Month-In-Review: April 2024

The U.S. economy cooled across the first three months of the year with topline GDP slowing to a 1.6% pace.?Investors, however, easily looked past first-quarter weakness largely segmented to inventories, trade, and government spending, focusing instead on a less favorable inflationary environment with the core PCE deflator accelerating to a three-quarter high, pushing up longer dated yields to levels not seen since November.?For the Fed, with cost indices gaining momentum across the board, the Committee’s outlook for three interest rate cuts in 2024 has rapidly become outdated, with the conversation of reengagement back on the table. For now, the Fed remains on the sidelines waiting for further disinflationary evidence, but at what point is the Committee willing to not just delay rate cuts, but potentially reengage in additional rate?hikes? At what point will the Committee concede it likely stopped short of the needed level of rates to meaningfully slow price pressures??

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Market Activity and Commodities

·?????? Equities – Stocks ended lower in April, marking the worst month since September and following five consecutive monthly gains. Beginning at 5,254.35, the S&P 500 fell 4.2% in April, closing at 5,035.69. Additionally, the Nasdaq dropped 4.4% in April, closing at 15,657.82 after hitting an all-time high on April 11. The Dow, meanwhile, plunged 5.0%, declining from 39,807.37 to 37,815.92 in April. Since the start of the year, however, the S&P 500 is up 5.7%, the Nasdaq gained 4.3% and the Dow rose 0.3%.

·?????? Treasuries – Treasury yields rose in April after finishing mixed in March. The 2-year Treasury yield closed out April at 5.04%, up 42bps since March’s close and the highest level since November. The 10-year Treasury yield, meanwhile, increased 48bps from 4.20% to 4.68% in April.

·?????? Commodities??????

o?? (Apr 15) – Oil prices were in focus as investors attempt to gauge the political impact of the war in the Middle East as Iran launched an attack on Israel. Crude traded down from earlier peak levels nearer $88 to $84.92 a barrel.

National Growth and Outlook

• NFIB Small Business Optimism (Apr 9) – The NFIB Small Business Optimism Index unexpectedly fell from 89.4 to 88.5 in March, the lowest reading in more than 11 years. According to the median forecast, the small business index was expected to rise to a reading of 89.9 at the end of the first quarter. In the details of the report, 28% of firms reported higher selling prices, up from 21% in February, while only 11% of firms reported plans to hire, down from 12% the month prior. Additionally, 37% of firms reported that they currently have positions they are not able to fill, unchanged from 37% in February.

·?????? Leading Index (Apr 18) – The Leading Index fell 0.3% in March, more than the 0.1% decrease expected and the largest monthly decline since January. Over the past 12 months, the Leading Index dropped 5.5%, the 21st consecutive annual decline.

·?????? Chicago Fed National Activity Index (Apr 22) – The Chicago Fed National Activity Index unexpectedly rose from 0.09 to a reading of 0.15 in March, a four-month high. The Chicago Fed Index draws on 85 economic indicators; a reading below zero indicates below-trend growth in the national economy and a sign of easing pressures on future inflation. In March, 50 of the 85 monthly individual indicators made positive contributions, while 35 made negative contributions.

·?????? GDP (Apr 25) – GDP rose 1.6% on an annualized basis in the preliminary Q1 report, the weakest quarterly pace since Q2 2022. According to the median forecast, activity January to March was expected to rise 2.5%. In the details of the report, personal consumption rose 2.5% in the preliminary Q1 report, less than the 3.0% gain expected and down from a 3.3% increase the quarter prior. Goods consumption, however, declined outright, falling 0.4%, due to a 1.2% drop in durables consumption. Nondurables consumption was flat (0.0%) in the preliminary Q1 report following a 2.9% gain the quarter prior. Services consumption, meanwhile, rose 4.0% in the first quarter, the largest quarterly gain since Q3 2021. Gross private investment, a gauge of business spending, increased 3.2%, a two-quarter?high. Fixed investment rose 5.3% in the preliminary Q1 report, the largest quarterly gain since Q1 2022. Nonresidential investment, including office buildings and factories, increased 2.9%, due to a 5.4% gain in intellectual property investment, and a 2.1% increase in equipment investment in the preliminary Q1 print. Structures investment, on the other hand, fell 0.1% in the preliminary first-quarter report. Residential investment, meanwhile, jumped 13.9%, marking the largest quarterly increase since Q4 2020. On the trade side, exports rose 0.9%, while imports gained 7.2% in the preliminary Q1 report. Finally, government consumption rose 1.2%. National defense spending increased 0.3%, and state and local spending rose 2.0% in the preliminary first-quarter report. On the other hand, federal spending fell 0.2%, the largest quarterly decline since Q2 2022. Excluding trade, real gross domestic purchases sales rose 2.4% in the preliminary Q1 report following a 3.1% increase in Q4. Meanwhile, excluding trade and inventories, real final sales to domestic purchasers rose 2.8% in the preliminary first-quarter report following a 3.5% gain in the fourth quarter.

