FOMC Meet/ Unemployment/ Delinquencies & Rejections/ GDP Estimates/ US CDS
Fed Meeting
The Federal Reserve convened their scheduled March meeting this week. There were no expectations for any action to be taken, so the focus was largely on the commentary post the conclusion. We prefer to focus on one of the main outcomes, the DOT plot.
The cluster of red under 2025 at the 3.75 level moving lower to 3.25 and now blue appears to be the most significant move.
That move makes sense to us considering the Committee lowered their year end GDP forecast from 2.1% growth to 1.7%. As well as raise their year end unemployment forecast from 4.3% to 4.4%.
But, the Committee also raised their year end PCE forecast from 2.5% to 2.8%.
So, slower growth but higher prices/inflation?
From the difference in direction 2 of the forecasts are headed above one could see how the Committee is concerned about risks to both of their mandates.
But are their concerns really 2 ways?
The SEP, or Summary of Economic Projections, completed quarterly, shows something a bit different. 18 of the 19 responses to the SEP see upside inflation risks. “The risk weighted core pce diffusion index (number of members see upside minus those who see downside, divided by total) is even more skewed toward upside than June 2022 (peak inflation).”
Translation, the committee appeared to be more concerned with the threat of inflation than they were in 2022 when they hiked by 75bps.
These hard numbers do not seem to jive exactly with Chairmen Powell’s representation of the FOMC stance during the press conference. But the Chairman is politically savvy, and maybe, just maybe, presenting the FOMC stance in such a manner is to help prevent any White House irritability ahead of time?
Unemployment
Oddly enough, the present stance of the FOMC might become justified if some of the existing concerns begin to come to fruition out there regarding unemployment levels rising. With much media focus on the new Department of Government Efficiency, many feel those levels rising are inevitable. As of now though, the numbers do not seem to bear that thesis out.
Government employee’s unemployment claims are classified separately from the individual state data.
Recently they did move meaningfully higher.
But in the grand scheme of things.
There could simply be procedural delays that are accounting for the lack of response, but as of right now it does not look concerning.
So, we thought we would look at the state numbers for non-government employee claims in the surrounding area of the capital.
There is some movement, but nothing jarring, yet.
Longer term view for perspective.
Delinquencies & Rejections
Somewhat of concern if those unemployment numbers do to begin to move higher is the state of the consumer. We have addressed debt levels and their associated costs to the consumer previously but wanted to look at the same issue from a different angle this week. The NY Fed website can offer a vast array of data surrounding the consumer, including rejection rates. Many of these charts are headed in the wrong direction.
As for delinquency data, missing auto payments are starting to be of concern.
Which brings us to the ultimate measure of consumer health, emergency savings. Although the present level should be considered healthy, the delta is headed in the wrong direction, and combined with any employment shock could spell trouble for the consumer’s health.
GDP Estimates
This is partially tongue in cheek, but one would think communication between Atlanta Fed peeps and NY Fed peeps should not be that hard. Granted we are familiar with the volatility of the Atlanta data, but still, they all work for the same department don’t they?
Atlanta is looking for -1.8% Q1 GDP presently.
But NY on the other hand is looking for +2.72% Q1 GDP growth.
With a spread like this, we are surprised the likes of Fan Duel or Draft Kings is not getting in on the action.
US CDS
Finally, we noticed a little pick up in the US Sovereign Credit Default Swap chart this week. Nothing to be concerned with, but we would like to point out that it looks to have broken its 3- year down trend.
Just sayin….
Earnings next week.
- BYD Co Ltd (BYDDY) Mon, Mar 24
- Cintas Corp (CTAS) Wed, Mar 26
- Paychex (PAYX) Wed, Mar 26
- Lululemon (LULU) Thu, Mar 27
- Kuaishou (KSHTY) Tue, Mar 25
- McCormick (MKC) Tue, Mar 25
- H & M Hennes (HMB SS) Thu, Mar 27
- Next Plc (NXT LN) Thu, Mar 27
- Dollar Tree (DLTR) Wed, Mar 26
- Chewy (CHWY) Wed, Mar 26
- Porsche Auto (PAH3 GR) Wed, Mar 26
- Jefferies (JEF) Wed, Mar 26
- SailPoint (SAIL) Wed, Mar 26
- TD SYNNEX (SNX) Thu, Mar 27
- Crown Holding (CCK) Tue, Mar 25
- GameStop (GME) Tue, Mar 25
- Smithfield Food (SFD) Tue, Mar 25
- Kingfisher Plc (KGF LN) Tue, Mar 25
- KB Home (KBH) Mon, Mar 24
- RH (RH) Thu, Mar 27
- Wynn Macau (1128 HK) Thu, Mar 27
- Oklo Inc (OKLO) Mon, Mar 24
- HB Fuller (FUL) Wed, Mar 26
- AAR Corp (AIR) Thu, Mar 27
- Worthington (WOR) Tue, Mar 25
- Verint System (VRNT) Wed, Mar 26
- Steelcase Inc (SCS) Wed, Mar 26
- Intuitive Mach (LUNR) Mon, Mar 24
- Harrow Inc (HROW) Fri, Mar 28
Have a great weekend!
Best,
Meraki Trading Team
About Meraki Global Advisors
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