President Vladimir Putin on Tuesday signed a decree ordering the establishment of joint military training centers with Belarus, in a potential sign that Russia’s ‘Union State’ ally under Alexander Lukashenko is preparing to join the Ukraine invasion, which is soon to hit its one year mark by the end of February.

“In a decree published Tuesday, Putin tasked the defense and foreign ministers to conduct talks with Belarus and sign an agreement to establish the facilities,” the AFP reports. “The document did not specify where they would be based.”

Currently, Moscow and Minsk are participating in joint air force drills which are scheduled to last until Feb. 1st, and there’s been an increase in Russian top level official visits to Belarus of late.

Putin had made a rare visit to Belarus on Dec.19, where he met with President Lukashenko in Minsk, and the two discussed the formation of a “unified defense space” – but no details were offered in terms of operational details involved in implementing such a plan.

Ukraine has meanwhile continued to fear that the Kremlin’s next escalation and potential large-scale mobilization could involve the formal entry of Belarus into the war. Lukashenko had at the start of the invasion allowed Russian troops to use his territory as a launching pad.

Last week there were reports that Kiev offered Belarus a ‘non-aggression’ pact, which is without doubt geared toward preventing a feared Belarusian cross-border offensive. This also came amid claims that Russia is launching drones against Ukraine’s energy infrastructure from Belarus.

Lukashenko had confirmed Ukraine’s offer last week: 

“On the one hand, they ask us not to fight Ukraine under any circumstances, not to move our forces there. They offer us to sign a non-aggression pact,” Lukashenko told officials in a meeting in Minsk, according to the Belta state news agency. On the other hand, Ukraine has been training and arming people to fight Belarus, he added.

⚡️Pictures from today’s joint air drills between Belarus and the Russian federation, somewhere in southern Belarus. pic.twitter.com/VJTb2UnAcU

— War Monitor (@WarMonitors) January 31, 2023

He again denied that there are any plans to send Belarusian troops into Ukraine, but he’s also remained a staunch defender of Putin’s order for Russia to invade, and has called out the “completely insane” actions of nearby NATO countries such as Poland and Lithuania.

Authored by Allen Zhong via The Epoch Times (emphasis ours),

The cost to fuel electric vehicles in the United States is higher than gas-powered cars for the first time in 18 months, a consulting company said.

“In Q4 2022, typical mid-priced ICE (Internal Combustion Engine) car drivers paid about $11.29 to fuel their vehicles for 100 miles of driving. That cost was around $0.31 cheaper than the amount paid by mid-priced EV drivers charging mostly at home, and over $3 less than the cost borne by comparable EV drivers charging commercially,” Anderson Economic Group (AEG) said in an analysis.

However, luxury EVs still enjoy a cost advantage against their gas-powered counterparts.

It costs luxury EV owners $12.4 to drive every 100 miles on average if they charge their cars mostly at home or $15.95 if they charge their cars mostly at commercial charger stations in the 4th quarter of 2022.

Meanwhile, the fuel costs for luxury gas-powered cars are $19.96 per 100 miles on average.

AEG is a consulting firm based in Michigan that offers research and consulting in economics, valuation, market analysis, and public policy, according to the company’s website.

The fuel costs in the analysis are based on real-world U.S. driving conditions including the cost of underlying energy, state taxes charged for road maintenance, the cost of operating a pump or charger, and the cost to drive to a fueling station, AEG said.

Insurers List Crashed Low-Mileage Tesla on Auctions: Analysis

Insurance carriers are sending low-mileage Tesla Model Ys to salvage auctions because they are too expensive to repair.

Of more than 120 Model Ys that were totaled after collisions, then listed at auction in December and early January, the vast majority had fewer than 10,000 miles on the odometer, according to a Reuters analysis based on online data from Copart and IAA, the two largest salvage auction houses in the United States.

Copart and IAA auction listings note whether the vehicles were involved in front, rear, or side collisions, and typically include after-crash photos of each vehicle. But the listings do not disclose specific details on the type of damage suffered.

Copart listings in some cases included the names of insurance companies that had bought back crashed vehicles, then listed them at auction. Those companies include State Farm, Geico, Progressive, and Farmers. Geico is part of Warren Buffet’s Berkshire Hathaway Inc.

Read more here…

Newly empowered House Republicans are kicking off their long-planned investigations into a wide variety of issues, beginning with hearings on the US-Mexico border crisis, the origins of Covid-19, and pandemic relief programs.

