10 Things You Need To Know: July 18, 2023
Key data releases this week include: retail sales (Tue), industrial production (Tue), NAHB Housing Market Index (Tue), housing starts (Wed), existing home sales (Thu), and leading economic indicators (Thu).
Haver
July 12, 2023
The Consumer Price Index rose 0.2% in June after edging 0.1% higher in May. A 0.3% rise had been expected in the Action Economics Forecast Survey. The 3.0% y/y increase was the weakest since March 2021. Prices excluding food & energy rose 0.2% following three consecutive 0.4% increases. A 0.3% gain had been expected. The 4.8% y/y increase stood below the 6.6% high last September.
Bloomberg
July 12, 2023
The US economy showed an overall increase in activity since late May, though most regions expect the pace of expansion to weaken, the Federal Reserve said in its Beige Book survey of regional business contacts. “Overall economic activity increased slightly since late May,” the report said. “Economic expectations for the coming months generally continued to call for slow growth.”
Haver
July 12, 2023
The Producer Price Index for final demand rose 0.1% during June (also 0.1% y/y), following a 0.4% May decline, revised from -0.3%. A 0.2% increase had been expected in the Action Economics Forecast Survey. The yearly increase was down from the 11.7% high in March of 2022. The PPI excluding food & energy increased 0.1% (2.4% y/y) after rising 0.1%. A 0.2% increase had been expected.
The AP
July 15, 2023
US Treasury Secretary Janet Yellen expressed optimism about building on recent improvements in US-China relations at the G-20 meetings in India but stated that it was premature to expect de-escalation in Chinese trade practices and US tariffs. She also emphasized the need for debt restructuring for poorer countries and further reforms in multilateral development banks.
Abby Joseph Cohen, Columbia Business School/Barron’s
July 17, 2023
“I’m not sure 2% is such a reasonable target. As long as inflation is improving directionally, the Fed will have some breathing room. Also, core inflation has been distorted by things that happened during and after the Covid pandemic, especially in the housing and auto markets. It will take time to see stabilization in some of the data. Central bankers should be focused on the directional change.”
David Giroux, T. Rowe Price/ Barron’s
July 17, 2023
“The challenge now is that the market is trading for 19 times forward earnings, and valuations aren’t as attractive as they were. Now that everyone seems bullish, we are a bit more bearish. You’ll see that in our stock recommendations. Cyclicals and tech have had a big run. Now we prefer more-defensive sectors, such as healthcare and utilities. Those stocks have been left behind, but the relative valuations are attractive.”
Sonal Desai, Franklin Templeton/ Barron’s
July 17, 2023
“I expect to see a 10-year Treasury yield of at least 4% to 4.25%. It is an excellent time to be looking to slowly scale and add duration to your fixed-income portfolio. We have brought our duration to relatively neutral and will be looking to add duration in the months ahead. As we move into the second half of the year, it will be time to start locking in yields on the longer end.”
Bloomberg
July 14, 2023
Federal Reserve Governor Christopher Waller said he expects the US central bank will need to raise interest rates twice more this year to bring inflation down to its target. “I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target,” Waller said.
Capital Economics
July 11, 2023
We still think a mild recession over the coming quarters is more likely than not. As the economy weakens and the downward trend in core inflation gathers pace, we think interest rates will be cut more quickly than markets are pricing in. We expect GDP growth to slow from 1.3% this year to only 0.4% in 2024, before looser monetary policy drives a recovery to 2.0% in 2025.