— Who would’ve thought that when you ship a zillion tons of materiel to another country and then try to replace it, then durable goods orders would climb? Once defense spending is not included, durable goods orders dropped 0.7%. Business spending remains weak, as business owners worry about a potential recession this fall and higher interest rates make previous “no-brainer” projects into “not-a-chance” projects, because of the financing costs.
Initial Jobless Claims Essentially Flat at 204,000… The continuing claims barely budged, rising by just 12,000 to 1.66 million.
What it means— Another week, another set of reports showing consistent employment; it’s as simple as that.
U.S. Bureau of Economic Analysis (BEA) Bumps First-Quarter Gross Domestic Income Much Higher, From Negative 1.8% to Positive 0.5%… The BEA points to dramatically higher wages and compensation as the reason for the big revision.
What it means— We’re not seeing a bunch of extra cash in the economy. Normally, it’s easy to point to income inequality due to capital gains, etc., but not this year: 2022 was not kind to the market, and neither was the first quarter of 2023. But with the big revision to gross domestic income (GDI), the BEA closed much of the gap between GDI and gross domestic product (GDP)… at least on paper. Anyone feeing better off?
In Greece, a Herd of Sheep Eats 100 Kilograms of Marijuana… It’s been a tough year for Greece, in part due to flooding from Storm Daniel. Authorities estimate that more than 100,000 livestock perished in the storm, and thousands more were left in flooded areas with no food source. But apparently, one herd of sheep hit the jackpot. A cannabis greenhouse owner who already had suffered severe production cuts due to the weather found the sheep munching much of what was left of his crop in the greenhouse. It won’t bring back his crop, but the sheep likely would like it if he threw in a few bags of Doritos.
Data supplied by HS Dent Research
“When the facts change, I change my mind.
What do you do?” ~ John Maynard Keynes
Our plan is “the plan will change.”
What is your plan?
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