Summary
United States: Recession Is Taking Its Time
- Economic data continue to suggest the U.S. economy is only gradually losing momentum. Consumers continue to spend, and industrial and housing activity are seeing some stabilization. We still view a recession is more likely than not by year-end, but there is no denying the underlying resiliency evident in the data.
- Next week: New Home Sales (Tue), Personal Income & Spending (Fri), Durable Goods (Fri)
International: Mixed Trends for Key Asian Economies
- China’s retail sales and industrial output firmed markedly in April, boosted by favorable base effects. However, those activity readings still came in below the consensus forecast and hint at a possible waning in momentum of China’s recovery. In Japan, Q1 GDP rose by 1.6% quarter-over-quarter annualized, more than expected. Consumer spending and business capital spending both rose as well, while Japan’s April CPI also quickened.
- Next week: Eurozone PMIs (Tue), RBNZ Policy Rate (Wed), U.K. CPI (Wed)
Credit Market Insights: Picking Up the Pieces of the Pandemic Refi Boom
- The Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit found U.S. aggregate household debt balances rose by $148 billion in Q1-2023. Mortgage debt advanced by just $121 billion in Q1. Mortgage originations for both purchases and refinancing also fell sharply in Q1 to $324 billion, the lowest level since Q2-2014. The historic pandemic-era refinancing boom has tapered off, but its effects will be felt for some time.
Topic of the Week: Fractures on FOMC Emerge
- A majority of Federal Open Market Committee (FOMC) voters made public appearances this week. Policymaker comments are particularly important in assessing the Fed’s path after the May meeting language signaled a data-dependent, month-to-month Fed from now on. The consensus around the Fed’s next steps appears to be fractured.
