6/24- Weekly Economic Highlights
Jun 24, 2022 | Weekly Highlights
Economic data releases the past week was for the most part lackluster, with the Chicago National Fed Activity Index coming in below consensus expectations at 0.01 for the month, but the three-month moving average remains constructive for the economic backdrop at 0.20. Weekly jobless claims continue to tick very marginally higher, but with the current pace of 229k continues to point towards a healthy labor market despite some preliminary signs of labor market softness linked to industries more dependent on low interest rates. S&P Global Manufacturing PMI data also came in below consensus expectations but remain in expansion territory, indicating overall economic conditions are normalizing. Perhaps the most noteworthy economic release was today’s update on the University of Michigan 5-10 year inflation expectations, with the final estimate contracting 0.2% to 3.1%, a constructive development for market participants concerned about inflation expectations becoming unanchored.
Benchmark interest rates moved lower over the course of the week but remain materially above the levels set as of month-end. Considering last week’s hawkish policy adjustment by the Federal Open Market Committee (FOMC), increasing the Fed Funds rate by 75 basis points, the realized pace of policy tightening has investors speculating monetary policy is no longer “behind the curve.” The current market estimate of the Fed Funds terminal rate is marginally below the level implied by the most recent Federal Reserve Summary of Economic Expectations as the risks of an economic slowdown increase.
Next week will provide several top-tier data releases which will undoubtedly influence the direction of asset prices across the capital markets. Late in the week updated estimates on Personal Income, Personal Spending and PCE inflation will be released. The PCE inflation data is forecasted to remain elevated, and this is likely to keep members of the Federal Reserve maintaining their hawkish disposition despite the year-to-date performance of risk assets and tightening financial conditions. The Chandler team expects monetary policy accommodation to continue to be removed at the July 27th and September 21st FOMC meetings with the outlook for inflation, both observed via Consumer Price Indices and the Personal Consumption Expenditures Indices, as well as market-based measures, including Treasury Inflation Protection Security Break Even spreads, influencing the decision.
Durable Goods, S&P Case Shiller Home Price Index, Consumer Confidence, updated 1Q GDP estimates, Personal Income, Personal Spending, PCE Inflation and ISM Manufacturing
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