Here is the executive summary of the U.S. macroeconomic indicators and trending topics for April 2023.
US Macroeconomic Indicators:
Fed increases rates a quarter point and signals a potential end to hikes
The Federal Reserve raised the fed funds rate by 25bps to a range of 5%-5.25%, marking the 10th increase and bringing borrowing costs to their highest level since September 2007. They dropped a tentative hint that the current tightening cycle is at an end. The rate that banks charge each other for overnight lending feeds through to many consumer debt products such as mortgages, auto loans, and credit cards.
US labor market softens as job openings drop, layoffs at the highest level in over two years
The U.S. Bureau of Labor Statistics reported that total nonfarm payroll employment rose by 253,000 in April, and the unemployment rate changed little at 3.4 percent. Job growth accelerated with wage gains increasing, indicating persistent labor market strength. It could compel the Federal Reserve to keep interest rates higher longer as it fights to bring inflation under control.
Employment increased in professional and business services, health care, leisure and hospitality, and social assistance. The number of unemployed persons, at 5.7 million, changed little in April. The unemployment rate has ranged from 3.4 percent to 3.7 percent since April 2022.
ISM Services PMI edges higher to 51.9
The business activity in the US service sector continued to expand at a modest pace in April, with the ISM Services PMI increasing to 51.9 from 51.2 in March. The sector has grown in 34 of the last 35 months, with the lone contraction in December.
The composite index indicated growth in April for the fourth consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020
The 14 services industries reporting growth in April are – Arts, Entertainment & Recreation; Other Services; Real Estate, Rental & Leasing; Accommodation & Food Services; Utilities; Public Administration; Transportation & Warehousing; Professional, Scientific & Technical Services; Educational Services; Health Care & Social Assistance; Retail Trade; Construction; Finance & Insurance; and Information. The three industries reporting a decrease in April are – Mining, Agriculture, Forestry, Fishing & Hunting, and Wholesale Trade.
A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent means it is generally contracting.
ISM Manufacturing PMI Improved to 47.1
According to the latest Manufacturing ISM® Report On Business®, the economic activity in the manufacturing sector declined in April for the sixth consecutive month following 28 months of growth. Compared to 46.3 percent recorded in March, manufacturing PMI® registered 47.1 percent, 0.8 percentage points higher, indicating a slower reduction.
The five manufacturing industries that reported growth in April are:
Printing & Related Support Activities; Apparel, Leather & Allied Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment.
The inflation rate eases to 4.9% in April, less than expectations
Last month, the consumer price index rose 0.4%, pushed higher by rising shelter, used vehicle, and gas prices. The increase was in line with Wall Street expectations.
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in April on a seasonally adjusted basis after increasing 0.1 percent in March, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all-items index rose 4.9 percent before seasonal adjustment.
The index for shelter was the largest contributor to the monthly all-items increase, followed by increases in the index for used cars and trucks and the index for gasoline. The food index was unchanged in April, as it was in March. The index for food at home fell 0.2 percent over the month, while the index for food away from home rose 0.4 percent.
US mortgage rates rise again, but the tide may soon change.
According to the Freddie Mac data, the average 30-year fixed-rate mortgage rate increased to 6.43% for the week ending April 27, 2023.
“The 30-year fixed-rate mortgage increased modestly for the second straight week, but with the rate of inflation decelerating, rates should gently decline over the course of 2023,” Freddie Mac Chief Economist Sam Khater said.
Spring is typically the busiest season for the residential housing market, and despite rates hovering in the mid-six percent range, this year is no different. Interested homebuyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability. This week, mortgage rates inched down a little amid recent volatility in the banking sector and commentary from the Federal Reserve on its policy outlook.
- Bluesky is building a micro-blogging platform and social web built on the AT Protocol (Authenticated Transport Protocol). The protocol can make social networks work more like email, blogs, or phone numbers.
- AT Protocol is an open-source framework and will allow modern social media to work more like the early days of the web. People will have transparency into how it is built and what is being developed.
- Account portability – A most important feature that creates a standard format for user identity, follows, and data on social apps, allowing apps to interoperate and users to move across them freely. It is a federated network with account portability.
- It is still under beta testing since February; by the end of April, there are over 50,000 users
- The layoffs continue as companies across the globe continue to lay off thousands of employees. An analysis of the Intellizence Layoff Dataset indicates companies continued to announce layoffs in April 2023. Technology companies cut the most jobs, followed by media and financial services.
- Over 420 companies announced terminations in April. Major layoff announcements were – David’s Bridal (9000), Flink (8000), 3M (6000), GM (5000), Cognizant (3500), Morgan Stanley (3000), and E&Y (3000), to name a few.
April U.S. Retail Sales Remain Steady, Up +7.2% YoY
According to Mastercard SpendingPulse™, which measures in-store and online retail sales across all forms of payment, U.S. retail sales remained steady, up +7.2%* Year-Over-Year in April.
Key trends for April reinforce consumer resilience in the face of inflation and highlight seasonal spending across sectors and channels. Of note:
- In-store sales were up +10.0%, while e-commerce sales are down -1.8% compared to last year, reflecting consumer demand to get out.
- Consumers refreshing their wardrobes for potential summer travel and the warmer months ahead contributed to continued growth for Apparel (+10.8% YOY) and Department Stores (+15.7% YOY).
- Furniture and Furnishing sales, which saw the seventh consecutive month of positive growth, were up +3.8% YOY.
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