Employment

• ADP Private-Sector Employment Report (Apr 3) – ADP reported that private-sector employment rose by 184k in March, surpassing the 150k gain expected and following an upwardly revised 155k gain the month prior.
• JOLTS (Apr 2) – The number of job openings according to JOLTS – the Job Openings and Labor Turnover Survey – rose 8k from 8.748M (revised down from 8.863M) to 8.756M in February, a two-month high. According to the median forecast, there were 8.73M expected job openings. As of February, the job openings rate remained at 5.3% with 1.4 available jobs for each unemployed person.
• Jobless Claims (Apr 4) – Initial jobless claims rose from 212k to 221k in the week ending March 30, the highest since January. The four-week average increased from 212k to 214k. Continuing claims, or the total number of Americans claiming ongoing unemployment, however, fell from 1.81M to 1.79M in the week ending March 23. (Apr 11) – Initial jobless claims declined from 221k to 211k in the week ending April 6, a five-week low. The four-week average, meanwhile, fell slightly from 215k to 214k. Continuing claims, or the total number of Americans claiming ongoing unemployment, however, climbed from 1.79M to 1.82M in the week ending March 30.? (Apr 18) – Initial jobless claims unexpectedly remained at 212k in the week ending April 13, now marking the second consecutive week at 212k after last week’s 211k was revised up to 212k. The four-week average, meanwhile, remained at 215k for the third consecutive week. Continuing claims, or the total number of Americans claiming ongoing unemployment, however, ticked up from 1.810M to 1.812M in the week ending April 6. (Apr 25) – Initial jobless claims unexpectedly fell from 212k to 207k in the week ending April 20, a two-month low. According to the median forecast, jobless claims were expected to rise to 215k. The four-week average declined from 215k to 213k.?Continuing claims, or the total number of Americans claiming ongoing unemployment, fell from 1.796M to 1.781M in the week ending April 13.
• Nonfarm Payrolls (Apr 5) – Nonfarm payrolls rose by 303k in March, surpassing the 214k gain expected?and posting the largest monthly gain since May. The three-month average, meanwhile, increased from 272k to 276k. February payrolls were revised down from a 275k gain to a 270k increase. However, with additional revisions to previous months, the?overall change in nonfarm payrolls (March data + net revisions) was 325k.?Private payrolls rose by 232k in March following a 207k gain in February.?Goods-producing payrolls increased by 42k, due to a 39k gain in construction payrolls. Manufacturing payrolls, meanwhile, were unchanged in March. Private service-producing payrolls rose by 190k in March following a similar gain in February. Education and health payrolls led the gain in service-producing payrolls in March, rising 88k following an 82k increase the month prior. Leisure and hospitality payrolls rose 49k, and trade and transport payrolls gained 27k in March, due to an 18k rise in retail trade payrolls. Professional and business services payrolls rose 7k, despite a 1k fall in temporary help payrolls, information payrolls were unchanged, and financial payrolls increased by 3k in March. Finally, government payrolls rose by 71k in March following a 63k gain in February.
• Participation Rate (Apr 5) – The labor force rose by 469k following a 150k rise in February. Therefore, the labor force participation rate rose from 62.5% to 62.7% in March, a four-month high. According to the median forecast, the participation rate was expected to rise to 62.6%.
• Unemployment Rate (Apr 5) – Household employment rose by 498k in March following a 184k decline the month prior. With a 469k rise in the labor force, the unemployment rate ticked down from 3.9% to 3.8% in March, as expected and a two-month low. March’s 3.8% unemployment rate marks more than two years below 4%, the longest stretch since the 1960s.
• Average Hourly Earnings (Apr 5) – Average hourly earnings rose 0.3% in March, as expected and following a 0.2% increase in February. Year-over-year, wages rose 4.1%, down however from a 4.3% gain in February.
• Average Weekly Hours (Apr 5) – The average workweek ticked up from 34.3 to 34.4 hours in March.

