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Economic Data Tracker

September 30, 2022

Our weekly view on the economy including rationale on GDP, jobs report, and Fed policy decisions. Download the entire weekly edition to view timely charts and data providing a comprehensive picture of how incoming economic data affects our economic outlook.

Trend watch and what’s new this week

Even though Hurricane Ian hasn’t finished its path of destruction, it is already beginning to ripple through some of the activity-based data (slides 5 and 6). Expect more impact in the weeks to come.

Air passenger counts fell below 1.8 million for the first time since May. More than 5,700 flights were cancelled this week from Wednesday through early Friday morning, the bulk of those were to or from Orlando, Tampa, and Jacksonville. More airports along the Mid-Atlantic coast were closed on Friday, including Charleston among others.

Hotel occupancy rose to an eight-week high as residents scrambled to either shelter or avoid the storm. For example, occupancy in Orlando spiked 7.9 percentage points last week to 72.2%. As an aside, New York City saw the highest absolute occupancy level (89.9%), which was helped by the High-Level Week of the United Nations General Assembly.

Meanwhile, restaurant bookings plunged South Carolina (-45% compared to pre-pandemic levels) and Florida (-43%). The worst hit cities in terms of declines were Tampa (-90%) and Naples (-87%).

The Fed’s favorite inflation gauge rose in August

The Federal Reserves’ (Fed) favorite inflation gauge—the price index of core personal consumption expenditures—rose in August (slide 7). While it has been moving in the right direction and is down from its February high of 5.4%, it ticked higher in August, up 4.9% on a year-over-year basis. It is still uncomfortably high and well above the Fed’s 2% target, meaning Fed rate hikes will continue.

New home sales surprise to the upside

On slide 8, new homes sales surprisingly jumped 28.8% to an annualized rate of 685,000 in August, in-line with the 20-year average. Still, sales have declined in six of the past eight months. Meanwhile, prices slipped for the third time in four months and are off their highs.

Two leading economic indicators remain solid

Initial jobless claims (slide 9) dropped for the sixth time in seven weeks. This is one leading economic indicator that continues to defy weakness in other areas.

Similarly, new orders for core capital goods (slide 10), which excludes the volatile aircraft and defense components, is also a leading economic indicator that has remained solid. It just notched its sixth straight monthly increase, matching the longest streak since 1992 (2005 and 2017).

We also received real personal income and spending figures for August. Both of those are part of the so-called “big 4” indicators of economic activity used to determine a recession (slide 11). While they have flattened out, which shows that the economy is slowing, the big 4 don’t indicate the U.S. is currently in a recession.

Our take

Sadly, Hurricane Ian hammered Florida, including more than 20 deaths, and is currently punching the Mid-Atlantic coast. Our hope is that the human toll won’t rise any further.

On the economic impact, major hurricanes tend to inflict property damage and negatively impact operations for companies in the near term. Yet, nearly immediately and as the weeks pass, the rebuilding process tends to outpace the losses. We already highlighted several examples, including travel to avoid the storm along with meals and hotels. On the other hand, massive storms like Katrina and Harvey can cripple a region for much longer than a few quarters.

Given Hurricane Ian’s size and severity, we’re hopeful that Hurricane Ian’s economic impact will fit in the typical storm rebuilding cycle, which is generally a positive for growth over several quarters.

In speaking to a business owner in Florida that relayed that, “we’ll be OK, we’ve been prepping for over a week,” securing vulnerable property, moving equipment out of the area, closing storm shutters, boarding up windows, etc. That reminded me that being prepared and having an early warning really does blunt the economic impact. We’d also equate that same preparedness to the coming recession, too.

Unlike an unexpected storm that catches many off guard, the visibility of the coming recession will likely blunt some of the impact and severity. If it does materialize, it’s not a surprise that an economic slowdown is coming. Moreover, much like a hurricane, the path of the storm may change, or it may downshift to be less damaging. While we view a high probability of recession in the coming year, its possible that it could be mild since businesses and individuals have been filling their financial sandbags to prepare for it. Also, there’s an old economic axiom that, “if you’ve seen one recession, you’ve seen one recession.” In other words, no two recessions are alike; each has different causes and factors that impact the rebound and recovery.  

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