ECONOMY AND POLICY
July 30, 2021
Chief Economist Scott Brown discusses the latest market data.
As expected, the Federal Open Market Committee (FOMC) left short-term interest rates and the monthly pace of asset purchases unchanged. In its policy statement, the FOMC noted that “the economy had made progress” toward its goals. In his press conference, Fed Chair Powell indicated that an increase in short-term interest rates is still a long way off and not currently under discussion. However, Fed policymakers are debating a tapering of asset purchases, with a decision expected later this year (and the Fed will give plenty of advance notice).
Real GDP rose at a 6.5% annual rate in the advance estimate for 2Q21, held back by a larger reduction in inventories, increased imports (which have a negative sign in the GDP calculation), and lower government spending (relative to 1Q21). Consumer spending rose at an 11.8% annual rate (following 11.4% in 1Q21), while business fixed investment rose 8.0% (following 12.9%). Personal income edged up 0.1% in June, as a 0.7% gain in wage and salary income offset an 11.0% drop in unemployment benefits. Personal spending rose 1.0%, as a 1.2% gain in services offset a 1.5% decrease in spending on durable goods. The PCE Price Index rose 0.5% in June (+4.0% y/y), up 0.5% (+3.5% y/y) ex-food and energy. The Employment Cost Index rose 0.7% in the three months ending in June (+2.9% y/y, slightly higher than the +2.7% y/y figure for June 2020). Wages and salaries rose 0.9% (+3.2% y/y), while benefit costs rose 0.4% (+2.2% y/y).
Next week: The ISM surveys should remain strong. The Employment Report will be subject to seasonal noise. Prior to the pandemic, we would normally lose around 1.3 million (unadjusted) education jobs each July. As we saw in the June report, fewer teachers hired means fewer job losses – and a seasonally adjusted increase – at the end of the school year. Outside of education, the economy likely added jobs at a strong clip, but one should take the headline payroll figure with a grain of salt. We still have a long way to go for a full labor market recovery.
IndicesLastLast WeekYTD return %
Consumer Money RatesLast1 year ago
CurrenciesLast1 year ago
|Dollars per British Pound||1.3947||1.396|
|Dollars per Euro||1.188||1.185|
|Japanese Yen per Dollar||109.77||104.73|
|Canadian Dollars per Dollar||1.244||1.342|
|Mexican Peso per Dollar||19.832||22.024|
CommoditiesLast1 year ago
Bond RatesLast1 month ago
|10-year municipal (TEY)||1.307||1.569|
Treasury Yield Curve – 07/30/2021
As of close of business 07/29/2021
S&P Sector Performance (YTD) – 07/30/2021
As of close of business 07/29/2021
|August 2||—||Construction Spending (June)|
|—||ISM Manufacturing Index (July)|
|August 4||—||ISM Services Index (July)|
|Factory Orders (June)||—|
|August 5||—||ADP Payroll Estimate (July)|
|—||ISM Services Index (July)|
|August 6||—||Employment Report (July)|
|August 11||—||Consumer Price Index (July)|
|August 17||—||Retail Sales (July)|
|August 3||—||Employment Report (August)|
|September 6||—||Labor Day Holiday (markets closed)|
|September 22||—||FOMC Policy Decision|
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