The House Judiciary Committee’s first meeting of the new Congress, led by Chairman Jim Jordan (R-OH), will be “The Biden Border Crisis: Part I.” 

Then, the House Energy and Commerce investigations subcommittee will hold a hearing titled: “Challenges and Opportunities to Investigating the Origins of Pandemics and Other Biological Events,” as part of its probe into the origins of Covid-19.

Meanwhile, the House Oversight and Accountability Committee, led by James Comer (R-KY) will kick off a hearing on waste, fraud and abuse related to federal pandemic spending, The Hill reports.

“I don’t think history will be kind to the PPP loan program,” said Comer during a Monday appearance at a National Press Club event, referring to the program that provided businesses with forgivable loans. “I think it’ll be eventually viewed in the same manner that the big bank bailouts were when people find out where a lot of that money was going.”

Republicans had been plotting extensive investigations into the Biden administration for more than a year before the midterm elections. Speaker Kevin McCarthy (R-Calif.), in preparation for taking the House majority, organized GOP members into “task forces” to come up with oversight and legislative priorities. Republican members of committees started investigations last year when they were in the minority.

Republicans now have control over committee hearing topics, a better chance of getting answers from administration officials, and are armed with subpoena power to compel testimony and documents — though no committee has used it yet.

Next week, the Oversight panel is set to hold a hearing on the U.S.-Mexico border and a hearing with former Twitter employees about the platform’s suppression of the New York Post’s story on the Hunter Biden hard drive in 2020. -The Hill

Speaking of the Bidens, the Oversight panel is also conducting an ‘extensive probe’ into the business dealings of President Biden’s family which will focus on Hunter Biden.

Republicans on the House Oversight, Judiciary and Intelligence committees have also sought information related to President Biden’s mishandling of classified information, while the House Foreign Affairs and Armed Services committees are going to be investigating the botched withdrawal from Afghanistan.

And in what will hopefully take the spotlight – House Republicans have formed the Select Subcommittee on the Weaponization of the Federal Government under the House Judiciary Committee, in response to those who wanted a “Church-style” committee to investigate how the DOJ and intelligence agencies were used in a character-assassination plot against former President Trump and others.

Via John Rubino’s Substack,

Last week I posted an article on the implosion of the official vaccine narrative.

That’s a controversial topic so not surprisingly it generated some heat on both sides. And a few readers expressed the wish that I’d stay in my lane (precious metals investing) and avoid venturing into unrelated and less well understood territory.

But believe it or not, the public health establishment losing its credibility is related to precious metals, via something called the trust horizon. It works like this: When things are good and the people in charge of big systems seem to be running them well, we’re content to trust the experts. We keep most of our money in banks, brokerage houses, and crypto wallets that exist for us only as websites. We buy produce that’s grown in a different hemisphere and shipped via boats, trains, and trucks to corporate chain grocery stores. We vaccinate ourselves and our kids according to the schedules set by the NIH or the CDC. We pop pills on our doctor’s orders without doing any research. We eat processed foods on the assumption that the FDA keeps them free of dangerous additives. And we believe what we see on cable news.

In other words, our trust horizon, defined as the distance from ourselves at which we’ll believe what we’re told, is global. We assume everything everywhere is working for our benefit and we’re thus willing to put our welfare in those distant hands.

But let some big systems fail to take proper care of us and we pull back, finding people and institutions closer to home that we can see and judge first-hand. We move our money out of distant banks and brokers and into local credit unions whose managers live down the street. We start buying groceries from farmers markets or directly from local farmers. Instead of popping whatever pill is standard for our ailments we look into “food as medicine” and other lifestyle remedies like exercise, supplements, and meditation. We homeschool our kids and join gun clubs. We buy homesteads and start raising chickens.

So where are today’s Americans on the trust horizon spectrum? Well, the military industrial complex is starting (potentially nuclear) wars all over the place. Government debt is growing exponentially. Wall Street has turned the markets into one big casino. Universities have become (very expensive) insane asylums. Congress is full of insider traders who amass fortunes while “serving the public.” And our presidents, well, insert your sarcastic phrase here.

It’s safe to say that for a growing number of disillusioned people, trust now extends to – maybe — the governor’s mansion, city hall, local farmers, their church and one or two community banks. And that’s about it.

Where does gold come in?

