Stocks advanced for the second week in a row to kick off 2023. Traders were encouraged by inflation data that showed prices slid lower in December. The interest-rate-sensitive Nasdaq posted gains for six consecutive sessions, its longest streak since 2021, while the Nasdaq and the S&P 500 enjoyed their biggest weekly gains in nearly two months. China’s economic reopening boosted prospects for increased energy demand, sending crude oil prices higher. The dollar declined last week, which helped gold prices surge to the highest level since April.
Last Week’s Economic News
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Good news on the inflation front. The December consumer price index fell 0.1%. Excluding food and energy, the CPI rose 0.3% last month. In December, prices for food rose 0.3% (0.5% in November), energy prices fell 4.5% (-1.6% in November), while prices for shelter rose 0.8% (0.6% in November). Over the last 12 months ended in December, the CPI has increased 6.5%, the smallest increase since the period ended in October 2021. For the 12 months ended in December, core prices (less food and energy) rose 5.7%, energy prices increased 7.3%, and food prices advanced 10.4%. All of these increases were smaller than for the 12-month period ended in November.
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Import prices rose 0.4% in December after declining 0.6% in November. Export prices fell 2.6%, following a 0.3% drop the previous month. The increase in import prices was the first since June 2022. Import prices increased 3.5% since December 2021. Fuel import prices rose 0.6% in December, while nonfuel prices increased 0.4%. Export prices haven’t increased since June 2022. Prices for exports rose 5.0% for the 12 months ended in December, the smallest 12-month advance since January 2021.
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The Treasury budget deficit for December was $85.0 billion, well above the $21.0 billion deficit of a year ago but well under the November deficit of $248.5 billion. For the first three months of the 2023 fiscal year, the deficit sat at $421.4 billion, up from $377.7 billion over the same period in fiscal year 2022. Compared to the same period last fiscal year, government expenditures increased $17.4 billion, while government receipts are down $26.3 billion.
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According to the U.S. Energy Administration, the national average retail price for regular gasoline was $3.259 per gallon on January 9.
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For the week ended January 7, there were 205,000 new claims for unemployment insurance, a decrease of 1,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended December 31 was 0.1%, a decrease of one percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended December 31 was 1,634,000, a decrease of 63,000 from the previous week’s level, which was revised up by 3,000.
Eye on the Week Ahead
There’s plenty of potentially market-moving economic data out this week. The producer price index, which measures the change in prices from the perspective of the seller of goods and services, is an important inflation indicator. Producer prices rose 0.3% in November and were up 7.4% for the year. The retail sales report for December is also out this week. Retail sales fell 0.6% in November. The Federal Reserve’s report on industrial production for December is on tap for release this week. Industrial production slid 0.2% in November. The housing sector waned for much of 2022. The December figures for housing starts, completions, and issued building permits are available this week as is the December report on existing home sales.
Have a nice week!
Sincerely,
Robert G. Carpenter