Inflation fears easing
There are now about 20 US states with average gas prices below $3/gallon, according to the AAA.
US gas prices are now down a thumping -37 per cent from their excruciating highs, and are actually lower over the year.
Fuel prices tend to impact inflation in other parts of the economy, so while lower prices can also be a stimulus for consumers, it's clear that inflation is going to ease in 2023.
We are just starting to see lower unleaded prices in Australia too, albeit with a lag.
Westpac expects Aussie inflation to peak at a lower level than previously forecast due to a combination lower fuel prices, food prices now easing, lower dwelling prices for new homes, and the government's energy price caps.
Lumber prices are now down -79 per cent from their 2021 highs as US homebuilding conditions have been smashed, so this should begin to flow through to Australia soon too.
AMP expects weaker data to see interest rates on hold in February, as weaker data flows through.
CBA sees clear signs of spending slowing now, both for goods and for services.
This gels with anecdotes I've been hearing about more cautious consumers, with the most recent interest rate hikes yet to take effect.
Perhaps not surprisingly, ANZ-Roy Morgan reported consumer confidence some 30 points below the long-run average.
All of this points to interest rates peaking soon, and being cut in the second half of 2023.
