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yellojktVital Statistics:
Stocks are flat this morning as we head into a 3 day weekend. Bonds and MBS are down.
Personal Incomes rose 0.4% in April, while personal consumption rose 0.8%. The PCE Price Index (the Fed’s preferred measure of inflation) rebounded in April to 0.4%. On an annual basis PCE inflation rose 4.4%. If you strip out food and energy, PCE inflation rose 0.4% on a month-over-month basis and 4.7% on a year-over-year basis.
While the PCE Price index did show an uptick in April compared to February and March, the annual rate is still working its way lower.
This will be the last PCE data before the June Fed meeting which takes place from June 13-14. We will get the May employment numbers and the May CPI before then, but the markets and the Fed-speak seem to be hinting at another hike. The Fed Funds futures are now handicapping a better-than-50% chance of another 25 basis points in June. The strong consumption numbers give them the excuse to move further away from the zero bound.
The FOMC minutes indicated that the Fed still has a tightening bias, and that comports with some of the statements from various Fed presidents over the past couple of weeks. About the only statement that indicated any sort of dovishness was this:
Participants also discussed several risk-management considerations that could bear on future policy decisions. A few assessed that there were upside risks to economic growth. However, almost all participants commented that downside risks to growth and upside risks to unemployment had increased because of the possibility that banking-sector developments could lead to further tightening of credit conditions and weigh on economic activity. Almost all participants stated that, with inflation still well above the Committee’s longer run goal and the labor market remaining tight, upside risks to the inflation outlook remained a key factor shaping the policy outlook. A few participants noted that they also saw some downside risks to inflation.
Even that isn’t much for doves to hang their hat on. The regional banking stress seems to have dissipated, so any resulting tightening of credit will probably fade as well. Problems in the CRE market seem to be mainly concentrated in the office sector, although the lower-tier retail spaces might have some issues as well. Rental inflation will be something to watch as we approach the peak in real estate prices a year ago and apartment completions remain elevated.
In other economic data, first quarter GDP was revised upward from an increase of 1.1% to 1.3%. Initial Jobless claims ticked up to 229k, and durable goods orders increased 1.1%.
Pending Home Sales were flat in April, according to NAR. “Not all buying interests are being completed due to limited inventory,” said NAR Chief Economist Lawrence Yun. “Affordability challenges certainly remain and continue to hold back contract signings, but a sizeable increase in housing inventory will be critical to get more Americans moving.” Unfortunately a lot of the housing starts and completions are in multi-family, not single family.
Consumer sentiment slipped in May, according to the University of Michigan Consumer Sentiment Survey. “Consumer sentiment slid 7% amid worries about the path of the economy, erasing nearly half of the gains achieved after the all-time historic low from last June. This decline mirrors the 2011 debt ceiling crisis, during which sentiment also plunged. This month, sentiment fell severely for consumers in the West and those with middle incomes. The year-ahead economic outlook plummeted 17% from last month. Long-run expectations plunged by 13% as well, indicating that consumers are concerned that any recession to come may cause lasting pain. That said, consumer views over their personal finances are little changed from April, with stable income expectations supporting consumer spending for the time being.”
This is interesting given that consumer spending remains robust. Expectations regarding future inflation fell to 4.2% after rising to 4.6% in April. Long-run inflationary expectations ticked up however, although they remain around 3%. This will concern the Fed, as it wants long-term inflationary expectations at 2%.
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Filed under: Economy |
All Things in Moderation 
One can hope:
“Meanwhile, Justice Clarence Thomas wrote a concurring opinion that would so severely limit Congress’s power to legislate that he might as well have taken several volumes of the United States Code and lit them on fire. ”
https://www.vox.com/politics/2023/5/26/23737863/supreme-court-clarence-thomas-neil-gorsuch-sackett-epa-child-labor-unconstitutional
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The first para made me laugh:
On Thursday, the Supreme Court imposed strict new limits on the Clean Water Act. The Court’s decision in Sackett v. EPA is likely to do serious harm to the government’s ability to quell water pollution, including in major waterways such as the Mississippi River and the Chesapeake Bay.
If I’m not mistaken the majority opinion said waterways unconnected to major bodies of water. How that somehow poisons the Mississippi, I’d love to know.
