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Patrick Zweifel Profile picture
@PkZweifel
Jun 21, 2023 • 5 tweets • 2 min read • Read on X
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1/5
 After 11 months of collapse, which took our #US housing activity indicator to its lowest point in over 10 years, it has rebounded for the 6th consecutive month, with 10 out of 15 components up, among which housing starts (+22% m/m !), … Image
2/5
 … homebuilders’ sentiment up 5 points, in expansive territory for the first time in 11 months and median new home price to disposable income ratio which fell 15% since its peak, returning to its >20-year average Image
3/5
 One of the implications of the rebound in our activity indicator is that the residential component of GDP should stop contributing negatively to growth as early as Q3, supporting the idea of a soft landing for the US Image
4/5
 Another implication is that house prices have likely bottomed out Image
5/5
 All in all, the US residential market has bottomed out, but the rebound should remain contained, with rates for new mortgages still high and debt servicing still at 26% of median income for the purchase of an existing home Image

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More from @PkZweifel

Patrick Zweifel Profile picture
Jul 15
1/
 Chinese activity data for June generally came in below expectations and slowed, as did GDP growth, which fell to 4% q/q ann. in Q2 from 6.6% in Q1. Taken together, these 2 quarters still point to growth in line with the Chinese authorities' target of around 5%. Image
2/
 Retail sales volumes contributed to the slowdown, as they contracted in June, leading to a Q2 contraction of 0.9% q/q ann. Image
3/
 That said, total consumer spending, which includes services, continues to be the main driver of Chinese activity, evolving only a few 2% below its pre-pandemic trend, with growth for the quarter of 4.8% ann., albeit decelerating sharply since Q1 (13%). Image
Read 8 tweets
Patrick Zweifel Profile picture
Jul 12
1/
 US Core inflation was much better than expected, down to 3.3% y/y and a m/m rise of 0.8% once annualized, the 2nd consecutive month below 2% and the lowest since May 2020
The decline stems from the continued contraction in goods prices and to a decline in services inflation Image
2/
 The fall in goods prices is explained by a contraction in demand for goods, since retail sales in volume have been declining for 3 years, falling by 3.8% since the April 2021 peak Image
3/
 The fall in services inflation to 5.0% stems from both the continued decline in rental inflation and, for the 2nd month in a row, in services inflation excluding rents, which fell from 5.5% to 4.7% over 6 months on an annualized basis. The best news for the Fed Image
Read 5 tweets
Patrick Zweifel Profile picture
May 31
1/
 A thread on rethinking emerging markets.

Since their introduction as an asset class in 1988, EM equities have outperformed developed markets (10.1% ann. vs 8.9%). But it has been a bumpy ride, with a couple of long cycles in the interim Image
2/
 One of the most salient features of EM in that period was the variability among the asset class’s national equity markets in how they responded to economic factors.

EM outperformance was indeed driven by a very diverse group of 10 countries Image
3/
 EM equity markets are significantly more correlated with each other, including developed market equities, than they are with other asset classes, but … Image
Read 10 tweets
Patrick Zweifel Profile picture
May 15
1/
 US core #inflation came out in line with expectations, down to 3.6% y/y from 3.8%

The decline stems from the continued contraction in goods prices to -1.2% y/y from -0.7%, while services inflation is unchanged at 5.3%. Image
2/
 The fall in the price of goods is justified by demand, since retail sales in volume have been declining for 3 years, falling by an annualized 0.7% since the Nov 2021 peak Image
3/
 Stable inflation at 5.3% is due partly to the continuing fall in rental inflation and partly to the continuing rise in inflation in the non-rent component, which on a 6-month annualized basis stands at 6.5% ... still worrying for the Fed Image
Read 6 tweets
Patrick Zweifel Profile picture
Apr 29
1/
 The latest US activity and inflation data send a stagflationary signal, with GDP slowing to 1.6% q/q ann. from 3.4% in Q4 and slightly below potential for the 1st time in 18 months, and core inflation rising to 3.7% from 2%.
Where do we really stand in the US business cycle? Image
2/
 A more detailed look at GDP gives a more nuanced picture
The decline in growth is indeed largely due to a sharp rise in imports, thus maintaining strong growth in domestic demand at 2.8% q/q ann. in line with the pre-pandemic 6Y average, but decelerating since Q4 (3.5%) Image
3/
 Domestic demand remains underpinned by private demand (consumption + investment) and, in Q1 in particular, by a strong rebound in residential investment from very low levels Image
Read 11 tweets
Patrick Zweifel Profile picture
Mar 30
1/
 In February, US household disposable income contracted in real terms, and is now 3.7% below its pre-pandemic trend, but above all is growing at a rate (1.3% 6m ann.) 2 times slower than its long-term trend... Image
2/
 ... and households can no longer count on the excess savings accumulated during the pandemic, which should be fully spent by the end of April... Image
3/
 ... nor can they compensate by increasing credit, which is growing at a rate well below its long-term average, affected by high interest rates... Image
Read 10 tweets

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