This Week’s Economic Update, February 13, 2023

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A sure sign of Spring is when three species of birds all start showing up in Florida.  The Blue Jays, Cardinals and Orioles are making their first appearance of the Spring in the area around Sarasota.  The first games of Spring Training start on February 25.  As Mel Allen would often say “How About That?” It seems like Football just ended, oh wait, it did.

A couple of weeks ago I mentioned that Wells Fargo was opting out of the correspondent mortgage business.  In light of what is expected to be a long period of rising or at least higher interest rates, Wells Fargo opted to cut costs in an area that is likely to see less volume.  The 30 year rates topped out in October and appear to have stabilized about 6/10ths beneath that high.  The slight drop in rates has moved the mortgage market activity higher. The Mortgage Market Index rose this past month from 232 to 249 indicating more activity is occurring.  Before anyone gets too excited, we need to recognize that, taking out the spikes, the index has maintained a pretty steady level around 400 to 500 prior to the pandemic. 

In light of the soft outlook in mortgages another big player, NYCB, announced they are closing 69% of their Flagstar mortgage offices.  Flagstar Mortgage was independent prior to December 1, 2022. NYCB purchased the mortgage company which in 2021 had over 2,100 origination related staff.  They are down to under 800 today.  The whole timing seems kind of odd.  NYCB evidently wanted to get a deal to be able to move into the market, but this seems more like catching a falling knife.  If you wait a bit, you might be able to grab the handle and not the blade.

The January Logistics Managers Index increased from 54.6 to 57.6.  It had hit a low in November of 2022 and is now showing two months of increase.  The index looks at a number of variables including warehouse capacity, inventory levels, transportation utilization, as well as pricing.  The report was very positive in both current measures and forward-looking indicators.  Inventories are finally returning to sufficient levels where fear of being out of stock is ebbing.  Warehouse utilization is now at 67% so there is runway to continue to grow.  Likewise, transportation utilization is now above 70% which means there is room to grow without needing to put forth any heavy investments.  The highlight here is that we are off the bottom and on the upswing again. 

Wholesale egg prices cracked last week. After climbing to record levels in December, Humpty Dumpty fell off the wall in January.  Prices that have fallen by 50% are scrambling the market.  Farmers were able to rebuild their flocks after the impact of the bird flu left them doing a slow burn, or maybe a hard boil. With more chickens laying and many consumers opting for egg-less options due to high prices, supplies are growing to a point where it is no yolk.  Retail prices that are pretty fowl right now, should be abating, allowing consumers to poach a good deal in the next month.

As more attention is given to electric vehicles, electric refueling infrastructure, solar panels and other renewable electrical based power sources, copper supplies are at critically low levels and are not expected to rebound anytime soon.  With limits on mining copper in the US and Europe and the political instability in South America, access to the much-needed commodity is a rising concern.  Analyst estimates indicate a shortage until 2030.  OUCH!

Have a great week.



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