4/21 - Weekly Economic Highlights
Apr 21, 2023 | Weekly Highlights
Although economic data was fairly light this week, there was a full slate of speaking engagements by members of the Federal Reserve. Each of the Fed speakers, including Federal Reserve Bank of New York President John Williams, were consistent in their messaging for the near-term direction of monetary policy. Williams, who is also Vice-Chairman of the Federal Open Market Committee emphasized that inflation was still too high, and monetary policy tools would be used to restore price stability. The Vice Chairman does diverge from the majority of other central bank members in that he does not expect a recession which was disclosed in the meeting minutes from the March FOMC meeting last week. Each speaker who addressed the topic of monetary tightening signaled the need for at least one additional rate increase to curtail inflation.
Most of the housing data released this week pointed to further weakness. Housing starts fell 0.8% in March to 1.42 million primarily driven by a drop of 5.9% in multifamily construction while single-family construction increased 2.7%. Consistent with new construction data, building permits were down 8.8% due to fewer permits for multifamily homes but single-family permits were up 4.1% in March. Existing home sales weakened further in March partially driven by the 30-year mortgage reaching a 2023 peak of 6.73% the week ending March 9th according to Freddie Mac. Sales of existing homes declined 2.4% to 4.44 million units. The current contract rate for a 30-year fixed rate mortgage is down from last month’s peak to 6.39%The Conference Board’s Leading Economic Index (LEI) remained in negative territory for the twelfth consecutive month declining 1.2% in March. This reading reflects the lowest level since April of 2020 and follows a decline of 0.5% in February pointing to an upcoming downturn in economic activity.
Treasury yields moved slightly higher this week; the 2-year treasury is up 5 basis points to 4.16% after starting the week at 4.11%, and the 10-year is up 4 basis points to 3.55% as of Friday morning. In addition, the yield inversion between the 2-year and 10-year treasury was essentially unchanged this week at approximately 61 basis points. The Chandler team continues to believe the FOMC will tighten monetary policy an additional ¼ point in one of their upcoming meetings and hold rates at that level for a period of time.
The next Federal Open Market Committee (FOMC) meeting takes place on May 3rd. Policymakers will have additional top tier economic data to take into consideration next week, notably the Fed’s preferred gauge of inflation, the Personal Consumption Expenditures report which will be released on Friday.
Chicago Fed National Activity Index (CFNAI), S&P Case Shiller 20-City Price Index, New Home Sales, Consumer Confidence, Durable Goods Orders, Gross Domestic Product (GDP) Q1, Pending Home Sales, Personal Consumption Expenditures (PCE).
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