Retail Sales: A Slow but Steady Climb
Retail sales, a crucial indicator of consumer spending, didn't quite meet expectations in June, rising a mere 0.2%. However, when stripped down to "core" retail sales, a measure that accurately mirrors economic growth, there was a notable increase of 0.6%. This marginal overall rise suggests the beginning of a consumer spending slowdown, which is something the Federal Reserve has been anticipating and aiming to stimulate with its rate hikes.
Inflation: Fed's Fight Shows Promise
Inflation rates saw a significant drop in June, with consumer price inflation falling to an annual rate of 3% from 4% in May. This represents the slowest pace since March 2021, a promising sign for the Federal Reserve's ongoing battle against inflation. Despite this development, it is unlikely to deter officials from a widely anticipated rate increase in this week's meeting. However, it might raise questions about the necessity for further hikes and cause a shift in the Fed's hawkish stance.
Employment: Resilience Amid Gradual Slowing
The job market data from June reported an addition of 209,000 jobs to the U.S. economy, a number lower than predicted. This signifies a gradual return to pre-pandemic levels with average job growth of about 180,000 per month from 2010 through 2019. Despite this slowing, the sustained annual wage growth of 4.4% and the slight dip in unemployment to 3.6% may keep the Federal Reserve on track for another rate hike this Wednesday.
Job Openings: Fed Eyes Labor Market Imbalance
Federal Reserve Chair Jerome Powell keeps a keen eye on the Labor Department's Job Openings and Labor Turnover Survey (JOLTS). This serves as a critical measure of the imbalance between labor supply and demand, as reflected by the job openings per job seeker ratio. With the rate hikes reducing labor market demand, the ratio fell to its lowest level since November 2021, at approximately 1.6-to-1.
Bank Data: The Credit Crunch Conundrum
Part of the Federal Reserve's strategy involves making credit less accessible and more expensive. This is a direct outcome of increases in the policy rate influencing economic activity. However, the recent wave of bank failures presents a threat of broader stress in the industry and a potentially worse-than-expected credit crunch. Weekly data indicates a slowdown in bank loan growth while borrowing from the Federal Reserve appears stable on a week-to-week basis.