Deutsche Bank strategist Binky Chadha provided some interesting context on the state of the economy in a Wednesday research report,
“There is still a wide spectrum of views on growth and demand trends. While several companies mentioned weakening demand, these largely fall into now familiar buckets: those suffering a reversal of the pandemic boom; those seeing inventory destocking as goods spending as well as supply-chains normalize; and those hurt directly by higher interest rates such as in housing.
My takeaway from this is to stay away from aggregates like “the U.S. economy is doing ….” because conditions are much different sector by sector.BMO chief economist Doug Porter argued that no recovery in housing prices is imminent despite record declines, “Not only have home prices taken a tumble in the past year, but the market balance does not suggest a rebound is imminent. Even as sales fell another 3 per cent in January , new listings actually crept up 3.3 per cent in s.a. terms. True, the level of new listings is also still quite low—the lowest for a January since 2000. But sales are even softer in relative terms, which has clipped the sales-to-new listings ratio to just above 50 per cent.
“We expect Q1/23 industry cash operating earnings to be down 5 per cent year-over-year , primarily due to higher PCLs [provisions for credit losses] of $2.0B/26bps vs. $472 million/7bps last year… recent macroeconomic indicators suggest the start of the mild/shallow economic slowdown is getting delayed; this bodes well for the near-term PCLs and may be a potential source of positive earnings revisions for FY2023.
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