Economy Watch

Confusing data is the rule. This makes the Fed’s job especially difficult. Which data points do you believe? Better question, which data points does the Fed believe?

  • New home sales unexpectedly rose 7.5% in October, befuddling economist who expected a decline of 5.5% for the month. While some analysts credited aggressive discounting by home builders as the reason for the rise, the median price of a new home hit $493,000, a new record. Despite the better-than-expected October data, new home sales are now waffling near the pandemic low.

  • US existing home sales in October were better than expected, but still fell 5.9%. This is the ninth straight decline in monthly sales, which are now at levels last seen in 2008.

  • US Services PMI (Purchasing Managers Index) comes in weak. US Services PMI fell to 46.1 from 47.8. This is below economist expectations of 48.0.
  • US Manufacturing PMI also indicates contraction. Manufacturing PMI fell from 50.4 to 47.6 and below the 50 level expected by economists. Note that PMI below 50 is indicative of a contraction. PMI data is supplied by S&P Global.

  • Durable Goods orders surprise on the upside. Durable goods orders rose 1.0% in October, far surpassing expectations of a 0.4% increase. Core durable goods orders (ex-transportation) also beat on the upside, gaining 0.5%. The data is certainly better than expected, but we note the data is not adjusted for inflation.

Despite some recent upside surprises, the preponderance of data appears to point to an approaching recession. We point to the comments from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commenting on the PMI data:

Business conditions across the US worsened in November, according to the preliminary PMI survey findings, with output and demand falling at increased rates, consistent with the economy contracting at an annualised rate of 1%.

“Companies are reporting increasing headwinds from the rising cost of living, tightening financial conditions – notably higher borrowing costs – and weakened demand across both home and export markets.”

Skill shortages also remain a worrying constraint on expansion, but there is better news on supply chains, with supplier performance improving in November for the first time for over three years.

While the reduced supply chain stress is partly a symptom of lower demand, the alleviation of supply delays removes a key driver of inflationary pressures and has helped moderate the overall rate of input cost inflation to a near two-year low. November even saw increasing numbers of suppliers, factories and service providers offering discounts to help boost flagging sales. Hiring has also slowed to a crawl so far in the fourth quarter as firms focus on reducing costs.

“In this environment, inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession.”

The Fed appears to be achieving its desired result, the critical question is whether they can time the economy such that they tame inflation without causing a recession. So far, they have done a fine job, but there is a long way to go.


What We’re Reading

Fears of crypto contagion grow as another company’s finances wobble

Binance deploys $1 billion to keep crypto industry afloat after FTX collapse

Biden says his administration is engaged in talks to avert railroad strike

China’s total daily Covid cases soar above Shanghai lockdown highs

iPhone Factory in China Offers $1,400 Payments to Quell Worker Unrest

Why Is The U.S. Losing Oil Refining Capacity?

Noncitizen Bill Makes Aliens and Diplomats D.C. Voters


Palumbo Wealth Management (PWM) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where PWM and its representatives are properly licensed or exempt from licensure. For additional information, please visit our website at

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forwardlooking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.



General News

By: Adam