Hot US Economy Stuns Again With Big GDP Revision, Plunging Claims
Thursday brought still more evidence of US economic resilience in the face of an ostensibly aggressive rate-hiking campaign.
Jobless claims plunged in the week to June 24, and the final read on Q1 GDP showed the economy expanded at a much brisker pace than initially reported.
Taken together, and considered with what one popular strategist described as a near "perfect" run of housing and confidence numbers released earlier this week, traders and policymakers were left to yet again ponder the po
perfect. ‘I’d like to have seconds on the last 6 months please’. rates higher, stocks higher, employment better, continued concern that theres a recession somewhere b/c ya know yield curve, maybe next month or quarter. its when the curve normalizes is the problem. as long as mkts perceive continued rate increases, the curve wont normalize.
The Fed is seemingly going to be faced with a really big choice, “Volcklerize” the rising rates program, which risks breaking some more and larger banks, or find other tools that will tighten without so much collateral damage. I prefer the latter because it seems to me the structure of our current inflation driving mechanism is not as simple as Friedman would have thought it to be. Too many exogenous factors this time around.
“…current inflation driving machine..” ? Inflation has been falling and falling….short term rates are now higher than inflation. What is the need for further tightening? Labor getting too much of its share of gdp and the capitalists arent used to sharing? Seriously though, why tighten further? the 2% inflation era was the anomaly. population growth plus efficiency/productivity gains (thanks tech!) really should put money supply growth at around 3-4%
The issue will be in July when they skip again in light of further declines in PCE and CPI….then we start to see the possiblity of the yeild curve normalizing….short rates ease a little…and long rates begin to drift higher.
Pce inflation number looms even larger now. An inflationary print would be a nail in the coffin for bonds. Not my bet, but if it happens you likely see a 4 handle 10 yr
sure and when was the last two-in-a row upticks in PCE? Sept and July 22, prior to that was before Feb 22. All the while Fed has been tightening via rates and cpi and pce havw been coming down. they say theres a lag on Fed rate increase prior to showing up in the economy. Given there has been no stops/skips until just now…..its difficult to see a PCE that pops higher, if it did sure, markets wouldnt like it….but who’s really thinking ‘this month will be differenct bc ‘x’. ?
A 4 handle on the 10 is a distinct possibility. People have jobs and are spending. I think it’s called Keynesian economics.
Frankly, if banks can’t handle a 6+% Fed Funds rate, maybe we should nationalize the institution of banking. If the US Government is going to bail banks out when all is said and done, the US Government might as well own them.
or run the banking industry like Utilities. but that will never happen.