10 Things You Need to Know: May 2, 2023
Key Data Points
Key data releases this week include: ISM Manufacturing (Mon), JOLTS Jobs Openings (Tue), factory orders (Tue), ISM Services (Wed), FOMC rate decision (Wed), nonfarm productivity (Thu), and nonfarm payrolls (Fri).
May 1. 2023
The U.S. ISM manufacturing index rose to 47.1 during April from 46.3 in March, according to the Institute for Supply Management. It stood below the break-even level of 50 for the sixth straight month and it remained under the peak of 63.8 in March 2021. The figure remained at the lowest level since May 2020. The Action Economics Forecast Survey expected 46.5 in April.
April 25, 2023
House prices rose 0.5% during February after increasing 0.1% in January, revised from 0.2% according to the Federal Housing Finance Agency (FHFA) House Price Index. The February increase was the strongest in nine months. Nevertheless, the 4.0% y/y increase was well below its high of 19.2% in February 2022.
April 27, 2023
Real GDP grew 1.1% at an annual rate (1.6% y/y) during Q1’23 following a 2.6% Q4 rise. It was the weakest rise since negative growth during Q2’22. The latest figure compared to expectations for a 2.1% gain in the Action Economics Forecast Survey. A reduction of inventories subtracted 2.26 percentage points from GDP growth last quarter. Real personal consumption expenditures strengthened 3.7% (2.3% y/y) following 1.0% growth in Q4.
The PCE chain price index increased 0.1% (4.2% y/y) in March following a 0.3% gain. The core index excluding food & energy prices rose 0.3% (4.6% y/y), the same as in February. Goods prices slipped 0.2% (+1.6% y/y) following a 0.1% uptick while services prices gained 0.2% (5.5% y/y), down from 0.4% in February and 0.6% in January.
April 26, 2023
Our China Activity Proxy (CAP) shows that the economy bounced back rapidly in Q1, with growth since the start of the pandemic now broadly back in line with the official GDP data. And while the recovery will slow, the strong start to the year has brightened the prospects for 2023 as a whole.
May 1, 2023
Just because the market is up doesn’t mean most stocks are participating. Less than a third of stocks in the S&P 500 have outperformed the index, the fewest at this point in the year since 1999, says Desh Paramagneticlike, head of microstrategy at Jefferies.
Some Federal Reserve officials, including Chair Jerome Powell, have raised concerns over the risks rising wages pose to inflation. However, two Fed officials — Federal Reserve Bank of Chicago President Austan Goolsbee and St. Louis Fed President James Bullard, who are normally on opposite ends of the policy debate – have expressed skepticism that wages are driving price increases.
April 26, 2023
The Fed looks set to deliver a final 25bp rate hike on Wednesday, taking the fed funds target range to a peak of 5.00%-5.25%. Although the accompanying statement may leave open the possibility of more tightening, we suspect the Fed’s next move will be a rate cut, as economic weakness helps drive inflation lower over the second half of this year.
April 29, 2023
More financial firms are recommending diversification beyond the traditional portfolio of 60% stocks and 40% bonds. While stocks and bonds are unlikely to decline in tandem to the extent they did last year, bond-market volatility and other factors call for alternative strategies.