In July of last year, we highlighted the historically fast pace of inventory accumulation over a period when producer prices were elevated. Additionally, over the last two years, we have observed a record-setting stretch of negative real average hourly earnings growth on a y/y basis. We have continued to highlight that the negative consumer setup...Read More

Last week, we highlighted the deceleration in retail sales and companies reporting a slowdown in consumer demand. In the current environment, where the trend in macro data has been negative, it’s important to also take a micro approach by looking at what individual businesses are experiencing and guiding towards. Over the next few weeks, we...Read More

At the beginning of the year there was a lot of conversation around a resilient consumer as the Personal Consumption Expenditures component of GDP accelerated. After that release, we highlighted the intra-quarter downward trend in that measure using the monthly series. More recently, we have seen spending trend lower in the monthly U.S. Census Bureau...Read More

On Wednesday last week, the Federal Reserve raised its target rate by twenty-five basis points to 5.00% – 5.25%. The pace of the current hiking cycle would suggest economic growth and inflation are accelerating. However, market-based indicators of those measures do not confirm that view. If long-term expectations for economic growth and inflation were accelerating,...Read More

Going back to January, we expected to see a continued slowdown in economic activity. We observed a deceleration across consumption, production, and order growth throughout 2022 and noted we would likely see a deceleration in GDP if that trend were to hold. The q/q seasonally-adjusted annualized rate (SAAR) came in at 1.1%, a deceleration from...Read More

Consumer prices have mostly decelerated from their peak growth rates globally. The y/y percent change in the global quarterly aggregate has slowed compared to the prior quarter. On a rate of change basis, prices have slowed sequentially since 3Q22, and 1Q23 was the fastest deceleration since 2Q09.   Source: Macrobond.  Most countries peaked between the...Read More

Commercial bank lending is a key driver of real economic growth. Historically, banks tend to tighten lending practices in periods of economic weakness. There is a reflexive and causal aspect to these setups where lending slows because the economy is slowing, and the economy slows more because lending is slowing. If commercial bank lending declines,...Read More

Since the bank failures in March, the conversation around a possible recession has shifted more firmly toward ‘when’ not ‘if’. However, there are Fed officials and financial commentators noting the recent labor market data as an indicator for strength in the economy. “Despite the slowdown in growth, the labor market remains extremely tight. The unemployment...Read More

Since the start of 2022, the federal funds target range has moved from 0-0.25% to 4.75-5%, and the Consumer Price Index (CPI) year-over-year growth rate made a high of 9.0% in June 2022. While 4.75-5% is a lower absolute level than prior rate hiking cycles, 4.75% is the most that has been added to the...Read More

Access to high-quality liquid assets (HQLAs), such as short-term government securities like U.S. Treasury Bills, is a critical component to bank lending activity. Banks need collateral for several reasons, but we tend to track demand for collateral because of its importance to banks when it comes to credit formation. Banks’ ability and willingness to lend...Read More