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Consumer Activity and Confidence

• Vehicle Sales (Apr 2) – Total vehicle sales unexpectedly fell from 15.81m to a 15.49m unit pace in March, a two-month low. According to the median forecast, vehicle sales were expected to rise to a 15.85m unit pace. Over the past 12 months, vehicle sales jumped 6.3%, the largest annual gain since December.
• Consumer Credit (Apr 5) – Consumer credit increased by $14.13 billion in February, falling short of the $15.0 billion gain expected. Total credit outstanding, meanwhile, rose to a record $5.05 trillion. Revolving credit, including credit cards, rose $11.3 billion, and non-revolving credit, including car loans and tuition, climbed $2.9 billion in February.
• Retail Sales (Apr 15) – Retail sales rose 0.7% in March, surpassing?the 0.4% gain expected and following an upwardly revised 0.9% increase the month prior. Year-over-year, retail sales climbed 4.0% in March, the most in three months. Car sales fell 0.7% in March following a 2.5% increase the month prior, and gasoline stations sales increased 2.1%. Excluding autos, retail sales rose 1.1% in March and climbed 4.3% over the past 12 months. Excluding autos and gasoline, retail sales rose 1.0% and increased 4.9% year-over-year. Finally, excluding food, autos, building materials and gasoline station sales, control group sales gained 1.1% in March and rose 5.2% over the past 12 months. In the details of the report, non-store retailer sales gained 2.7%, miscellaneous sales rose 2.1%, and general merchandise sales increased 1.1%, despite a 1.1% decline in department store sales. Also, building materials sales increased 0.7%, food and beverage sales climbed 0.5%, and eating and drinking sales increased 0.4% in March as did health and personal care sales. On the other hand, furniture sales fell 0.3%, electronics sales declined 1.2%, clothing sales decreased 1.6%, and sporting goods sales fell 1.8% at the end of the first quarter.
• University of Michigan Consumer Sentiment (Apr 12) – The University of Michigan Consumer Sentiment Index dropped from 79.4 to a reading of 77.9 in the preliminary April report, a two-month low. In the details of the report, a gauge of current conditions declined from 82.5 to 79.3, a four-month low, and a gauge of future expectations ticked lower from 77.4 to 77.0 in the preliminary April report, the lowest reading since February. (Apr 26) – The University of Michigan Consumer Sentiment Index was revised down from 77.9 to 77.2 in the final April report, a two-month low. In the details of the report, a gauge of current conditions was revised down from 79.3 to 79.0, and a gauge of future expectations was revised lower by one point to a reading of 76.0 in the final April print, still the lowest reading since February.
• Consumer Spending and Income (Apr 26) – Personal income rose 0.5% in March, as expected and following a 0.3% increase in February. Consumer spending, meanwhile, increased 0.8% at the end of the first quarter, surpassing the 0.6% gain expected and following a 0.8% gain in February. Year-over-year, consumer spending increased 5.8%, the strongest annual gain in three months, while personal income rose 4.7% in March following a similar rise in February. Adjusting for inflation, real consumer spending rose 0.5%, while real income increased 0.2% in March following a 0.1% decline in February. Over the past 12 months, real spending rose 3.1%, a three-month high, while real disposable personal income gained 1.9%, the smallest gain in five months.
• Consumer Confidence (Apr 30) – Consumer confidence, according to the Conference Board, dropped from 103.1 (revised down from 104.7) to 97.0 in April, the lowest reading since July 2022. According to the median forecast, confidence was expected to decline to 104.0. In the details of the report, a gauge of current conditions declined from 146.8 to 142.9, and a gauge of future expectations fell 7.6 points to 66.4 in April, the lowest reading since July 2022.

