Here is the executive summary of the U.S. macroeconomic indicators and trending topics for March 2023.
US Macroeconomic Indicators:
Federal Reserve hikes interest rate by 25 bps to 4.75-5%
The Fed raised the fed funds rate by 25bps to 4.75%-5% in March 2023, matching the February increase and pushing borrowing costs to new highs since 2007, as inflation remains elevated, despite recent banking sector turmoil. The fed funds rate is seen reaching 5.1% this year, the same as in the December projection, and to end 2024 slightly higher at 4.3%, compared to 4.1%, and to fall to 3.1% in 2025.
Federal Reserve Bank of Cleveland President Loretta Mester said, “To put inflation on a steady path down to 2%, monetary policy needs to move somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time.”
U.S. job growth solid in March; wage inflation cooling
The U.S. Bureau of Labor Statistics reported that total nonfarm payroll employment rose by 236,000 in March, and the unemployment rate changed a little to 3.5 percent. In addition to the payroll gains came a 0.3% increase in average hourly earnings, pushing the 12-month increase to 4.2%, the lowest level since June 2021.
Employment increased in leisure and hospitality, government, professional and business services, and health care.
Services PMI® at 51.2% for March 2023
Economic activity in the services sector expanded in March for the third consecutive month as the Services PMI® registered 51.2 percent, according to the latest Services ISM® Report On Business®. The sector has grown in 33 of the last 34 months, with the lone contraction in December.
The Business Activity Index registered 55.4 percent, a 0.9-percentage point decrease compared to the reading of 56.3 percent in February. The New Orders Index expanded in March for the third consecutive month after contracting in December for the first time since May 2020;
“Thirteen industries reported growth in March. The Services PMI®, by being above 50 percent for a third month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 158 months.” The composite index has indicated expansion for all but three of the previous 158 months.”
A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent means it is generally contracting.
US Manufacturing PMI Stands at 46.3%; Near Three-Year Low; Casts a Shadow Over Economy.
U.S. manufacturing activity contracted in March to the lowest level in nearly three years as new orders plunged. Economic activity slumped for the fifth consecutive month following 28 months of growth, according to the latest Manufacturing ISM® Report On Business®.
Economists polled by Reuters had forecast the index would dip to 47.5. The PMI remained below the 50 thresholds for the fifth straight month, a sign of contraction in manufacturing, yet hard data have suggested continued moderate growth in manufacturing, which accounts for 11.3% of the economy.
Only petroleum and coal products and machinery registered growth in March of the six largest manufacturing industries. Other manufacturing industries reporting growth were printing and related support activities, miscellaneous manufacturing, fabricated metal products, and primary metals.
Inflation rose 0.1% in March and 5% from a year ago.
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in March on a seasonally adjusted basis after increasing 0.4 percent in February, according to the U.S. Consumer Price Index report. Over the last 12 months, the all-items index rose 5.0 percent before seasonal adjustment.
The index for shelter was by far the largest contributor to the monthly all-items increase. The food index was unchanged in March, with the food at home index falling 0.3 percent. In March, indexes that increased include shelter, motor vehicle insurance, airline fares, household furnishings and operations, and new vehicles.
US mortgage rates fall by the most in 4 months.
Interest rates on the most popular U.S. home loan fell by the most in four months in the last week of March. According to data from Freddie Mac, the 30-year fixed-rate mortgage averaged 6.32% in the week ending March 30, down from 6.42% the week before.
“Economic uncertainty continues to bring mortgage rates down,” said Sam Khater, Freddie Mac’s chief economist. “Over the last several weeks, declining rates have brought borrowers back to the market, but as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers.”
- ChatGPT – Launch of GPT-4
The newest version of OpenAI’s language model system, GPT-4, was officially launched on March 13, 2023, and is only available in the ChatGPT Plus paid subscription. However, complete access to the model’s capabilities remains limited. The free version of ChatGPT still uses the GPT-3.5 model.
GPT-4, the next-generation language model, is more advanced in three key areas: creativity, visual input, and longer context. The Large Language Model (LLM) has powerful new features and capabilities.
- Understand more complex inputs – GPT-4 “exhibits human-level performance on various professional and academic benchmarks.”
- Multimodal capabilities – The model can accept both text and image prompts. It can help create long-form content and “extended conversations” and process up to 25,000 words of text from the user. You can send GPT-4 a web link and ask it to interact with the text from that page.
- Safer to use – It can reportedly produce 40% more factual responses compared to previous versions, 82% less likely to “respond to requests for disallowed content,” and 29% more likely to respond as per OpenAI’s policies to sensitive requests.
- Factual responses – GPT-4 is safer and more responsive than previous models. During the company’s testing, it was “60% less likely to make stuff up.”
- The layoff winter continues into the new year. An analysis of the Intellizence Layoff Dataset indicates companies continued to announce layoffs in March 2023. Technology companies cut the most jobs, followed by media, healthcare, and financial services.
- Major companies, including tech giants like McKinsey, Accenture, Meta, and Amazon, are laying off many employees. They have cited economic uncertainty and over-hiring as the reason for laying off employees.
- Over 312 companies announced the terminations of more than 118,271+ employees. Major layoff announcements were – Accenture (19000), Amazon (9000), Skoda (3000), and McKinsey (1400), to name a few.
U.S. retail sales were up +4.7% year-over-year in March
According to Mastercard SpendingPulse™, which measures in-store and online retail sales across all forms of payment, U.S. retail sales excluding automotive were up +4.7% year-over-year (YOY) in March. The spending trends in March were consistent with those experienced earlier this year.
- E-commerce sales were up +13.0%.
- In-store sales were up +2.8%.
- Lodging (+23.5%), Restaurants (+11.6%), and Grocery (+5.6%) were key drivers for the month’s year-over-year growth.
- Home Improvement, Home Furniture & Furnishings, and Electronics sectors continued to experience a dip in YOY growth as consumers prioritized experiences and essentials.
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