7/1- Weekly Economic Highlights

The market digested a wide range of key data this week about the health of the US economy, and it was choppy but mostly points towards a slower pace of growth as we transition into the second half of 2022. First quarter GDP was revised down to -1.6% on slower personal consumption growth, although the negative print was largely the result of higher inventories, a surge in imports, and weak exports in the first part of the year.

A preliminary reading on orders for durable goods, which includes items intended to last at least three years, surprised to the upside with a 0.7% increase for May. This is in sharp contrast to recent negative data from the Dallas and Richmond Fed Manufacturing Indexes as consumer spending growth downshifts and producers grapple with headwinds such as inflation, supply chain disruptions, and strong US dollar. The Institute for Supply Management (ISM) manufacturing index slumped to 53 in June, the lowest level since June 2020, but remains in expansion territory.

Personal spending growth slowed to 0.2% in May and Consumer Confidence plummeted to 98.7 as of mid-June as consumers react to rising prices and become increasingly pessimistic as the Federal Reserve shifts its stance from accommodative to tightening to combat persistent elevated inflation. The US savings rate improved to 5.4% for May but remains below the long-run average. The Personal Consumption Expenditures (PCE) Deflator and PCE Core Deflator both came in slightly below expectations for May at 6.3% and 4.7% year-over-year, respectively, with Core PCE remaining well above the Fed’s 2% target.

Global central bankers met this week in Portugal for the annual ECB Forum and expressed concerns about inflation and committed to utilizing monetary policy tools to contain it. Bond yields declined this week as fears that hawkish central bank policies could trigger a recession.

Next Week:

Durable Goods, ISM Services Index, FOMC Meeting Minutes, Employment Report

Copyright © 2022. All Rights Reserved.

© 2022 Chandler Asset Management, Inc. An Independent Registered Investment Adviser. Data source: Bloomberg and Federal Reserve. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.