10 Things You Need To Know: June 28, 2022
Key data releases this week include: durable goods orders (Mon), pending home sales (Mon), FHFA House Price Index (Tue), consumer confidence (Tue), Q1 GDP revision (Wed), personal income and spending (Thu), PCE deflator (Thu), and ISM Manufacturing Index (Fri).
Bloomberg
June 27, 2022
A gauge of US pending home sales unexpectedly rose in May for the first time in seven months. The National Association of Realtors’ index of pending home sales increased 0.7% from a month earlier to 99.9. Economists expected a 4% drop, per the median forecast. Compared with a year earlier, contract signings were down by 12% on an unadjusted basis.
Haver
June 23, 2022
Initial claims for unemployment insurance filed in the week ended June 18 declined by 2,000 to 229,000 (-46.0% y/y) from 231,000 in the previous week. Weekly claims have been trending up modestly over the past few months but remain historically quite low and indicative of still tight labor-market conditions. The Action Economics Forecast Survey expected 225,000 claims for the latest week. The four-week moving average of initial claims rose to 223,500.
BBC, Financial Times
June 22, 2022
UK inflation rose to 9.1% in May, the highest rate among the Group of Seven nations, with the Bank of England warning of a probable 11% peak in October and reports emerging that rising prices are affecting even wealthier households. In response, rail workers have started a series of strikes, with teachers and health workers mulling similar action.
Barron’s
June 27, 2022
If inflation pressures are at a peak, thank the stock market, according to Doug Ramsey, CIO at the Leuthold Group. “Major” drops in the S&P 500—which he found to be 19% based on data from the past 55 years, just shy of the arbitrary 20% definition of a bear market—have “usually unleashed a powerful, disinflationary impulse,” Ramsey wrote in a client note.
Barron’s
June 27, 2022
Given disinflationary signals from bonds and commodities, fed-funds futures anticipate a peak of 3.5% to 3.75% hit by the middle of next year, lower than the 3.8% end-of-2023 projections of Fed policy makers.
Barron’s
June 27, 2022
If the central bank can do little to affect energy prices because demand is largely inelastic, and if political interventions such as a gas-tax holiday remain focused on preserving demand instead of boosting supply, energy prices, and thus inflation, will remain stubbornly high.
The Wall Street Journal
June 22, 2022
The Federal Reserve is “strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” Chair Jerome Powell has testified before the Senate banking committee as part of a two-day semiannual report on monetary policy. However, Powell has acknowledged that achieving a soft landing “is going to be very challenging” and that a recession is possible. “It’s not our intended outcome at all, but it’s certainly a possibility,” Powell said.
Financial Times, Reuters
June 23, 2022, June 22, 2022
Federal Reserve Governors Michelle Bowman and Christopher Waller have indicated the central bank might raise interest rates by 75 basis points again next month. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, has made a similar statement but has suggested that subsequent increases not be as steep.
Capital Economics
June 24, 2022
If demand concerns intensify, further falls in commodity prices could be in store. However, we don’t think there is a great deal of room for prices to fall in the near term for a couple of reasons. First, energy prices will remain historically high due to supply constraints. Second, stocks of many commodities, particularly industrial metals, are low, which will further underpin prices. And finally, China’s economy should recover somewhat in the second half of this year.