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Personal Finance Weekly News Roundup February 4, 2023

Weekly Personal Finance News Recap - FEBRUARY 4, 2023

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Credit Sesame’s personal finance weekly news roundup February 4, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.

  1. Key inflation measure shows moderate increase
  2. Global economic forecast looking a little rosier
  3. Leading indicators signal trouble ahead for the US economy
  4. Stocks follow troubled 2022 with a strong January
  5. Fed slows its rate hike pace
  6. Wage growth outpaced inflation in the last quarter of 2022
  7. Mortgage demand struggles despite dip in rates
  8. Job growth soars despite high-profile layoffs

1. Key inflation measure shows moderate increase

The Bureau of Economic Analysis announced that its PCE Price Index rose by just 0.1% in December. The PCE Price Index is significant because it is the Fed’s preferred measure of inflation. Compared to the Consumer Price Index, the PCE Price Index reflects more frequent changes in consumer behavior. This allows it to reflect more accurately how consumers substitute cheaper items for more expensive ones when prices rise. The PCE Price Index rose by 5.0% in 2022, but by only 1.05% in the second half of the year. See release at BEA.gov.

2. Global economic forecast looking a little rosier

The International Monetary Fund (IMF) has raised its forecast for global economic growth in 2023. Its October forecast was for the global economy to grow by 2.7% in 2023. The updated forecast is for 2.9% growth this year. Reasons given for the upgrade included better-than-expected demand in the United States and Europe, easing energy prices and China’s reopening from strict COVID shutdowns. While the 2.9% growth forecast would represent a slower pace of global growth than last year’s 3.4%, it is enough growth to suggest most major economies have a good chance of avoiding a recession. See article at Reuters.com.

3. Leading indicators signal trouble ahead for the US economy

In contrast with the IMF’s optimistic forecast for the global economy, the Conference Board’s Leading Economic Index (LEI) forecasts weakness for the US economy. The LEI is a forward-looking measure of conditions. This index declined by 3.8% in the second half of 2022. This represents an acceleration of the decline in the first half, which showed a drop of 2.3% in the LEI. The Conference Board warns that the direction of the LEI indicates a recession is likely within the next 12 months. See full release at Conference-Board.org.

4. Stocks follow troubled 2022 with a strong January

In a partial rebound from last year’s terrible market performance, US stocks posted strong gains in the first month of 2023. The S&P 500 was up over 5% for the month of January. The more tech-heavy Nasdaq composite ended the month with an 11% gain. That bounce is significant because the tech sector was hit especially hard last year. See article at Yahoo.com.

5. Fed slows its rate hike pace

The Federal Reserve announced a 0.25% increase in the Fed funds rate on February 1. This follows a string of four consecutive 0.75% rate hikes last year plus a 0.50% hike in December. By continuing to raise rates, the Fed is acknowledging that inflation remains well above its 2% target. However, the transition to a smaller rate hike acknowledges that inflation may have turned the corner. After peaking in June of last year, inflation has slowed over the past six months to a pace that is within the Fed’s 2% inflation target. The new target range for the Fed funds rate is from 4.5% to 4.75%. The Fed’s next scheduled meeting is on March 21 and 22. See full release at FederalReserve.gov.

6. Wage growth outpaced inflation in the last quarter of 2022

The Bureau of Labor Statistics announced that wages and salaries grew by 1% in the fourth quarter of 2022. Overall compensation costs, which also include employee benefits also grew by 1% in the quarter. For the year, wages and salaries grew by 5.1%. That trailed the 6.5% increase in the Consumer Price Index for 2022, but wage and salary growth did beat inflation in the fourth quarter. The strong compensation growth is good news for workers, but may make it harder for inflation to continue its recent easing trend. See release at BLS.gov.

7. Mortgage demand struggles despite dip in rates

The Mortgage Bankers Association announced that mortgage applications fell by a seasonally-adjusted 9% last week. Compared with a year ago, purchase applications were down by 41% and refinance applications were down by 80%. The fact that mortgage volume continues to decline even though interest rates have fallen in recent weeks is a reminder that those rates remain far above where they were a year earlier. This continues to make the housing market less attractive to buyers. See news release at MBA.org.

8. Job growth soars despite high-profile layoffs

The US job market added a net total of 517,000 jobs in January. That’s the best month for job growth since July, and breaks a string of five straight months of slowing employment increases. January’s strong job gains come despite a series of headline-making mass layoffs in the tech sector. With the jump in job growth, the unemployment rate dropped to 3.4% – its lowest level since May of 1969. See full release at BLS.gov.

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Richard Barrington
Financial analyst for Credit Sesame, Richard Barrington earned his Chartered Financial Analyst designation and worked for over thirty years in the financial industry. He graduated from St. John Fisher College and joined Manning & Napier Advisors. He worked his way up to become head of marketing and client service, an owner of the firm and a member of its governing executive committee. He left the investment business in 2006 to become a financial analyst and commentator with a focus on the impact of the economy on personal finances. In that role he has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications.

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