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So, What is the Data Telling Us?

On Friday morning, S&P released their Purchasing Manager Indices on U.S. manufacturing, services, and the composite of all purchasing manager activity. All three indices were higher than the consensus expectation. We saw accelerating manufacturing and services. Also, both of these indices were above 50 which means that the metrics are both improved and showing economic expansion. This morning, we had a release of the Conference Board U.S. Leading Economic Index and existing home sales and prices. The Leading Index was -0.5% versus the consensus expectation of -0.3%[1]. At the same time, existing home sales were slightly higher than expected and the National Association of Realtors reported that home prices reached a median of $419,300, up 5.8% from last year[1]..

We believe that the Fed will not be able to cut the Fed Funds Rate in July due to inflationary pressures. Wages are still growing faster than inflation, and this is inflationary in and of itself. When you couple this inflation pressure with climbing home prices and expanding economic indicators, the Fed’s actions have not tamped down inflation. In a great sense, we are still seeing the inflationary impact of the excess savings built from too many rounds of stimulus.

One positive that may come from this expanding economic activity is the amount of tax revenue that Washington may receive. If they can tame the budget, we might be onto something! For now, it seems that inflation is still with us, and the Fed remains in a holding pattern.

[1] Source: Bloomberg as of 06/21/2024

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