Summary
United States: Long Holiday Weekend Clouded by Debt Ceiling
- With a deal on the debt ceiling hanging in the balance, the near-term economic outlook remains uncertain. Data released this week suggest the real economy is showing resilience, as new home sales and durable goods orders stabilized, while real personal spending surprised to the upside.
- Next week: Consumer Confidence (Tue), ISM Manufacturing (Wed), Nonfarm Payrolls (Fri)
International: Inflation to Force the Bank of England’s Hand
- The U.K. April consumer price index was an unpleasant surprise for Bank of England policymakers. Headline inflation slowed and energy prices receded, albeit by much less than expected. As a result, we now expect the Bank of England to raise its policy rate at both its June 22 and August 3 announcements. We have adjusted up our global growth outlook slightly on the back of improving economic activity, which continues to flow in; however, growth prospects for the global economy this year may be starting to plateau.
- Next week: China PMIs (Tuesday), India GDP (Wednesday), Brazil GDP (Thursday)
Interest Rate Watch: Star Gazing Once Again
- As the FOMC tries to determine what level of interest rates will be sufficient to tame inflation, oneguidepost is the natural rate of interest, or r-star. Estimations resumed this month after being temporarily halted due to the volatility surrounding the pandemic, and suggest the era of a low natural rate of interest remains intact.
Topic of the Week: Is Demography Still Destiny?
- The 2020 Census Demographic and Housing Characteristics (DHC) data were published this week and The population of the United States is not getting any younger. The median age in most states rose between 2010 and 2020 as falling birth rates and domestic migration drove demographic shifts.