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Inflation

• CPI (Apr 10) – The Consumer Price Index (CPI) rose 0.4% in March, a tenth of a percentage point more than expected and following a 0.4% gain in February. Year-over-year, consumer prices rose 3.5%, slightly more than the 3.4% annual increase expected according to the median forecast, and the largest annual gain since September. Food prices rose 0.1%, while energy prices increased 1.1% in March following a 2.3% gain in February. Excluding food and energy costs, the core CPI rose 0.4% in March, topping the 0.3% gain expected and following a 0.4% increase the month prior. Year-over-year, the core CPI increased 3.8% for the second consecutive month. According to the median forecast, the CPI was expected to rise 3.7% at the end of Q1. In the details of the report, transportation prices rose 0.8%, despite a 0.2% decline in new vehicle prices. Used cars and trucks prices, meanwhile, fell 1.1% and airline fares dropped 0.4% at the end of the first quarter, the first monthly decline in four months. Shelter prices, meanwhile, rose 0.4% with a similar gain in the OER. Also, medical care prices climbed 0.5%, other goods and services costs rose 0.4%, and commodities prices increased 0.1% at the end of Q1. On the other hand, education and communication prices were flat (0.0%), while recreation prices fell 0.1%. Another iteration of inflation, the supercore, defined as core services excluding housing, rose 0.7% in March, a two-month high. Over the past 12 months, the supercore jumped 4.8%, the largest annual gain since April 2023.
• PPI (Apr 11) – The Producer Price Index (PPI) rose 0.2% in March, slightly less than the 0.3% gain rise expected and following a 0.6% increase the month prior. Year-over-year, producer prices rose 2.1% in March, up from the 1.6% gain in February and the largest annual increase in nearly a year. Food prices rose 0.8% following a 1.1% gain the month prior, while energy prices dropped 1.6% in March, the largest monthly decline since November. Excluding food and energy costs, the core PPI rose 0.2%, as expected and following a 0.3% gain in February. Year-over-year, the core PPI increased 2.4% in March, up from the 2.1% annual gain in February and the largest annual increase since August 2023. Additionally, services costs rose 0.3%, due to a 0.8% rise in transportation and warehousing costs and a 0.3% gain in trade costs.
• PCE (Apr 26) – The Personal Consumption Expenditures (PCE) Index rose 0.3% in March, as expected and following a 0.3% rise in February. Year-over-year, headline inflation increased 2.7%, slightly more than the 2.6% gain expected and up from the 2.5% annual gain in February. Excluding food and energy, the core PCE rose 0.3% in March, as expected and following a similar gain in February. Over the past 12 months, core inflation increased 2.8%, slightly more than the 2.7% increase expected and following a similar gain in February.

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Manufacturing and Production Activity

