Dinner Deflation, Oil Prices, & More
Week in Review: Nov. 20-22
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There are plenty of reasons to be thankful this week: demand for travel is hotter than a turkey dropped in an overfilled deep fryer, the cost of a Thanksgiving dinner is down, and oil prices continue to sink (for Americans, that means savings at the pump; for OPEC+, that means infighting and lots of drama).
If you’re feeling particularly grateful, consider making a donation to Paul’s Place, a great nonprofit that provides meals, housing assistance, peer recovery services, and innovative job training programs to residents of Southwest Baltimore.
Monday
American Farm Bureau Cost of a Thanksgiving Dinner
According to the AFBF’s 38th annual survey, the average cost of a Thanksgiving feast for 10 people fell to $61.17 this year. That’s down 4.5% from last year, which is great! But it’s still up 25% from 2019 levels, which is decidedly less great.
Gas Prices
Gas prices declined for a ninth straight week and are down to $3.41/gallon. That’s the lowest price since the second week of January. With prices down nearly $0.60/gallon over the past two months, Americans are spending $100s of millions less per day at the pump.
Diesel Prices
Diesel prices fell again and, at $4.21/gallon, are $1.02/gallon cheaper than during the same week last year. Diesel prices staying low would be a nice development on the inflation front.
TSA Checkpoint Travel Numbers
The number of people passing through TSA security continued its takeoff this week. Travel volumes have been up about 8% compared to 2019 levels over the past week, the largest gap to date. AAA’s forecast that this will be the busiest Thanksgiving weekend for air travel in 18 years is looking pretty good.
Tuesday
Existing Home Sales
The National Association of Realtors can’t be feeling too thankful this year, because their measure of existing home sales fell 4.1% in October, setting another 13-year low. But this is a week for optimism, and I expect that existing home sales have been higher (if only slightly) in November.
FOMC Minutes
The Fed released the minutes from their end-of-October meeting. We usually try to read the tea leaves here for clues about future rate hikes, but 1) tea just doesn’t go well with Thanksgiving and 2) it looks like the Fed is done raising rates, though that could change if inflation rebounds in the coming months (I don’t expect it to).
Wednesday
Crude Oil Prices
Crude prices plunged again and, at roughly $74/bbl, are down more than 20% from the late September peak.
U.S. Crude Oil Production
U.S. oil production remains at the highest level on record (13.2 million barrels per day).
Saudi Arabia Decidedly Not Thankful
Saudi Arabia is decidedly less thankful and expressed their displeasure with high oil production and falling oil prices by delaying the OPEC+ meeting that was scheduled for Sunday. It seems likelier than not that we’ll see extended (and maybe larger) production cuts from OPEC+ countries at that rescheduled meeting on November 30th.
Durable Goods Orders
Orders for durable goods (things that lost a while) dropped 5.4% in October. That had a lot to do with a decline in orders for Boeing planes—excluding transportation equipment, orders were unchanged—but no segment performed particularly well for the month. A large share of durable goods require financing, and both businesses and households just aren’t willing to take on high borrowing costs at the moment.
Mortgage Applications
Mortgage applications increased for the third straight week as mortgage rates moved slightly lower. While homebuying is still close to historical lows, purchase applications are now up roughly 10% from the recent trough.
Mortgage Rates
Average mortgage rates fell sharply and are down to the lowest level since the middle of September. That said, with the average 30-year fixed now at 7.29%, rates will have to drop a lot more before we see a meaningful rebound in home sales.
Jobless Claims
Initial jobless claims sank to 209,000 this week. That’s the fewest in over a month. This measure of unemployment remains exceptionally low.
Continued claims for unemployment insurance declined, ending a streak of eight straight weekly increases. Because these are affected by probably off-kilter seasonal adjustments, I continue to look to labor market economist Guy Berger for insight; he thinks continuing claims remain relatively tame.
Links of the Week
Welding and the Automation Frontier (Construction Physics)
Why you should make an estate plan even if you’re healthy
Layoffs and bankruptcies pile up in logistics amid shocking downturn (FreightWaves)
Final Thoughts
After this week, my outlook for the economy is: A little bit better
Consumers are still spending. Inflation is slowing. The labor market continues to outperform. Are there economic risks out there? Sure (like lag effects from really high interest rates), but for now, the outlook is as good as it’s been in a long time.
Looking Ahead
Next week gives us new data on consumer expenditures, saving, new home sales, construction spending, and more.