Senate Dems Work on Scaling Back BBB to Get Manchin OK and Keep House Votes

FY 2022 spending issues must be resolved by Feb. 18

Washington Focus

Washington is in a holding mode as both chambers are out on the holiday recess and will return early in January. The Senate returns Jan. 3; the House comes back Jan. 10.

Negotiations continue in the Senate regarding a scaled back Build Back Better (BBB) measure. Centrist Sen. Joe Manchin (D-W.Va.) has reportedly given enough information to White House officials and key lawmakers as to what it will take to get his approval. That will likely mean significant changes that may have House progressives balking at the changes needed.

Sen. Ben Cardin (D-Md.) said Sunday he’s not convinced that the Democrats’ BBB legislation is dead. “There is unanimity in our caucus that we want to get a bill to the president, and we are working to see what that bill will contain. President Biden is directly involved in these negotiations,” the Maryland Democrat said on Fox News Sunday. “We are prepared to move; we just need to make sure we have unanimity in our caucus and that's what we are working on and we will start on that… when we return,” Cardin told host Mike Emanuel. The senator acknowledged that Democrats needed to find a “sweet spot” to get legislation through without losing votes from the Democratic caucus. “We want to see it as comprehensive as possible, but we need to make sure we have the votes to pass it, so that means it will be different than some of us would like to see,” he said. Cardin said Democrats are open to potentially passing some parts of the bill as standalone items. “That's a strategy decision that's being negotiated. We are open to a way to reach the finish line,” Cardin said.

Once Congress returns, they will need to also focus on completing work on the fiscal year 2022 appropriations bills before the continuing resolution expires on February 18.

Friday is the observed New Year’s Day holiday in most areas of the world, with U.S. gov’t offices closed, but most markets will trade normal hours — the bond market will close early at 2 pm ET.

Economic Reports for the Week

Updates on home prices, jobless claims and the Chicago PMI numbers will be the numbers to watch.

Econ Reports

Monday, Dec. 27

Federal Reserve Bank of Dallas releases its Texas Manufacturing Outlook Survey for December. Consensus estimate is for a 13.8 reading, two points more than November’s figure. While still indicating growth in the state’s manufacturing sector, the index is well off its postpandemic peak of 37.3 from April of this year.

Tuesday, Dec. 28

FHFA releases its Home Price index for October. Through the third quarter, home prices rose 18.5% year over year, a record. Every state saw price appreciation, led by Idaho and Utah, with over 30% gains.
S&P CoreLogic releases its Case-Shiller National Home Price Index for October. Economists forecast a 18.5% year-over-year jump, slightly slower than September’s 19.5% rate of growth—which is the third highest in the index’s history. Of the 20 metropolitan areas tracked by S&P CoreLogic, five saw gains of 25% or more, led by Phoenix, Tampa, and Miami. Chicago, Minneapolis, and Washington, D.C. were the bottom three with still-robust increases of 12% to 14%.
The Federal Reserve Bank of Richmond releases its Fifth District Survey of Manufacturing Activity for December. Expectations are for a 12 reading, roughly even with the previous two months. Like its Dallas counterpart the index is well below the levels from earlier this summer.

Wednesday, Dec. 29

MBA Mortgage Applications
National Association of Realtors releases its Pending Home Sales Index for November. Consensus estimate is for a 123 reading, less than October’s 125.2. The October reading was the highest of the year for the PHSI, which is a forward-looking indicator of home sales based on contract signings. Fast-rising rents and anticipated increases in mortgage rates drove the rise in house-contract signings according to Lawrence Yun, the NAR’s chief economist.
Census Bureau reports retail and wholesale inventories for November. In October, seasonally adjusted inventories held by wholesalers were a record $759 billion, as they stockpiled goods for the all-important holiday season. Retailers held $604 billion of inventory during the same period.

Thursday, Dec. 30

Jobless Claims
Department of Labor reports initial jobless claims for the week ending on Dec. 24. Jobless claims have averaged 199,333 a week so far in December. Included in those data were the 188,000 initial jobless claims for the first week of December, the lowest claims total since September of 1969.
The Institute for Supply Management releases its Chicago Purchasing Manager Index for December. Economists forecast a 62 reading, roughly even with November’s figure, which was the lowest since February. The Chicago PMI has had 17 consecutive months with readings above 50, indicating expansion for the nation’s manufacturing sector.
Fed Balance Sheet
Money Supply

Key USDA & international Ag & Energy Reports and Events

Christmas and New Year holidays have altered the release dates of Commitments of Traders weekly data from CFTC and ICE.

Monday, Dec. 27

Ag reports and events:

Export Inspections
Peanut Stocks and Processing
CFTC Weekly Commitments of Traders; this report with data through Dec. 21 is delayed from the usual Friday slot
Malaysia’s Dec. 1-25 palm oil exports
Public holiday in U.K., Canada, Australia, Nigeria, various others