• ISM Manufacturing (Apr 1) – The ISM Manufacturing Index rose from 47.8 to 50.3, surpassing the expected gain to a reading of 48.3 and moving into expansionary territory (a reading above 50) for the first time since September 2022. In the details of the report, prices paid increased from 52.5 to 55.8 in March, averaging 50.2 in the past six months, production rose 6.2 points to 54.6, the highest reading since June 2022, new orders increased from 49.2 to 51.4, and inventories climbed from 45.3 to 48.2 at the end of Q1. Also, employment ticked up from 45.9 to 47.4 in March, albeit still marking the sixth consecutive month in contractionary territory. On the other hand, backlog of orders remained at a reading of 46.3 for the second consecutive month, while supplier deliveries fell from 50.1 to 49.9, and customer inventories dipped from 45.8 to 44.0 in March, a two-month low.
• ISM Services (Apr 3) – The ISM Services Index unexpectedly fell from 52.6 to a reading of 51.4 in March, a three-month low, although still a reading above 50 and marking a continued expansion in the service sector. According to the median forecast, the index was expected to rise to 52.8 at the end of the first quarter. In the details of the report, employment ticked up from 48.0 to 48.5, averaging 48.6 over the past six months. On the other hand, new orders decreased from 56.1 to 54.4 in March, a three-month low, and supplier deliveries declined from 48.9 to 45.4. Also, prices paid dropped 5.2 points to 53.4, backlog of orders slipped by 5.5 points to a reading of 44.8, and the change in inventories declined from 47.1 to 45.6 at the end of the first quarter.
• Empire Manufacturing (Apr 15) – The Empire Manufacturing Index rose from a reading of -20.9 to a reading of -14.3 in April, a two-month high albeit the fifth consecutive month of a negative print. According to the median forecast, the index was expected to rise to -5.2 at the start of the second quarter. In the details of the report, prices paid rose five points to 33.7, while prices received decreased from 17.8 to 16.9 in April, a three-month low. Additionally, new orders rose one point to a reading of -16.2, the number of employees increased by two points to -5.1, averaging -5.4 over the past six months, and inventories gained from -12.9 to +3.4, a five-month high. On the other hand, the six-month general business conditions index declined from 21.6 to 16.7 in April, a four-month low.
• Industrial Production (Apr 16) – Industrial production rose 0.4% in March, as expected and following a similar gain in February. Over the past 12 months, production was flat (0.0%) following two consecutive months of an annual decline.
• Capacity Utilization (Apr 16) – Capacity utilization increased from 78.2% to 78.4%, slightly less than the gain to 78.5% expected albeit a two-month high.
• Philly Fed Business Outlook Survey (Apr 18) – The Philly Fed Index unexpectedly jumped from 3.2 to a reading of 15.5 in April, a two-year high. According to the median forecast, the index was expected to decline to a reading of 2.0. In the details of the report, prices paid surged from 3.7 to 23.0, a four-month high and averaging 15.5 over the past six months, and prices received moved up 0.9 points to a reading of 5.5, a two-month high. Also, new orders climbed from 5.4 to 12.2, the highest reading since May 2022. On the other hand, the number of employees inched lower from -9.6 to -10.7 in April, now marking the sixth consecutive month in negative territory.
• Richmond Fed Manufacturing (Apr 23) – The Richmond Fed Manufacturing Index rose from -11 to a reading of -7 in April, the highest reading in two months, albeit the sixth consecutive month of a negative print. In the details of the report, the volume of new orders rose from -17 to a reading of -9, shipments ticked up four points to -10, and capacity utilization gained from -21 to -5, a two-month high. On the other hand, the number of employees slipped two points to -2, the lowest reading since January, and wages declined from +23 to +16 in April.
• Durable Goods (Apr 24) – Durable goods orders rose 2.6% in March, slightly more than the 2.5% gain expected and following a 0.7% increase in February (revised lower from the 1.3% increase initially reported). Year-over-year, headline orders rose 1.3% in March, down from the 2.0% annual increase in February. Transportation orders rose 7.7% following a 1.8% gain the month prior, due to a 30.6% jump in civilian aircraft orders and a 2.1% rise in vehicles and parts orders. Excluding transportation, durable goods orders rose 0.2% in March and increased 1.0% over the past 12 months following a similar annual increase in February. In other details, machinery orders rose 0.1%, as did electrical equipment orders, fabricated metals orders gained 0.2%, and computers and electronics orders rose 0.8% in March. On the other hand, primary metals orders fell 0.5% at the end of the first quarter, a two-month low.
• Capital Goods (Apr 24) – Capital goods orders rose 6.0% in March following a 0.3% increase the month prior. Nondefense capital goods orders, meanwhile, climbed 5.4% following a 2.7% rise in February. Capital goods orders excluding aircraft and defense – a proxy for business investment – rose 0.2% in March following a 0.4% gain in February. Year-over-year, business investment increased 1.1%, the largest annual increase since November.
• Kansas City Fed Manufacturing (Apr 25) – The Kansas City Fed Index unexpectedly ticked down one point to -8 in April, the lowest reading in three months and now marking the eighth consecutive month of a negative print. According to the median forecast, the regional Fed index was expected to rise two points to a reading of -5 at the start of the second quarter. In the details of the report, employment plunged from +6 to -2, shipments dropped from -5 to -11, and production declined four points to -13 in April. On the other hand, the volume of new orders rose from a reading of -17 from to -6, prices paid gained one point to +18, and the six-month outlook ticked up one point to +2 in April.
• Dallas Fed Index (Apr 29) – The Dallas Fed Manufacturing Activity Index ticked down from -14.4 to a reading of -14.5 in April, the lowest reading in three months and the 24th consecutive month of a negative print. According to the median forecast, the index was expected to rise to a reading of -11.2 at the start of the second quarter. In the details of the report, capacity utilization rose from -5.7 to +4.2, production gained from -4.1 to +4.8, and new orders increased from to -11.8 to -5.3, averaging a reading of -9.1 over the past six months. Additionally, the six-month general business outlook index rose from +1.3 to +7.9 in April, the highest reading since February 2022. On the other hand, employment slipped from a reading of +1.5 to -0.1, a three-month low.
• Chicago PMI (Apr 30) – The Chicago PMI unexpectedly declined from 41.4 to a reading of 37.9 in April, the lowest reading since November 2022. According to the median forecast, the index was expected to rise to 45.0 at the start of the second quarter. In the details of the report, prices paid rose, signaling expansion, while new orders, employment, inventories, supplier deliveries and order backlogs fell, signaling contraction.

