The Friday File: In 2009, Internet Explorer was the browser boss with a 65% market share, it’s now zero. Firefox was at 31% and today it’s at 3%, Apple’s Safari was at 2% and is now holding at 20%, and Google Chrome was at 1% but today is the standard-bearer with a stable 64% share. Microsoft Edge, began in 2015, is the only browser gaining share and is at 5%.
In early 2021 the Fed said inflation was transitory. That turned out to be true only if transitory is defined as two years, a bit long. Similarly, the Fed told us they expected the Fed funds rate to be 0.625% at the end of 2023, that’s a bit low since it’s now 5.375%. Now the Fed is saying higher for longer. Take that with a grain of salt.
Unsurprisingly, the Fed left Fed funds unchanged but signaled a willingness to possibly raise it 25bps in the future, a hawkish pause. However, it doesn’t matter if the Fed raises rates once more, or not. It stretches credulity to think inflation and the health of the economy hinge on 25bps. What matters is how long the Fed ends up keeping Fed funds at the terminal rate. And they don’t know.
From 2/17 through 2/22, the percentage of pending home sales that fell out of contract declined from 13% to 11%, except for 3/20 and 4/20 when it exceeded 16%. From 3/22 through 9/22, as rates quickly rose, the failure rate jumped from 11% to over 16%. From 9/22 through 1/23, rates fell and the percentage dropped from 16% to almost 13%. Now with rates rising again, failures are approaching 16%.
Prior to the start of the September UAW strike, there were eight work stoppages involving more than a thousand people, the largest of which is the Screen Actors Guild strike involving 160,000 workers. Three of the eight stoppages began in August. The total amount of lost workdays because of these stoppages was 4.1 million, 0.11% of total working time, and the biggest monthly total since 8/00.
The Friday File: Smucker’s Uncrustables, the lunchbox treats first produced in 1995, were introduced to stores in 2000. Sales are expected to hit $800 million in FY2024. Currently, four million of the sandwiches are produced each day in Denver, CO (where the plant is being expanded)and Scottsville, KY, and a new plant is being built near McCalla, AL. Newer flavors include BBQ Chicken and Taco Bites
August CPI rose a sharp 0.6% M-o-M, largely attributable to costlier gasoline. Core inflation rose 0.3% M-o-M, its highest reading since May, but just 4.3% Y-o-Y, its lowest reading since 9/21 and its 10th decline in 11 months. However, core services rose 0.6% M-o-M, unchanged since March. The Fed’s favorite, core services minus housing rose 0.4% M-o-M its highest reading since March. While generally falling, inflation remains uncomfortably high.
The resumption of student loan payments on 10/1/23 is likely to knock 0.25 percentage points off quarterly annualized GDP. A government closure will knock 0.2 percentage points per week off quarterly annualized GDP, and a UAW strike against all three automakers would knock off another 0.1 percentage point/week. A two-week closure combined with a three-week strike means quarterly annualized GDP declines almost one full percentage point! That’s painful, albeit temporarily.
Pricey Payments High rates have pushed up the average interest and principal payment for new borrowers using a 30-year mortgage to $2,306. Similarly, two years ago 5% of new borrowers had a payment over $3,000/month, today it’s almost 25%. Moreover, high rates have depressed the dollar volume of cash-out refi activity by about half from 22Q1 when it was almost 1% of available equity/quarter to 0.4%/quarter, a decline of $40 billion/quarter.
While gasoline prices have increased somewhat since May as the price of WTI crude has risen by 13%, diesel prices are up over 40% over the same period. It’s because in May Saudi Arabia, Russia, and others in OPEC+ surprised markets with production cuts, and their heavy sour crude, which is usually cheaper than lighter sweet crude but is now more expensive, is best suited to making diesel.