Chief Economist Scott Brown discusses the latest market data.
The Fed’s Beige Book noted that “inflationary pressures remained strong” into April, with “steep increases in raw materials, transportation and labor costs.” The Russian invasion of Ukraine and lockdowns in China are adding to supply chain disruptions. In an International Monetary Fund discussion on the global economy, Fed Chair Jerome Powell said that a 50-basis-point increase in short-term interest rates was “very much on the table” for the May 3 to 4 monetary policy meeting.
Building permits and housing starts were mixed in March, as a softening in single-family activity was more than offset by strength in the more volatile multifamily sector. Existing home sales fell 2.7% in March (-4.5% y/y), reflecting reduced affordability and tight supply. Homebuilder sentiment continued to decline, as higher mortgage rates reduced expectations of future home sales.
Next week: There’s always uncertainty heading into the advance GDP estimate. A slower pace of inventory accumulation and a wider trade deficit should subtract from the headline growth figure for 1Q22 GDP, but underlying demand is expected to have been strong. Retail sales benchmark revisions, durable goods shipments and inventories, and the advance economic indicators (March wholesale and retail inventories and merchandise trade) could lead to some fine-tuning of 1Q22 GDP expectations. The Employment Cost Index is the preferred measure of labor costs (should be elevated). March personal income and spending figures will help to gauge the degree of momentum heading into 2Q22.
Treasury Yield Curve – 4/22/2022