Week in Review: March 3, 2023

Economic Commentary

Manufacturing activity, as measured by industry group ISM, contracted for a fourth consecutive month in February, albeit at a slightly slower pace. Notably, prices paid rebounded to 51.3, marking the first growth in prices in five months. Recent economic resilience is seemingly putting renewed upward pressure on prices. The service sector continued its expansion in February, aided by strong new orders, suggestive of  continued strong demand.

Durable goods orders fell 4.5% in January, due to a decline in civilian aircraft orders. Excluding transportation, durable goods orders rose 0.7%, the largest increase in 10 months. On a year-over-year basis, headline and core orders rose 7.0% and 4.8%, respectively, marking the slowest pace since February 2021.

Pending home sales jumped 8.1% in January, far greater than the 0.9% consensus estimate. It was the second monthly increase, and the most since June 2020. Mortgage rates, coming off their peak levels seen in late 2022, have attracted more buyers, which may benefit sales in the near-term. Compared to a year ago, pending home sales were down 24.1%, marking an improvement from the record 36.4% decline observed in November.

Consumer confidence declined for the second consecutive month as a slight increase in consumers’ views of their present situation were more than offset by a decline in future expectations, which fell to a seven-month low. One-year inflation expectations slowed from 6.7% to 6.3%, which directionally will be welcomed by the Fed, given its importance to monetary policy decisions.

Of Note