• New COVID-19 cases picked up by 35% since the start of January, though they're well below readings this summer. Despite the increase, mobility indicators remain healthy.
• Household spending moderated over the holidays owing to high prices and borrowing costs. But lower gasoline prices, now down 35% from the all-time high, have helped improve people's moods in January.
• The labor market remained close to full employment, with the unemployment rate at 3.5% in December, a 50-year low and a continuing challenge for the Fed.

Virus and mobility

COVID-19 cases:  Average daily new cases increased by almost 35% since the start of January, to 73,544 as of Jan. 9. But this remained significantly below the 99,000 average daily new cases from June to September. The latest figures are also still below the average daily new cases since the pandemic began in March 2020. Average daily new deaths have also increased since the start of January but are still significantly lower than the recent peak of 2,605 on Feb. 2, 2022.

People-facing COVID-19-sensitive

OpenTable:  Nationally, as of Jan. 8, seated diners' reservation data showed 8% more activity compared with the pre-pandemic baseline. New York and Illinois, however, were 19% and 6% below pre-pandemic levels, respectively. Florida, Georgia, California, and Texas stayed well above the baseline.

Air traffic:  The number of passengers passing through TSA checkpoints increased by 31% year over year as of Jan. 8 and is up 6% compared with the same period in 2020, before the pandemic began. The data reflects recovery in the industry.

Hotel occupancy:  The hotel occupancy rate rebounded during the last week of 2022 after declining the week before to its lowest level (43.9) since February 2021. The improved comparisons to 2019 came against the backdrop of the holiday season. The latest rate is at 54.2%, higher than the same period in 2019 but almost 12 percentage points lower than the 2019 average.

Current and future activity

Weekly Economic Index (WEI):  The WEI has almost returned to pre-COVID-19 levels as spending patterns and business activity absorb higher prices and interest rates. The WEI for the week ended Dec. 31 came in at 1.8% year over year, slightly above the pre-pandemic average of 1.5%. The decrease in the WEI during the week of Dec. 31, compared with the previous week, is due to declines in consumer confidence and railroad traffic, which more than offset rises in retail sales, steel production, and tax withholding, as well as a drop in initial unemployment insurance claims.

Taiwan Purchasing Managers' Index (PMI) measures:  The Taiwan Manufacturing PMI continued to deteriorate in December into a deep contraction, to 39.8--the lowest since the data became available in 2012--suggesting persistent weakness in manufacturing. Manufacturing activity was down by almost 16.4 percentage points since the beginning of the year (when the index was at 56.2) and was down by 28.9 percentage points since its record high in April 2021 (of 68.7). This latest reading suggests a broad-based weakness from new orders, production, prices, supplier deliveries, and employment.

U.S. PMI measures:  The U.S. Services PMI slipped into contraction territory (to 49.6) for the first time since May 2020. The Manufacturing PMI also remained in the contraction zone (48.4) for the second consecutive month. Both indices reflect slowing demand across the economy caused by the Federal Reserve's intense rate-hike cycle. New orders for services plunged 10.5 points to 45.2.

Raw steel capacity:  Raw steel capacity utilization came in at 71.3% for the week ended Jan. 7, which was 11 percentage points lower than the same period a year ago and almost 10 percentage points below the 2019 average. Capacity utilization has been dropping since the third week of August because of dampening demand in the economy.

Home mortgage applications:  For the week ended Jan. 6, the mortgage purchase applications index fell approximately 10% over the past month and is 43% lower than where it was a year ago, according to the Mortgage Bankers Assn. The declines are due to broader weakness in the housing market. The index is currently at 159, its lowest reading since 2014. The Refinance Index, on the other hand, improved by 5% from the previous week. The 10-year mortgage rate has fallen by almost 47 basis points since November 2022, to 6.48% as of Jan. 5.

Johnson Redbook Same-Store Sales Index:  As we have been reporting, the Same-Store Sales Index averaged 7.5% in December (year-over-year, four-week moving average), well below its all-time high of 18.5% in January 2022. The index ticked up by 1.13 percentage points from last week as the holiday season drove sales higher. We expect that high inflation will keep purchasing power low in the coming months and sales subdued.

Rigs count:  The number of active drilling rigs in the U.S. in the week ended Jan. 6 came in at 618, down by three from the previous week and by 155 from the 2019 average of 773. The number of active rigs is declining despite hopes of increased demand from the reopening Chinese market.

Consumer confidence:  The University of Michigan Consumer Sentiment preliminary January reading rose 4.9 points to 64.6 amid easing inflationary pressures. It is still in recessionary territory and 36.4 points below its February 2020 level, but it's much better than its all-time low in June. The Consumer Confidence Index also improved in December. All confidence readings remain well below their summer 2021 highs.

Prices

Lumber futures:  Amid the cooling U.S. housing market, lumber prices slid to $350/1,000 board feet, their lowest level since June 12, 2020, and 79% below the all-time high on May 7, 2021. The recent drop has brought lumber prices very close to the average price from 2019--when U.S. housing plunged into a deep contraction.

CRB-BLS Metals Price Index:  The Metals Price Index has jumped 14% to $1,065.70 per point after reaching its recent low of $913 per point on Oct. 31. Metal prices have been in a slump since peaking on April 4, 2022, but they remain 26% above the 2019 average.

Freightos Baltic Index:  The Freightos Baltic Index sank to $2,245 per point on Jan. 10, a long way from its record high of $11,137 per point in September 2021. However, the index remains almost 63% above its average from 2019, before the pandemic. Lower global demand and easing supply chain constraints are further depressing global shipping costs.

Gasoline prices:  With the drop in international crude oil prices, gasoline prices reached $3.36 per gallon for the week ended Jan. 9, down 35% from the all-time high on June 13 and down 4% from Dec. 5. Faltering global demand, the resumption of crude oil exports from Libya, and a production hike from OPEC+ countries are all putting pressure on prices. Gasoline prices are still 25% higher than the average pre-pandemic levels.

Forward inflation expectations:  Five- and 10-year inflation expectations declined since December by 3 and 15 basis points, respectively, to 2.24% and 2.21% on Jan. 6. They are down by 43 and 81 basis points from their April 21 peaks of 2.67% and 3.02%, respectively, mainly on the back of declining oil prices and overall inflation.

Labor market

Initial jobless claims versus Indeed job postings:  For the week ended Jan. 7, initial jobless claims decreased by 1,000 to 205,000, well below market expectations of 215,000. Jobless claims largely remained stable throughout November, at an average 230,000 per week. The low claims suggest that the labor market is still strong. Indeed job postings remain elevated. Monthly data also shows a hot jobs market, with the December unemployment rate falling to 3.5%, a 50-year low, from 3.7%.