Equities closed the week and month higher. Stocks posted gains in four of the five sessions last week, with the Global Dow and the Russell 2000 leading the way. The Nasdaq enjoyed robust weekly returns as it has for most of 2023. Traders’ fears of a banking crisis apparently subsided but not enough to prevent the financial sector from enduring its worst month since June. Consumer prices continued to advance, according to the latest Personal Consumption Expenditures Price Index but not as much as estimated. Ten-year Treasury yields increased, despite falling lower at the end of the week. Crude oil prices rose, and the dollar slid, while gold prices ended last week higher.
Last Week’s Economic News
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Gross domestic product advanced 2.6% in the fourth quarter of 2022, according to the Bureau of Economic Analysis. GDP rose 3.2% in the third quarter. Personal consumption expenditures, which accounted for about 70.0% of GDP, rose 1.0% in the fourth quarter, lower than the 2.3% advance in the third quarter. Spending on goods declined 0.1%, while spending on services rose 1.6%. Spending on fixed investment fell 3.8% in the fourth quarter (-3.5% in the third quarter), pulled lower by a 25.1% decrease in residential fixed investment. Exports decreased 3.7% after advancing 14.6% in the previous quarter. Imports, which are a negative in the calculation of GDP, fell 5.5% in the fourth quarter, lower than the 7.3% decrease in the third quarter. Consumer prices rose 3.7% in the fourth quarter (4.3% in the third quarter). Excluding food and energy prices, consumer prices rose 4.4% (4.7% in the third quarter). For 2022, GDP advanced 2.1%, compared with an increase of 5.9% in 2021. The increase in GDP in 2022 primarily reflected increases in consumer spending, exports, private inventory investment, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment and federal government spending. Imports increased.
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Consumer prices continued to rise in February. Following a 0.4% increase in the Consumer Price Index, the Personal Consumption Expenditures Price Index rose 0.3%. Excluding food and energy, the PCE price index also increased 0.3%. Since February 2022, prices have risen 5.0%. Consumer spending, as measured by the Personal Consumption Expenditures Index, increased 0.2% in February. Personal income rose 0.3%, while disposable (after-tax) personal income increased 0.5%.
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The advance report on international trade in goods revealed that the trade deficit widened by 0.6% in February over the previous month’s total. Trade activity lessened overall in February as exports declined 3.8% and imports decreased 2.3%.
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The national average retail price for regular gasoline was $3.421 per gallon on March 27, $0.001 per gallon less than the prior week’s price and $0.810 less than a year ago. Residential heating oil prices averaged $4.037 per gallon on March 27, $0.060 below the previous week’s price and $1.054 per gallon less than a year ago.
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For the week ended March 25, there were 198,000 new claims for unemployment insurance, an increase of 7,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended March 18 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended March 18 was 1,689,000, an increase of 4,000 from the previous week’s level.
Eye on the Week Ahead
Manufacturing and services have lagged for much of this year. The March purchasing managers’ survey results for manufacturing and services are out this week and may show a continued slowdown in both sectors. The employment figures for March are also out this week. Job gains have been solid throughout the year, which has supported the Federal Reserve’s policy of interest-rate hikes.
Have a nice week!
Sincerely,
Robert G. Carpenter