Weekly economic and financial commentary: This party is breaking up fast
United States: This party is breaking up fast
- Slowdown signals are beginning to appear in all sectors. Business and consumer confidence weakened, real consumer spending weakened, real estate activity stagnated and business investment declined accordingly. On the other hand, robust job growth and strong gross domestic income suggest we are not in the hole yet.
- Next Week: Housing Starts (Tuesday), Existing Home Sales (Wednesday), Initial UI Claims (Game)
International: British growth surprises on the upside, the Bank of Canada offers an exceptionally large increase
- UK GDP recorded a gain in May, but some cracks in the economy may be starting to show, particularly in the consumer sector. Elsewhere in the G10, the Bank of Canada hiked a whopping 100 basis points at its July monetary policy meeting, raising the benchmark rate to 2.50% and signaling more rate hikes to come.
- Next week: UK CPI (Wed), Canadian CPI (Wed), ECB rate decision (Thu)
Interest rate monitoring: asset inflation is already under control
- The Federal Reserve continues to reduce its holdings of Treasuries and mortgage-backed securities (MBS), accelerating the pace of decline in September. However, shrinking the MBS portfolio could prove difficult as rising interest rates reduced mortgage refinancing. We will also be on the lookout for liquidity issues in the fall as the Fed’s balance sheet shrinks.
Credit Market Snapshot: Record Monthly Auto Loan Payments
- The average monthly car loan payment hit a record high of $712 in June, with 12.7% of new car buyers paying at least $1,000 a month for their car, according to Cox Automotive Inc. , with peak inflation not yet behind us and a potential economic slowdown looming, household balance sheets could be further strained by these large monthly payments.
Topic of the week: Beige book heralds slower growth, inflation fears and risk of recession
- This week, the Federal Reserve released the Beige Book for its July meeting. Regional banks describe situations seen across the country with some of the following terms: slowing growth, inflation fears and even some risks of recession.
Full report here.