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Market Recap – February 21, 2023

Keel Point

February 21, 2023

Economic data continue to surprise on the upside, first with January’s larger than expected payroll employment gains and then with January retail sales and manufacturing output. So the chances of first quarter GDP growth being positive are improving.

  • Real consumption and personal incomes data are due out this week, and both are expected to show 1% and 1.5% gains respectively (January over December).
  • January CPI data out last week showed continuing improvement, but also that inflation is appearing to be more persistent than hoped. FOMC members responded that more work needs to be done to contain inflationary pressures.

While economic data show strength broadly in the economy, real estate market indicators were generally worse than expected in the fourth quarter of 2022.

  • All-Property Capital Value fell 4.4% in Q4 – the largest since 2009 – with similar markdowns expected in the first half of 2023, as interest rates continue to rise.
  • Office and apartment sector demand has softened as angst about slowing economic growth and rising interest rates continues. New supply deliveries also will pick up in the apartment and industrial sectors in 2023 and 2024 thereby putting downward pressure on rent growth.
  • Real estate investment was down by about 65% y/y in Q4-2022, the weakest since 2013, with further weakness expected in the first half of 2023, before a gradual recovery later in 2023.

China household wealth declined in 2022 for the first time in at least two decades. This suggests that once the initial reopening rebound has happened, we shouldn’t expect a further surge in consumer spending which is 40% of China’s GDP.

 

Disclosure:  Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC.  Brokerage and Investment advisory Services are offered under the Keel Point brand. Investment Advisory services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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