Update on the US Economy
After January’s hotter-than-expected economic reports, it had once seemed both investors and the Fed alike were worried that the increases in interest rates still weren’t enough to slow the American consumer and economic growth. At the beginning of March, investors had even priced in a 50-basis-point hike for the Fed’s March meeting, however, this all changed after the collapse of several regional banks in the nation. This placed the Fed between a rock and a hard place, poised to choose between fighting inflation or assisting domestic financial services; now, it seems they are continuing to make progress in the fight against inflation, with both consumer demand and the core PCE index slowing more-than-expected throughout the month of February.
When compared to January, consumer spending rose approximately 0.2%, following the previous month’s whole 2% increase; although they were quite strong, February did show signs of small easing. The personal consumption-expenditures price index rose by 5%, however, when excluding food and energy, the core PCE index rose 4.6%. These data measures are both down a few percentage points, and several believe they signal successes in the Fed’s action to tighten the economy through its current benchmark federal-funds rate at 4.75 and 5%
When it comes to the US labor market, things are still looking extremely tight as unemployment claims rose very minimally last week. Although layoffs continue to flood our news feeds, there aren’t a significant number of jobs being lost, and there are currently 1.9 job openings for every unemployed person in the United States. However, the banking crisis comes here yet again as the closing of regional banks and stress on the system will hurt consumers from borrowing and accessing lines of credit, which could cause larger layoffs and hurt those who are unemployed. The coming months will be interesting when it comes to economic data so we can see how much the banking crisis has truly affected the economy, and whether a slowdown is to come.
Want to learn how to invest? Download the Invstr app, where you can play Fantasy Finance and manage a virtual investment portfolio or open a brokerage account and invest for real. Take our interactive investing course on Invstr Academy and become a better investor today!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
