This is a great week to take time every day to count our blessings. With Thanksgiving this week, it is a perfect time to recognize areas in our life to be thankful for. We can move past the negativity we get daily from the media and focus on the positives. Thankfulness will bring us to a greater appreciation for those around us, the small as well as the larger joys that our family, friends, co-workers and others bring us. Look beyond the temporal, physical things we have, to the intangibles in our lives that, without them, our lives would have less color, be drabber. The goal, while you daily consider what you are grateful for, will be to bring a smile to your face, not purposefully, but spontaneously. Who knows, that smile might be something someone around you might need, something that they might be thankful for.
The energy market continues to be under strain. While gasoline inventories grew, distillate and heating oil levels remain well below averages. Historically, over a full 12 months, our supply of diesel and heating oil levels average just over 30 days. Right now we are down to 25 days of supply nationwide. Essentially, we are about 20% below our normal average. However, seasonally, the US typically has its highest average during the late Fall and into Winter to make sure users will have adequate access to heat their homes. In this case, we are in a critical position where access will be an issue in the very near future.
It is an understatement that inflation continues to be a concern. There will continue to be painful price increases in some areas of our economy for an extended period. Energy prices will be unstable until a coherent policy is developed by the government which will attract investors into the market. Food prices and food shortages will likely continue for years. Beef herds in particular have been impacted by the drought and will not rebound in supply anytime soon.
As the supply chain begins to correct itself, we are actually seeing deflation in some areas. Clothing and many hard goods are back in near normal levels. Many retailers are cutting prices as well as rolling out early, large Black Friday sales by November 1.
Residential rental rate increases have abated from last year. In fact, some multifamily rents have not increased or in some areas we are actually seeing vacancies rise. Commercial rental rates are being pressured downward as companies cut staff and adhere to a hybrid business model that continues to have some remote workforce.
While new housing starts are off from the peaks we saw over the past two years, they are still above 2019 and 2018 levels. Mortgage interest rates and high housing prices have deterred some buyers, others continue to shop and purchase, demand is still good. We moved past the peak housing price market which was achieved in May. Note, this was about the time that the FED began moving rates. However, the impact of the rate increases will not be fully felt until early next year. If they continue to increase rates, there is a strong likelihood that the economy will suffer greatly in 2023 when the full impact of the higher rates sweep through the economy.
November manufacturing reports reflect a seasonal downturn. Philadelphia Fed numbers fell to a negative 19.4, a second month in a row of declining growth in the report. Kansas was also down for a second straight month. The declines are not supply chain related, but rather reflective of new orders and backlogs that are softening.
Consumers continue to spend, but do so cautiously. When you remove energy and auto sales from the retail numbers, October produced a sales growth of .9%. While this was improved from the September number of .6%, it is nothing to be excited about. The trend, even with a slight increase in October, is slightly downward.
Enjoy Thanksgiving with your family and friends. I will be taking a week off so the next update will be December 5. Have a great week.