Macro Report

Week’s Takeaway:

This week’s inflation data was mixed while manufacturing and housing data showed further softening. The underlying trend of cooling economic growth, labor, and inflation still suggests there is still an opening for at least one interest rate cut in the 2nd half of this year.


Early in the week, the NY FED 1yr inflation expectations consumer survey echoed the sentiment from the U of Michigan survey with a signal that there is less confidence in the disinflationary trend, with the reading increasing from 3% to 3.3% in April. Core PPI (ex. food & energy) also came in unchanged at 2.4%, above the expected 2.3% print. The Core CPI print calmed some of these nerves, coming line with the expected 3.6% print, marking the lowest core level since April 2021.

Manufacturing data largely disappointed this week, with the May Empire and Philadelphia Fed Manufacturing Surveys both below expectations, – (15.6 v -10.3), and (4.5 v 7.8), respectively. Even with the disappointment, it should be noted that Philly has been in expansion territory for 4 straight months. MoM industrial production also came in below expectations, printing 0%, v 0.2%. This was largely driven by manufacturing production – the largest component of the index – which was down -0.3% v 0.1% expected.

The housing sector also came in soft, with the May NAHB Housing Market Index down for the first time since November. Building permits decreased in April, -3% versus an expected 1.6% increase, while housing starts increased, but not as significantly as forecasters anticipated, up 5.7% versus 8.6%. The drag in housing is likely the result of a steady increase in mortgage rates from early-March, through the end of April.

Finally, after last week’s surprising surge, initial jobless claims cooled, down to 222k, slightly above the expected 219k. This brings the 4-week moving average up to 218k, well below the threshold of 260k – the threshold we referenced last week as a level of distress.

Next Week’s Notes:

Next week, preliminary data will offer insights into the manufacturing sector for May. The S&P Global US Manufacturing PMI is expected to dip slightly to 49.6 from 50, suggesting a marginal contraction in

manufacturing activity. Additionally, April’s preliminary figures for Durable Goods Orders are projected to show a decrease to -0.8% from a previous 2.6% increase. Similarly, Durables Ex Transportation are forecasted to modestly decline to 0.1% from 0.2%.

We will also receive additional housing market data for April. Existing Home Sales are expected to remain steady at 4.19m units, while New Home Sales are projected to decline to 675k from 693k, indicating a slight cooling in the housing sector.

Finally, the University of Michigan consumer sentiment surveys final May data will be released, with Sentiment expected to rise from 67.4 to 67.8.