Weekly economic and financial commentary

Summary

United States: Naughty & Nice: Mixed Data to End 2022

• This week's data showed that the U.S. economy is ending the year on a mixed note. The housing market generally showed further signs of deterioration in November, and data on durable goods orders were generally weaker than expected, when backward revisions to previously released data are taken into account. That said, data on consumer confidence shows that consumers are less downbeat at present than they were a few months ago.
• Next week: S&P Case-Shiller Home Price Index (12/27), ISM Manufacturing (1/4), Nonfarm Payrolls (1/6)

International: Bank of Japan Tweaks Its Accommodative Monetary Policy Stance

• In a surprise move, the Bank of Japan (BoJ) tweaked its yield curve control policy at its December monetary policy meeting, widening the tolerance band for its 10-year Japanese government bond (JGB) yield to +/- 50 bps, around a 0% target. The BoJ emphasized that the change in policy was not a form of monetary tightening, but was designed to enhance the sustainability of its current monetary policy. While the policy tweak has added uncertainty to the BoJ outlook, we continue to lean toward BoJ policymakers making no further policy adjustments through the end of 2023.
• Next week: Japan Retail Sales/Industrial Output (12/27, 12/28), Swiss KOF Leading Indicator (12/30), China PMIs (12/31)

Credit Market Insights: Not All Rate Hikes Are Created Equally

• How quickly rate hikes are transmitted through the economy depends not only on how high policy rates are lifted, but also structural elements of an economy. Generally, a higher level of household debt, higher interest servicing costs, as well as a larger proportion of variable rate mortgages to fixed rate mortgages tends to indicate more sensitivity to rate hikes.

Topic of the Week: Population Growth Picks Up Slightly in 2022

• One negative knock-on effect of the pandemic was a considerable slowdown in population growth. Fortunately, the trend appears to be reversing somewhat. According to the Census Bureau, U.S. population growth picked up 0.4% between July 2021 and July 2022, still slow by historical standards, but an improvement from the record-low 0.2% rate from the year-earlier period.

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