The biggest of the big systems that the experts have failed to manage is money. If we can’t trust the monetary authorities to maintain the value of the dollar (and in the past year we’ve learned that we emphatically cannot) then we need other forms of money to trust. And that would be gold and silver, the forms of money that disillusioned people have been running to since literally before the Roman Empire.

The advantage of precious metals lies with the concept of “counterparty risk.” Fiat currencies and pretty much everything else in today’s world require someone (the counterparty) to keep a promise for the thing in question to perform as advertised.

For your dollars to hold their value, the Fed must keep the money supply under control. For your bank account to work your bank has to stay solvent. Likewise your brokerage house. But gold and silver have no counterparty risk. No one must keep a promise for them to stay valuable. They are what they are, regardless of the behavior of the world’s experts. That’s why those experts hate precious metals and why regular people rediscover them every few generations.

Looked at this way, you can draw a direct line from the vaccine mess to gold and silver coins and bars stored in a safe place. And the line is getting thicker and stronger with every new scandal.

*  *  *

Subscribe to John Rubino

Here we go again… French President Emmanuel Macron in Monday comments signaled openness to sending Ukraine advanced fighter jets, something which Kiev has broadly asked its allies for since nearly the start of the Russian invasion.

“Nothing is excluded in principle,” Macron said immediately following talks with Dutch Prime Minister Mark Rutte when pressed by reporters about the question of fighter jets for Ukraine. The Dutch premier himself had weighed in too saying, “There is no taboo but it would be a big step.” But he noted, “It is not at all a question of F-16s, there has been no demand (from Ukraine).”

Macron added that the French “are not making this request at the moment for fighter jets” – in what appears a first confirmation that the Ukrainian government has not yet gone through with a formal ask. Macron’s fresh remarks, however, are likely to be seen from Kiev as an invitation to proceed with a formal request, while will putting more pressure on Paris and the Western alliance. Ukrainian officials have long been going through Poland, it seems, to press the jet issue with NATO command in Brussels.

Macron stipulated that jets for Ukraine must “not be escalatory” – meaning that they would “not be likely to hit Russian soil but purely to aid the resistance effort.” But obviously advanced fighters would be escalatory by the very nature of sending them after Moscow has reiterated its “red lines”. 

As for the rest of Europe, on the same day that the White House said that it would not be sending jets, Britain’s Prime Minister Rishi Sunak said it would not be practical.

“The UK’s … fighter jets are extremely sophisticated and take months to learn how to fly. Given that, we believe it is not practical to send those jets into Ukraine,” a spokesperson for the British prime minister told reporters. “We will continue to discuss with our allies about what we think what is the right approach.”

Indeed given training on the Abrams M1 tank could take at minimum six months, something as sophisticated as Western-made fighter jets could take years for pilots unfamiliar with their systems to get combat ready on. Germany too has issued a firm “no” amid mounting pressure from Ukraine for jets.

Meanwhile it’s no surprise that the European country pressing the hardest to send jets continues to be Poland. Warsaw has been pressing the rest of NATO to transfer jets since the opening months of the war.

On Monday Polish officials expressed readiness to send US-made F-16s to Ukraine, but emphasized it would only do so in coordination with NATO. “We will act in full coordination here,” Polish Prime Minister Mateusz Morawiecki said. 

Since he started lobbying for F-16 deployments so quickly, is it rude to point out that Admiral Stavridis is a Managing Director of the Carlyle Group, whose recent acquisitions include StandardAero, a global defense contractor that provides maintenance services for F-16 engines https://t.co/pgdBROIywf

— Michael Tracey (@mtracey) January 30, 2023

A spokesman for the Ukrainian presidency’s office, Andrii Yermak, posted a statement to Telegram saying “Work on obtaining F-16 fighters continues. We have positive signals from Poland, which is ready to pass them on to us in coordination with NATO.”

The Ukrainian official then aimed his statement at Moscow, stressing provocatively that “Tanks, fighter jets — a great combination for turning Russian enemies into fertilizer.”

Shares of General Motors are surging higher by about 5% this morning after the Detroit automaker crushed expectations across the board, beating both Wall Street’s top and bottom line expectations to wrap up their full year 2022.

The company also issued strong guidance for the upcoming year. Shares are up about $1.70 and trading near $38 as a result.

