{"id":200244,"date":"2023-12-15T11:45:00","date_gmt":"2023-12-15T16:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=200244"},"modified":"2023-12-15T15:52:30","modified_gmt":"2023-12-15T20:52:30","slug":"williams-pours-cold-water-on-the-doves-dec-15-2023","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/williams-pours-cold-water-on-the-doves-dec-15-2023\/","title":{"rendered":"Williams Pours Cold Water on The Doves: Dec. 15, 2023"},"content":{"rendered":"\n

Markets are sluggish as the New York Fed’s Williams poured cold water on rate cut expectations. Williams stated that the committee is not really talking about rate cuts. Marching at the beat of Williams while justifying hawks, flash PMI data from S&P Global reflected accelerating activity in the inflation-prone services sector this month. While cost pressures strengthened in services, the manufacturing sector did offset some of the acceleration amidst weak demand.<\/p>\n\n\n\n

Services and Manufacturing Accelerate but in Different Directions<\/strong><\/h2>\n\n\n\n

Even as the larger and more significant services sector is accelerating positively this month, the manufacturing segment is contracting even faster than last month. S&P Global\u2019s Purchasing Managers\u2019 Index for Services rose to 51.3 this month, well ahead of expectations of 50.6 and last month\u2019s 50.8 reading. The index for manufacturing, meanwhile, dipped further below the expansion-contraction threshold of 50. The manufacturing figure arrived at 48.2, below projections of 49.3 and November\u2019s 49.4 reading.<\/p>\n\n\n\n

Servicers reported strong consumer demand with orders picking up at the fastest pace since July which contributed to rising cost pressures. The pickup in ordering was attributed to greater advertising expenses, looser financial conditions and adding additional revenue streams from existing customers. Service providers didn\u2019t raise prices on consumers, though, as firms decided to trim margins to grow sales volumes. They did pick up their pace of hiring in response to robust customer traffic, with service sector job growth rising at the fastest pace since June even as wage pressures accelerated. Finally, purchasing managers reported an improved outlook for future months, with business confidence rising to the highest level since July.<\/p>\n\n\n\n

Manufacturing conditions worsened, as consumer demand remained anemic with production and hiring falling as a result. Indeed, manufacturers reduced headcounts for the third consecutive month. Supplier delivery times improved due to reduced ordering and material availability. Against that backdrop, goods producers, in a surprising move, raised their prices to preserve margins.<\/p>\n\n\n\n

Europe Entering Technical Recession<\/strong><\/h2>\n\n\n\n

Across the Atlantic, economic conditions continue worsening in Europe against the backdrop of weak consumer demand, subdued hiring, elevated prices and lofty interest rates. The Services PMI arrived at 48.1 this month, much worse than expectations of 49 and November\u2019s 48.7. On the manufacturing front, the sector\u2019s PMI came in at 44.2, matching last month\u2019s figure but missing estimates of 44.6. The absence of stronger data and an economic recovery point to the region entering a technical recession this quarter. <\/p>\n\n\n\n

Consumers Look for Value Amidst Cost Constraints<\/strong><\/h2>\n\n\n\n

Consumers are continuing to trade down to lower-cost options but are increasing their discretionary spending. Meanwhile, the shortage of housing is helping homebuilders even as discounting is being used to entice buyers. Consider the following examples:<\/p>\n\n\n\n