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Housing Market Activity

• Construction Spending (Apr 1) – Construction spending unexpectedly declined 0.3% in February following a 0.2% decrease at the start of the year and marking the largest monthly drop since October 2022. According to the median forecast, construction spending was expected to rise 0.7%. Over the past 12 months, construction spending rose 10.7%, the smallest annual gain since September.
• NAHB Housing Market Index (Apr 15) – The NAHB Housing Market Index remained at a reading of 51 in April for the second consecutive month, as expected and the highest reading since July.
• Building Permits (Apr 16) – Building permits fell 4.3% in March, pulling the annual pace down from 1.52M to 1.46M, an eight-month low. Building permits were expected to decline 0.9% in March, according to Bloomberg. Single-family permits fell 5.7% and multi-family permits slipped 1.2%. Year-over-year, building permits climbed 1.5% in March, the weakest annual pace in five months.?
• Housing Starts (Apr 16) – Housing starts dropped 14.7% in March, pulling the annual pace down from 1.55M to 1.32M, a seven-month low. Starts were expected to decline 2.4%, according to the median forecast on Bloomberg. Single-family starts fell 12.4%, and multi-family starts plunged 21.7%. Year-over-year, housing starts declined 4.3% in March, the largest annual drop since September.
• Existing Home Sales (Apr 18) – Existing home sales declined 4.3% in March from 4.38M to a 4.19M unit pace, a two-month low. According to the median forecast, existing home sales were expected to decline 4.1% at the end of the first quarter. Year-over-year, existing home sales fell 3.7% in March, the weakest annual pace since December and marking the 32nd consecutive month of decline. Due to a fall in sales, the months’ supply of existing homes ticked higher from 2.9 months to 3.2 months, averaging 3.0 months over the past three months. Additionally, from a price standpoint, the median cost of a previously owned home climbed 4.8% in March from a year earlier to $394k, a seven-month high.??
• New Home Sales (Apr 23) – New home sales jumped 8.8% in March from 637k to 693k, the highest level since September with sales rising in all four regions. According to the median forecast, new home sales were expected to rise just 0.9%. Over the past 12 months, new sales increased 8.3%, the strongest annual gain in five months. Due to a rise in new sales, the months’ supply of new homes declined from 8.8 to 8.3 months. From a price standpoint, the median cost of a newly constructed home rose 6.0% from the month prior to $431k, the highest since August. Year-over-year, however, new home prices fell 1.9% in March, the seventh consecutive month of an annual decline in prices.??? ???? ?
• Pending Home Sales (Apr 25) – Pending home sales rose 3.4% in March, well surpassing the 0.4% gain expected. Over the past 12 months, however, pending home sales fell 4.5%, marking the 28th consecutive month of decline.
• S&P/CS 20 City & National Index (Apr 30) – The S&P Case-Shiller 20 City Home Price Index rose 0.61% in February, well surpassing the 0.10% increase expected and the largest monthly gain in four months. The National Home Price Index increased 0.41%, also marking the largest monthly gain since October. Over the past 12 months, the 20-city index increased 7.3%, the biggest annual gain since October 2022, and the national index rose 6.4%, the largest annual increase since November 2022.

