Weekly Surveillance Note

Summary Views

  • Economic data this week suggests that Fed policy is impacting interest-sensitive sectors (housing, consumer durables, and business spending on equipment and structures)

  • While Q2 GDP print came in negative, we don’t see the US currently in recession territory, as consumption grew by 1% -- we’ll create a follow up post to discuss

  • Revisions: no change for GDP estimate, no change for inflation estimate, lower rate outlook (based upon FOMC meeting results)

Our Takeaway

  • Q2 data for GDP was not bad enough for us to call it a recession –especially given the strong labor market, strong real growth in consumer spending, and negative impacts of SPR release (detracts from GDP) and reductions in inventories

  • Q3 – Q4 may see an improving dynamic should inflation materially move lower; however, we do not see this as likely without a steep recession occurring

  • Balance of risk for August is negative, given the nature of data and lagged effects in both inflation and growth indicators

  • With back-to-back 75bp hikes, we see the current level of rates at around neutral for the US

  • Financial conditions improved after last weeks FOMC meeting, which may end up countering the Feds job

  • We do not believe the Fed will cut rates this year, but we do expect a pause before ending the year near 3.00% on the Fed Funds Rate

Upcoming Events

  • For next week, we’ll be focused on earnings data and PMI data

  • We expect the Fed to talk tough on inflation through the month

  • While there seems to be an improving situation in equities, we think the real signal for higher equity markets will be improving new orders (from PMI report)

To access the full report, including data, please click below:

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