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My God, the hyperbole knows no bounds!
That means that there are now at least two votes on the Supreme Court for an act of judicial arson unlike any in US history.
The Fugitive Slave Act ain’t got nothing on Thomas!!
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It’s if you assume it will be interpreted the way that Kavanaugh does:
Of course it’s also worth noting that the decision was unanimous against the EPA in this particular case. The three split opinions (one majority and two concurring) were about the extent of how wrong they were.
The EPA could have avoided all of this by not overreaching previously.
I also liked this:
“Thursday’s opinion in Sackett adopts the narrowest of those three approaches, the one Justice Antonin Scalia suggested in one of those 2006 opinions.”
It’s like he’s still on the bench in spirit.
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What I get from the ruling is that Congress cannot authorize an Administrative branch to make law. I saw no interpretation that said that Congress cannot pass laws that would regulate waterways, or commerce for that matter.
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To the left, history always begins with conservatives pounce.
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It’s interesting to me that it was Nixon, if I’m not mistaken, who claimed success with the EPA. My how times have changed!
Concern about air and water pollution had spread in the wake of disasters. An offshore oil rig in California fouled beaches with millions of gallons of spilled oil. Near Cleveland, Ohio, the Cuyahoga River, choking with chemical contaminants, had spontaneously burst into flames. Astronauts had begun photographing the Earth from space, heightening awareness that the Earth’s resources are finite.
In early 1970, as a result of heightened public concerns about deteriorating city air, natural areas littered with debris, and urban water supplies contaminated with dangerous impurities, President Richard Nixon presented the House and Senate a groundbreaking 37-point message on the environment. These points included:
requesting four billion dollars for the improvement of water treatment facilities;
asking for national air quality standards and stringent guidelines to lower motor vehicle emissions;
launching federally-funded research to reduce automobile pollution;
ordering a clean-up of federal facilities that had fouled air and water;
seeking legislation to end the dumping of wastes into the Great Lakes;
proposing a tax on lead additives in gasoline;
forwarding to Congress a plan to tighten safeguards on the seaborne transportation of oil; and
approving a National Contingency Plan for the treatment of oil spills.
Around the same time, President Nixon also created a council in part to consider how to organize federal government programs designed to reduce pollution, so that those programs could efficiently address the goals laid out in his message on the environment.
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lms:
It’s interesting to me that it was Nixon, if I’m not mistaken, who claimed success with the EPA.
He didn’t just “claim” it…it was his to claim. Although some of us might say he deserves blame, not credit.
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George Will may be onto something here:
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Worth noting:
https://lawandcrime.com/jeffrey-epstein-2/judge-appears-poised-to-open-jeffrey-epstein-survivors-suit-against-jpmorgan-to-hundreds-of-potential-victims-in-class-action/
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I’m old enough to remember when conservatives cared about the environment……………..LOL
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The decision that the EPA had overreached in the case was unanimous. The split opinion was on what limits would be placed going forward, but they were all concurrences, no dissents.
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lms:
I’m old enough to remember when conservatives cared about the environment
I’m old enough to remember when liberals:
1) knew what a woman was
2) were in favor of free speech
3) opposed discrimination based on race
4) didn’t seek to sexualize children
5) were simply wrong on policy instead of having bat-shit crazy goals
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LOL Scott……………..you remind me of someone from FL who is now running for President of the United States……………good luck with that!
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Well the EPA of 40 years ago fixed some necessary things. It accomplished its mission 20 years ago and now is less than useless
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Good read
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Lol
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Need moar invasions!
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He need not worry. Defense spending is going up and everything else is pretty much staying the same. It’s pretty much a joke of a deal from the Republican side.
The only plus that I can see is that it tied up Congress from doing anything else for a few months.
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jnc:
It’s pretty much a joke of a deal from the Republican side.
Completely agree. There is no party in the US that wants to shrink the federal government. There is one party in favor of bringing the country to economic ruin quickly, and the other wants to do the same only slightly less quickly.
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I say we make an overt gesture of peace and honor the warrant.
Lindsey, if you’re innocent you got nothing to worry about. You voted for the Patriot Act, right?
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