Here are the numbers behind the full report, per Bloomberg: 

• Adjusted EPS $2.12, estimate $1.67

• Net sales and rev. $43.11 billion, estimate $40.51 billion

• Cruise net sales and revenue $25 million, estimate $62.6 million

• Automotive net sales and revenue $39.83 billion, estimate $38.1 billion

• GM Financial net sales and revenue $3.28 billion, estimate $3.35 billion

• North America adjusted Ebit $3.65 billion, estimate $3.31 billion

• International operations adjusted Ebit $272 million, estimate $286.9 million

• Cruise adjusted ebit loss $524 million

• GM financial adjusted EBT $775 million

• Adjusted automotive free cash flow $4.46 billion

• Adjusted Ebit $3.80 billion, estimate $3.46 billion

And guidance for the upcoming year, per Bloomberg:

• Sees adjusted EPS $6.00 to $7.00, estimate $5.70 (Bloomberg Consensus)

• Sees adjusted auto free cash flow $5.0 billion to $7.0 billion

• Sees adjusted Ebit $10.5 billion to $12.5 billion, estimate $10.35 billion

• Sees net income $8.7 billion to $10.1 billion, estimate $8.16 billion

In Mary Barra’s letter to shareholders, she wrote: “We expect that our momentum will help us deliver strong results once again in 2023. In fact, we have all the essential ingredients to deliver EBIT-adjusted in a range of $10.5 billion to $12.5 billion thanks to our strong operating performance.”

She called the coming year a “breakout” year for the company’s Ultium battery platform: “2023 will also be a breakout year for the Ultium Platform. By leveraging U.S.-made battery cells produced by our Ultium Cells joint venture and the scalability and flexibility of the Ultium Platform, we are accelerating production of the Cadillac LYRIQ, GMC HUMMER EV and BrightDrop Zevo 600, and we will launch exciting vehicles like the Chevrolet Silverado EV, Blazer EV and Equinox EV. This keeps us on track to produce 400,000 EVs in North America from 2022 through the first half of next year.”

Barra continued: “Our EVs are transformational in so many ways. We’re earning new customers. Our investments are creating new jobs. We’re moving closer to a world with zero crashes, zero emissions and zero congestion, and we believe our R&D, supply chain, manufacturing scale and distribution network will unlock the profitability of EVs.”

CFO Paul Jacobson said on Tuesday morning: “We think the underlying business is going to be pretty consistent with what we saw last year, and I think that’s a slightly more bullish statement than where most of the market is.” 

He added that demand and pricing “remain strong” for the automaker. GM says it will also put into place a $2 billion cost cutting plan for the next two years and to expect “some” headcount attrition – but he says the company isn’t planning layoffs. 

Focus will also continue to be on margins at the company, as the Q4 results shows “signs of a margin squeeze”, according to CNBC: “GM’s net income slipped last year, down by less than 1% from the full year 2021 to $9.9 billion, with a profit margin that was off 1.6 percentage points to 6.3%. Its adjusted profit margin was 9.2%, down 2.1 percentage points compared with the previous year.”

Bloomberg also pointed out some of the company’s additional corporate initiatives:

• GM to Make A $650M Equity Investment in Lithium Americas
• GM, Lithium Americas to Develop Thacker Pass Mine in Nevada
• Thacker Pass Production Projected to Begin in 2H 2026
• GM: Investment Will Be Split Between Two Tranches
• GM: Escrow Release Is Expected to Occur No Later Than End 2023
• GM: We Are Gaining Considerable Market Share in Fleet Business
• GM Sees Capital Spend $11B-$13B for Year
• On track to open 4 battery cell plants targeting 160 GWh of capacity
• The company expects its core auto operations to perform at a consistently strong level in 2023, with full-year net income attributable to stockholders of $8.7 billion-$10.1 billion, EBIT-adjusted of $10.5 billion-$12.5 billion, and EPS-diluted and EPS-diluted-adjusted of $6.00-$7.00.

Case-Shiller’s latest data (for November) showed US home price acceleration continued to slow (-0.54% MoM – slightly stronger than expected) for the 5th straight month.

Source: Bloomberg

This slowed the annual growth in the 20-City Composite index to 6.77% YoY – its slowest since Sept 2020.

“As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices,” Craig J. Lazzara, managing director at S&P Dow Jones Indices, said in statement.

“Economic weakness, including the possibility of a recession, would also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”

More broadly, the S&P CoreLogic Case-Shiller National Home Price index rose 7.69% YoY in Nov., smallest gain since Sept. 2020, after rising 9.23% in prior month

Every one of the major cities saw home prices decline MoM…

Miami, Tampa, and Atlanta reported the highest year-over-year gains among the 20 cities surveyed but we note that San Francisco home prices are now lower (-1.57%) year-over-year…

That is the largest price drop since at least 2012…

Several days after blowout earnings by its biggest competitor Chevron, this morning US E&P giant Exxon Mobil posted blowout Q4 and full year numbers, when it reported $59 billion in adjusted profit for 2022, taking home more than $6.7 million per hour last year, and setting not only a company record but a historic high for the Western oil industry. 

