- The Federal Reserve's current federal-funds rate target range is 5.0%-5.25%
- The Leading Economic Index fell by 0.7% in May, it's 14th straight decline
- Housing starts increased by 291,000 units in May
Please join us for our July 2023 Gallagher Financial Markets Update webinar on Thursday, July 13th at 11:00 a.m. ET.
Top Three Market Headlines
Fed Chair Foresees Additional Rates Hikes: In testimony to Congress last week, Federal Reserve Chairman Jerome Powell cautioned that the central bank was likely not done raising interest rates, notwithstanding officials' decision to pause rate increases at their latest policy meeting. Mr. Powell indicated the recent decision to hold the federal-funds rate steady at 5.0% to 5.25% represented a moderation in the pace of rate hikes following ten consecutive increases in just over a year. However, the Chairman noted that inflation continues to "run high" and remains well above the bank's long-run goal of 2.0%, supporting the case for additional increases.
U.S. Leading Economic Index Falls Again: The Conference Board reported last week that its Leading Economic Index (LEI), a composite of ten U.S. economic indicators intended to signal turning points in the economy, fell by 0.7% in May. This marked the 14th consecutive monthly decline in the index, which is down 4.3% over the last six months. May's decline was chalked up to weakening consumer expectations for business conditions and worsening credit conditions, among other factors. According to the Conference Board, the declining trend is consistent with "weaker economic activity ahead" and continues to signal a recession within the next 12 months.
New Home Construction Surges: The National Association of Realtors (NAR) reported last week that existing home sales in May totaled 4.3 million (seasonally adjusted annualized rate, or SAAR), up marginally from April but 20% lower than the prior year. Beyond higher mortgage rates, tight inventories of existing homes have also hindered sales activity; according to the NAR, the current supply of existing homes is approximately half the level of 2019. This shortfall, however, is supporting new home construction: The U.S. Department of Commerce reported last week that the SAAR of housing starts in May was 1.631 million units, compared to 1.340 million in April. The 291,000 unit increase represented the largest monthly increase in starts since January 1990.
Please note: There will be no Weekly Financial Market Update published next week. We would like to wish everyone a happy Fourth of July holiday!