EconoTicker

The U.S. trade balance widened sharply to a -$56.8B deficit in November, far worse than the -$43.4B expected and a big deterioration from -$29.2B previously. The gap expanded because exports fell to $292.1B (from $303.0B), while imports jumped to $348.9B (from $332.1B). The mix implies a heavier drag from net exports on near-term GDP tracking and reinforces the view that domestic demand (and import absorption) remained strong into month-end.

U.S. nonfarm productivity rose 4.9% q/q in Q3, matching expectations (4.9%) and accelerating from 3.3% previously signaling a strong efficiency boost. At the same time, unit labor costs fell -1.9% q/q, in line with forecasts (-1.9%) and a sharp reversal from +1.0% prior. The combination is disinflation-friendly: higher productivity with falling labor costs reduces wage-driven price pressure and supports a “soft-landing” narrative if it persists.

Weekly initial jobless claims came in at 209K, slightly above 206K expected but essentially in line with the 210K prior, keeping layoffs contained. Continuing claims dropped to 1.827M (vs 1.860M expected, 1.865M prior), suggesting fewer people are staying on benefits and pointing to ongoing labor-market resilience. The 4-week average edged up to 206.25K from 204.00K, indicating only a mild, gradual firming—still consistent with a tight labor backdrop.

The Federal Reserve kept the fed funds target range unchanged at 3.50%–3.75% (upper bound: 3.75%), matching expectations and the prior setting, as it pointed to “solid” economic growth, low job gains with signs of stabilization in unemployment, and inflation still “somewhat elevated.” The vote was 10–2, with Stephen Miran and Christopher Waller dissenting in favor of a 25 bp cut—a notable split that keeps markets focused on the timing of the next move and the balance between sticky inflation and cooling labor momentum.

The MBA’s 30-year mortgage rate ticked up to 6.24% from 6.16%, triggering a sharp pullback in demand. Mortgage applications fell -8.5% w/w after a +14.1% surge previously, while the purchase index dipped to 193.3 (from 194.1). The rate move hit refinancing hardest: the refinance index dropped to 1,332.2 (from 1,580.8), and the broader mortgage market index slid to 363.3 (from 397.2). The data suggest that housing finance conditions remain highly rate-sensitive, with activity cooling quickly when yields rise.

As TD Securities’ Prashant Newnaha put it, the problem for overseas investors is simple: you can earn ~4% in Treasuries and still lose ~10% on the currency if the dollar slides. That logic is starting to show up in real allocation behavior—Reuters reported that Australia’s second-largest pension fund, Australian Retirement Trust (ART), is reducing U.S. dollar exposure via heavier FX hedging while maintaining its U.S. investments, a playbook that helps explain how equities can keep grinding to record highs even as FX swings get more violent.

The U.S. Treasury’s 5-year note auction cleared at 3.823%, up from 3.747% previously—pointing to slightly higher intermediate-rate funding costs and a firmer term-premium tone at the belly of the curve. At the same time, M2 money supply rose to $22.40T in December from $22.30T, indicating a modest uptick in broad liquidity that could cushion financial conditions at the margin even as auction yields drift higher.

The Dallas Fed’s services revenues index surged to 7.8 in January from 0.0 previously, signaling a clear pickup in demand/turnover across Texas service firms. The broader Texas Services Sector Outlook also improved to 2.7 from -5.0, moving back into positive territory and reinforcing the message that regional services conditions are stabilizing or improving after a softer prior month.

The Richmond Fed’s January readings showed a modest rebound, but conditions remain weak. The Services Index improved to -3 from -6, while the Manufacturing Index rose to -6 (vs -5 expected, -7 prior), still signaling contraction. A brighter spot was manufacturing shipments, which improved to -5 from -11, suggesting the flow of goods picked up even as overall sentiment stayed negative.

The Conference Board’s Consumer Confidence Index fell to 84.5 in January, well below 90.6 expected and down sharply from 94.2 prior, signaling a meaningful deterioration in household sentiment. The downside surprise points to rising caution around spending and the outlook—an important macro signal given consumption’s role as the main U.S. growth engine, and a potential tailwind for “slower growth/softer inflation” pricing if corroborated by other demand indicators.

U.S. home-price momentum strengthened in November. The Case-Shiller 20-city index rose 1.4% y/y (vs 1.2% expected, 0.3% prior), while the seasonally adjusted m/m pace quickened to +0.5% (vs +0.4% prior); the non-seasonally adjusted m/m reading was 0.0%. The FHFA House Price Index also advanced, with the headline index at 439.3 (vs 436.8 prior), +1.9% y/y (vs +1.8% prior) and +0.6% m/m (vs +0.3% expected, +0.4% prior). Taken together, the data point to a renewed firming in housing prices—consistent with tight supply and still-resilient demand despite restrictive mortgage rates.

The Redbook retail sales index rose 7.1% y/y, up from 5.5% previously, signaling stronger same-store sales momentum at major U.S. retailers. The pickup supports the view that near-term consumer demand remains resilient—though the series can be volatile and influenced by seasonal promotions and pricing.