That’s right: Exxon’s full-year profit, excluding one-time items, jumped 157% from 2021 to $59.1 billion, far exceeding the driller’s prior record of $45.2 billion in 2008 when oil hit $142 per barrel, 30% above last year’s average price, and which at the time marked the biggest in US corporate history. Deep cost cuts during the pandemic helped supercharge last year’s earnings.

On a quarterly basis, Exxon surpassed expectations for the ninth time in 10 periods, posting adjusted fourth-quarter profit of $3.40 a share that was 11 cents higher than the median estimate by analysts in the Bloomberg Consensus. This translated into $14 billion in fourth quarter profit excluding charges, 60% more than the same period last year but down almost 25% from the previous quarter as oil prices eased and some operations suffered from cold-weather related outages. Here is a snapshot of what the company reported for Q4:

• Revenue $95.4BN, beating consensus expectations of $$94.7BN
• Adjusted EPS of $3.40, beating consensus expectations of $3.29.
• E&P was the largest driver of the beat across US/International, as well as International Energy and Specialty products.
• Cash flow came in at $17.8 bn excluding working capital and asset sales, missing consensus expectations of $18.3 bn.

“Overall earnings and cashflow were up pretty significantly year on year,” Exxon Chief Financial Officer Kathryn Mikells told Reuters. “So that came really from a combination of strong markets, strong throughput, strong production, and really good cost control.”

Exxon said it incurred a $1.3 billion hit to its fourth quarter earnings from a European Union windfall tax that began in the final quarter and from asset impairments. The company is suing the EU, arguing the levy exceeds its legal authority.

Here is how the earnings look when compared side by side with the GS model:

And in more details:

• On a segment basis, relative to Goldman’s numbers (Buy reco, $120 PT) the company beat on E&P and R&M (Energy and Specialty Products), and was slightly below on Chemicals, and more in-line on Corporate.
• On the Upstream, XOM came in above GS estimates, with the US and International business above. XOM announced $8.8 bn for adjusted E&P worldwide, versus our expectations of $8.3 bn.
• Production was above GS expectations. XOM reported 3,822 Mboe/d versus our 3,703 Mboe/d forecast, and consensus of 3,772 Mboe/d. Digging deeper, liquids volumes came in above GS forecast driven by International. On the gas side, volumes came in above expectations in International.
• R&M (including both Energy Products and Specialty Products) was above GS estimates, with XOM reporting worldwide adjusted R&M earnings of $5.6 bn for 4Q22 versus our expectations of $5.2 bn. The variance was mainly driven by International, with US more in-line vs our estimates.
• The Chemicals segment came in slightly below our forecasts during the quarter driven by International. XOM reported $250 mn of adjusted earnings versus our ~$350 mn forecast.

Still, despite the blowout, record earnings, because XOM did not follow CVX in reporting a just as gargantuan stock buyback, some traders decided to punt the stock, at least in early trading when it dropped as much as 4% before recovering some gains. Instead of matching Chevron’s $75BN, XOM stuck with its previous guidance of $35BN in buybacks for the 2023-2024 period, although it is very likely that the company will have to boost this number.

Exxon also boasted its cash flow from operations soared to $76.8 billion last year, up from $48.1 billion in 2021.

Exxon’s spending on new oil and gas projects bounced back last year to $22.7 billion, up 37% from the prior year. The company increased outlays on discoveries in Guyana, in the top U.S. shale field, and on fuel refining and chemicals.

“The counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering,” Exxon Chief Executive Officer Darren Woods said in a statement.

The results may set up another confrontation with the White House. On Friday, President Joe Biden’s administration blasted oil firms for pouring cash into shareholder payouts rather than production. Windfall profit taxes are “unlawful and bad policy,” countered CFO Mikells. Slapping new taxes on oil earnings “has the opposite effect of what you are trying to achieve,” she said, adding it would discourage new oil and gas production.

The five supermajors are swimming in cash after a record 2022 but pressure is mounting on executive teams to satisfy Biden’s contradictory demands: investor appetite for bigger payouts and buybacks versus political outrage over windfall profits during a time of war and economic dislocation.

