Latest Insights

Investors had a large amount of economic data to process this week, with the March Consumer Price Index (CPI) headline numbers coming in slightly lower than expected, up 0.1% month-over-month and 5.0% year-over-year, moderating from +6.0% in February. Core CPI, which excludes the volatile food and energy components, increased 5.6% year-over year in March, a slight uptick from the previous month. Housing was by far the largest contributor to the increase, along with gains in restaurant dining and new car prices. Since shelter data tends to lag, that factor is expected to fade in the coming months. There were declines in the prices of energy, used cars and trucks, medical care services, and groceries during the month. In other inflation news, the Producer Price Index (PPI) fell 0.5% in March, the largest monthly drop since April 2020, as wholesale prices for goods, especially gasoline, declined. Supply chain disruptions and commodity prices eased from last year when Russia’s invasion of Ukraine caused a spike, but OPEC+ production target cuts are expected to be inflationary.

The Chandler team has been calling for positive, but below trend growth, in the first half of 2023 and in aggregate the data releases this week were supportive of the view. The ISM Manufacturing Index continues to face headwinds, coming in at 46.3 for March, compared to 47.7 in the prior month. This is the fifth month in a row with the index below 50.0, signaling contracting activity in the sector. The ISM Services Index also disappointed relative to recent trends with a reading for March of 51.2 compared to the prior months 55.1, but encouragingly still shows expansion in the sector. The Bureau of Labor Statistics updated the Job Openings and Labor Turnover Survey (JOLTS), which is reported with a one-month lag, and for the first time since May 2021 the number of job openings was below 10 million, signaling the tightening of financial conditions is starting to impact the labor market. In a further indication the labor market is not as tight as previously believed, the Department of Labor updated their seasonal factors for weekly unemployment insurance claims and the recent trends show a four-week moving average of 238k; prior to the revisions the four-week moving average was below 200k.