Observations
Eight questions on US debt
The dramatic fall of US debt prices leads to multiple questions about the nature of ongoing processes in the US economy. As often happens at moments of surging market fluctuations investors are seeking an explanation far beyond where logic resides. We are highlighting several aspects of the current US government debt market.
GDP growth and Retail Sales
The US statistics that came in in July-August 2023 are revealing resistivity if the US economy to the high-rate environment. The real GDP, as of June 2023, is 7.6% higher than in June 2019. The Atlanta Fed GDP nowcasting is showing 5.8% of projected growth for Q3. Part of this growth is a result of low rates in 2021-2022 when the US fixed investments were at their highest level over the past 15 years. In this review we are investigating another phenomenon – a shift in Retail Sales cycles and its influence on GDP growth.
The Fed spectrometer
FOMC members are showing increasing disagreement on the projected path of monetary policy.
ADP report
The ADP report which was released on July 6th led to a controversial reaction. The number of signed new job contracts unexpectedly surged to near 500k for June versus normal level somewhere between 200k and 300k.
US June economic figures
Has an upcoming recession become less likely over the past half a year? We would not say so. It looks like the economy is getting less hot more slowly than many thought, but we can find very few arguments for the situation has changed in principle. With that said, we assume that the most powerful driver for the current market is the momentum it has gained, but not fundamental gauges.
US economy strength and consumer demand
During the recent FOMC press-conference, Chair Powell from the Fed highlighted that the US economy appears more resilient than previously thought. However, the robustness of the US economy could prove misleading. Consumer demand yields high profits. In turn, these corporate profits underpin the labor market. A heated labor market encourages consumer spending, imparting a sense of stability. This positive feedback loop supports the economy, yet it could also precipitate an abrupt crash.