According to Reuters, oil majors are expected to break their own annual records on high prices and soaring demand, pushing their combined take to near $200 billion. The scale has renewed criticism of the oil industry and sparked calls for more countries to levy windfall profit taxes on the companies.

Chevron was excoriated by the White House and Democratics when it disclosed plans last week to funnel $75 billion to investors in the form of stock repurchases. Investors cheered.  Exxon had already expanded buybacks multiple times last year and already has signaled its intention to repurchase $50 billion of stock through 2024. Chief Executive Officer Darren Woods is likely to be probed on whether Exxon can increase the pace of buybacks again when he hosts a conference call with analysts at 8:30 a.m. New York time.

There are also signs that Wall Street, after a long hiatus, is once again keen to see oil explorers increasing crude output. As Bloomberg notes, Chevron executives faced multiple questions about growth plans last week, and several analysts noted their disappointment at the California-based company’s outlook for a flat-to-3% increase this year.

A slowdown in Chevron’s Permian Basin annual growth to 10% probably will be an “overhang” on the stock, Cowen & Co. said in a note to clients. That said, Exxon has less reason to be concerned about when it comes to growth than some of its peers. The company has a “differentiated upstream project queue” that should increase return on capital over the coming years, Goldman Sachs wrote in a Jan. 20 note.

The Texas oil giant has continued to invest in major projects in Guyana and the Permian region during the pandemic, which by Exxon’s own estimates should have the knock-on effect of driving production to the equivalent of more than 4 million barrels a day by 2027, up about 8% from current levels.

Alongside fossil-fuel growth, Exxon plans to ramp up spending on clean-energy investments by focusing on carbon capture, hydrogen and biofuels. The company cited the Biden administration’s Inflation Reduction Act as a key policy pillar that improves profitability of decarbonizing existing operations, but has said that more government support is needed for big projects such as its proposal to capture emissions from industrial facilities along the Houston Ship Channel.

The stock initially tumbled on lack of a buyback expansion, but has since recovered much of its losses.

Exxon’s Q4 earnings presentation is below (pdf link)

Despite double-digit inflation and Russia’s invasion of Ukraine, the Eurozone looks set to avoid recession as GDP grew 0.1% in the final quarter (against expectations of a 0.1% decline).

Only a few months ago, economists had forecast a deep recession and energy shortages.

But a less cold winter than feared, falling gas prices and generous government support have all helped avoid that scenario, helping the region to grow in each quarter of 2022 and by 3.5% over the course of the year.

While German and Italian output shrank, France and Spain recorded expansion. There was also stronger-than-anticipated data on Monday from Ireland.

“The Irish economy, propelled by the presence of multinational corporations, expanded by 3.5% contributing 0.1 percentage points to the euro-area figure and tipping the balance such that the bloc expanded overall,” said Jamie Rush, chief European economist at Bloomberg Economics.

Bert Colijn, senior economist at ING, the bank, said the region’s economy was showing “incredible resilience” in the face of the energy crisis triggered by Russia’s invasion of Ukraine.

“The worst scenarios for this winter have been avoided,” Colijn said.

“But the economy remains sluggish.”

While Lagarde and he lackeys can celebrate for now, the bloc isn’t out of the woods yet, as economists continue to predict output will dip in the first quarter.

The euro spiked lower early in the EU session, but has recovered most of that drop since…

The economy holding up better than feared means the ECB can stay focused on tackling high and persistent inflation.

With The Fed huddling in The Eccles Building and traders hyper-focused on any signs of ‘peak inflation’ (because that means ‘peak Fed tightness’), this morning’s Q4 US employment costs index rose 1.0% QoQ (slightly cooler than the +1.1% expected and down from the +1.2% QoQ in Q3)…

Source: Bloomberg

Labor costs have risen at least 1% for six straight quarters, extending what was already a record streak in data back to 1996.

As a reminder, Fed Chair Powell explicitly mentioned this signal, and while the quarterly changes are trending in the right direction, we note that the YoY rate of change rose to a new record 5.07%.

The ECI is notable in part because other recent wage data (the average hourly earnings data in the monthly payroll report) have pointed to a deceleration in wage growth.

The ECI could provide confirmatory or contradictory evidence of this recent trend for the wage story.

— Nick Timiraos (@NickTimiraos) January 31, 2023

Given the record rise in ECI YoY, we are not sure this is what The Fed wants to see…