10 Things You Need To Know: July 5, 2022

Key data releases this week include: factory orders (Tue), ISM Services Index (Wed), FOMC meeting minutes (Wed), JOLTS Job Openings (Wed), and nonfarm payrolls (Fri).

Haver

June 28, 2022

The Federal Housing Finance Agency (FHFA) House Price Index increased 1.6% during April (18.8% y/y) following a 1.6% increase in March. The FHFA noted that “The inventory of homes on the market remains low, which has continued to keep upward pressure on sales prices. Increasing mortgage rates have yet to offset demand enough to deter the strong price gains.”

Haver

June 30, 2022

Personal income increased 0.5% y/y (5.3% y/y), the same monthly rise as in April. The May gain matched the expectation from the Action Economics Forecast Survey. Personal consumption expenditures edged up 0.2% m/m (8.5% y/y) in May following a 0.6% m/m increase in April (initially 0.9%). The Actions Economics Forecast Survey had looked for a 0.4% monthly increase.

Haver

June 29, 2022

U.S. real GDP fell 1.6% (+3.5% y/y) during Q1’22, revised from the second estimate of a 1.5% weakening issued last month. The decline followed a 6.9% rise during Q4’21 and was the only quarter of negative growth since the end of the recession in Q2’20. The Action Economics Forecast Survey expected a 1.4% decline.

Haver

July 1, 2022

The ISM U.S. manufacturing PMI fell to 53.0 in June from 56.1 in May and 55.4 in April, according to the Institute for Supply Management. The June reading, below the high of 63.7 in March 2021 and 60.9 in June 2021, was the lowest level since June 2020. The Action Economics Forecast Survey expected 55.0 for June.

Reuters

June 30, 2022

In the face of growth slowing in China, interest rates rising, and inflation accelerating, World Bank Chief Economist Carmen Reinhart said she is skeptical that the big, developed economies can avoid falling into recession. “In the mid-1990s, under (Fed) Chairman (Alan) Greenspan, we had a soft landing, but the inflation concern at the time was around 3%, not around 8.5%,” she said.

Barron’s

July 4, 2022

“Central banks will not have the stomach to keep policy tight enough for long enough to squeeze inflation out of the system,” Martin Barnes, the recently retired chief economist at BCA Research, predicts. Barnes sees inflation settling into a 3%-4% range, with forays into the 5% area. That will lead to an environment of stagflation. Growth won’t be weak enough to suppress inflation and not strong enough for the Fed to keep a restrictive stance.

Barron’s

July 4, 2022

The markets are still pricing in another 75-basis-point rise in the federal-funds target range, from the current 1.50%-1.75%, at the Fed meeting later this month. But they’re increasingly anticipating rate cuts next year—even though Fed officials expect inflation to remain above their 2% goal through 2024.

Financial Times

July 3, 2022

President Joe Biden might announce a cutback of tariffs on Chinese imports as early as this week, sources say. The issue reportedly has been a subject of discussion between Biden and senior advisers for weeks, and a spokesperson says the White House aims to ensure tariffs are in line with “economic and strategic” priorities and do not jeopardize consumer prices.

The Wall Street Journal

July 4, 2022

A drop in the price of commodities such as wheat, corn, and copper during the second quarter has analysts predicting inflation is slowing. Meanwhile, investors have pulled about $125 billion from commodities this year, with about $15 billion pulled from commodity futures during the week ending June 24, JPMorgan Chase strategist Tracey Allen says.