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Trade and Currency

• U.S. Dollar (Apr 30) – The U.S. dollar increased for the fourth consecutive month in April, marking the longest stretch of gains since the third quarter of 2022 as traders continued to push out expectations for the first Fed rate cut following an acceleration in inflation data. The dollar rose 1.7% to $106.24.
• Trade Balance (Apr 4) – The U.S. trade deficit widened for a third consecutive month from $67.6b to $68.9b in February, the largest in almost a year. According to the median forecast, the deficit was expected to widen to $67.6b. The value of imports increased from $325b to $332b due to gains in cell phones, food, and motor vehicles. Meanwhile, the value of exports rose from $257b to $263b in February, reflecting shipments of civilian aircrafts and oil.
• Import & Export Prices (Apr 12) – Import prices rose 0.4% in March, a tenth of a percentage point more than expected, while export prices increased 0.3%, as expected. Much of the rise, however, in import prices was attributed to rise in petroleum. Excluding petroleum, import prices were flat (0.0%). Over the past 12 months, import prices rose 0.4%, the first annual gain since January 2023, while export prices dropped 1.4%, the 14th consecutive month of decline.

Monetary Policy, Reports, and Commentary

• Atlanta Fed GDPNow Forecast

o?? (Apr 26) – According to the Atlanta Fed GDPNow model, the initial forecast for GDP in the second quarter is 3.9%. At 3.9%, this would mark a three-quarter high.

• Fed Speak/News (Apr 2) – Speaking at a Cleveland Fed event, Cleveland Fed President Loretta Mester noted that she needs to see “more data”?in order to gain further confidence that inflation will continue to cool towards the Fed’s 2% target. “Some further monthly readings will give us a better sense of whether the disinflation process is stalling out or whether the start-of-the-year readings reflect a temporary detour on the downward path back to price stability,”?Mester said. (Apr 2) – Discussing the Fed’s outlook for rate cuts at an event in Las Vegas, San Francisco Fed President Mary Daly reminded market participants, “A projection is not a promise.”?She went on to say, "You have to maintain a ready position...that if inflation is stickier than I projected? We may want to cut less...that if the labor market starts to falter or inflation comes down more rapidly? Then we might be in a position where cutting more is appropriate." (Apr 3) – Speaking in an interview with CNBC, Atlanta Fed President Raphael Bostic reiterated his forecast for just one rate cut this year in the fourth quarter. “I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter,”?Bostic noted. “If that trajectory slows down in terms of inflation, then we’re going to have to be more patient than I think many have expected.” (Apr 3) – Chair Powell spoke at a Stanford University event and reiterated the Fed’s ongoing message of data-dependency and patience. Powell noted that it would be appropriate to cut rates “at some point this year.” Powell also specifically commented on the recent hotter-than-expected inflation reports, but noted, “It is too soon to say whether the recent readings represent more than just a bump.” (Apr 8) – Speaking to WBEZ Chicago, Chicago Fed President Austan Goolsbee spoke on the current state of the economy and the outlook for this year, noting that the real economy has been “solid,” but there are some concerning elements such as “credit delinquencies on the consumer side rising.” He was also asked about the banking system to which he replied, “The banking system is safe and sound.” ?(Apr 8) – Participating in a town hall discussion at the University of Montana in Missoula, Minneapolis Fed President Neel Kashkari warned that the Fed cannot “stop short” on its inflation fight. “We are right around the 3% rate, we want to be at 2%,” Kashkari said. (Apr 16) – Speaking at a Fed research conference in Washington, Federal Reserve Vice Chair Philip Jefferson said he continues to expect inflation to moderate with the policy rate “at its current level.” That being said, ongoing and persistent price pressures would warrant holding borrowing costs unchanged for longer than previously expected. “If incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer. I am fully committed to getting inflation back to 2%,” Jefferson noted. (Apr 16) – San Francisco Fed President Mary Daly reiterated the need for patience given “remarkable” U.S. growth, a resilient consumer and labor market, and still-above target inflation “The labor market’s not giving us any indication it’s faltering, and inflation is still above our target, and we need to be confident it is on path to come down to our target before we would feel the need — and I would feel the need — to react,” Daly said. (Apr 16) – Federal Reserve Chairman Jerome Powell was clear that the Fed intends to stay on the sidelines for longer than previously expected given the unexpected increase in recent inflation data.?Speaking alongside Bank of Canada Governor Tiff Macklem at the Wilson Center in Washington, Powell said, the Committee still needs more time – and evidence – to regain confidence inflation is trending back down to 2% in a sustained manner. If, however, price pressures persist, the Fed is prepared to keep rates steady for “as long as needed.” “The recent data have clearly not given us greater confidence and instead indicate that is likely to take longer than expected to achieve that confidence…Given the strength of the labor market and progress on inflation so far, it is appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us,” he said. (Apr 17) – Speaking at an event in Chagrin Falls, Ohio, Cleveland Fed President Loretta Mester warned the Fed should not “rush” to cut rates. “I still am expecting inflation to come down but I do think that we need to be watching and gathering more information before we take an action,” Mester said. (Apr 17) – Speaking in a fireside chat at the Institute of International Finance Global Outlook Forum dinner, Fed Governor Michelle Bowman acknowledged the previous disinflationary progress has stalled and went on to question the extent to which the current level of policy was restraining the economy. “Progress on inflation may have stalled,” Bowman noted. “A lot of people are struggling with meeting the expectations of increased prices. We’re continuing to see housing being more expensive than it has been in the past, as well as other services and insurance. Affordability is certainly more challenging for people.” She went on to say, there is “a lot of financial market activity and a lot of continued growth that we wouldn’t have expected if policy was sufficiently tight…I think it is restrictive. I think time will tell whether it is sufficiently restrictive.” (Apr 22) – Given the rapid pace of change in the underlying economic data, there is a growing push for the Federal Reserve to shift towards a “scenario analysis.” Rather than indicating a singular outlook, the Fed communicates a range of outcomes based on varying conditional scenarios. While even an acknowledgement of alternative scenarios will not give investors certainty, advocates argue it will give the market a better understanding of the overall bandwidth for policy given varying degrees of improvement. According to former Fed Chairman Ben Bernanke, publishing both central and alternative scenarios means “the public will be able to draw sharper inferences about the reaction function and thus better anticipate future policy actions.”?

