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Before you go celebrating the higher (record breaking!) retail sales numbers for this holiday season vs last, know that we're talking nominal, as opposed to real, terms (i.e., not counting vs counting inflation).
As I stressed in Friday's video (worth watching), while we're open to the notion that a new bull market is in the near-term offing, it's still not our base case, per the general conditions backdrop and the technical indicators I continue to illustrate.
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This week's "Flash" (preliminary) Composite Purchasing Managers reading dipped further into contraction territory, supporting our thesis that odds favor recession vs continued expansion in the coming months.
"Business surveys released Wednesday pointed to declines in output across the U.S. and Europe’s largest economies in November. But the figures and other economic readings pointed to a mixed outlook, with some parts of both economies continuing to show resilience despite high inflation and rising interest rates.
In China, the world’s second-largest economy, the outlook is highly uncertain as the country faces a surge in Covid-19 cases. Economists expect a rebound in growth next year as Beijing attempts to ease tough pandemic policies.
A tight U.S. labor market and still strong household balance sheets are supporting consumer spending, the economy’s main engine. A healthy consumer helped power retail sales in October and could keep the world’s largest economy growing at the end of this year. The U.S. outlook depends in part on how it weathers the Federal Reserve’s interest-rate increases aimed at cooling inflation that is running near a 40-year high.
Europe is experiencing less economic disruption from Russia’s decision to limit energy supplies than analysts earlier feared. Many households and businesses in the region are adapting by, for instance, cutting back on energy consumption, said Adam Posen, president of the Peterson Institute for International Economics. European governments also distributed larger-than-anticipated sums of fiscal support to households to help address rising energy and food costs, he added.
“We’re going to end up with more than 75% of the world’s economy actually doing pretty well,” Mr. Posen said. The U.S. and European Union “are likely to have relatively short, not terrible recessions and return to growth possibly by as early as the fourth quarter of 2023.”
This morning's message comes to you by way of video... My monologue on current conditions takes up the bulk of the presentation, although pay close attention to my volume analysis on the daily chart, as it presents a picture somewhat at odds with the price action of this very nice Q4 rally to this point.
All of us here at PWA wish you and yours the best of Thanksgivings!
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