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March 19-20 FOMC Meeting Minutes (Apr 10)

·?????? The March FOMC meeting minutes showed a rising level of concern among Fed officials regarding the upside risk to inflation even before the latest hotter-than-expected?consumer and producer price reports.?While most participants agreed rate cuts would likely be warranted at some point this year should the economy evolve as expected, inflation has already proved unruly relative to the Committee’s forecasts for a continued disinflationary trend back towards 2%. Additionally, some Fed officials warned that recent increases in inflation "had been relatively broad-based and therefore should not be discounted as merely statistical aberrations.”?While Chair Powell was clear in March that the Committee would not "overreact" to just two months of bad data, now facing three consecutive months of rising price pressures, the Committee will have an increasingly difficult time ignoring the upside risks to prices. That’s not to say the Fed won’t still be willing to cut rates by year-end should inflation remain near current levels, as again this is a Fed seemingly desperate to provide relief.?But without more meaningful improvement, the Committee is likely to take another extended pause on the sidelines after minimal action (1 or 2 cuts).?The bigger risk is a material rise in inflation for an extended period (6+ months) at which point the Committee may be forced to reengage in additional policy firming to tame price pressures.?However, keep in mind, the economy is already showing signs of waning momentum.?Consumers are still spending and businesses are still investing, but they’re doing so at a markedly reduced pace.?Thus, the Fed has a limited?window to tackle?inflation against the backdrop of a still solid economy.??

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Domestic News and Activity?

• Politics and the Biden Administration

• (Apr 9) – The Biden administration continues to focus on a potential pathway for further student loan debt forgiveness. Facing barriers to earlier proposals, the White House is now?targeting borrowers with balances greater than what they originally borrowed and those who have been in repayment for at least two decades. The latest plan builds on earlier executive?actions already taken, which have resulted in the cancelation of $146 billion in debt?for roughly?4 million borrowers. Advocates of the president’s plan say it is vital, as Americans are strapped with debt and struggling to make payments amid a higher rate environment. Others argue the plan could encourage educational institutions to further raise prices, not to mention act as a “punishment” to those that opted not to go to college because of the cost, or already paid off their debt.??

International News and Activity?

·?????? Euro Area

o?? (Apr 12) – The European Central Bank (ECB) appears to be increasingly inching towards rate cuts near term. While keeping its deposit rate steady for the fifth consecutive meeting, ECB President Christine Lagarde said at least a “few” members of the ECB's Governing Council were ready to cut rates at the April meeting. The majority, however, said they need further confidence in the inflation data before adjusting policy. The ECB is "data-dependent, not Fed-dependent" she said.

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-Lindsey Piegza, Ph.D., Chief Economist