The Conference Board, which is a think tank founded in 1916 that conducts their own research and publishes insights on worldwide economic cycles, published their Leading Economic Index today. The report shows that economic activity declined 0.5% last month to an 11 year low. They’re not specifically throwing out the word “recession” in their statement, but there are some strongly-worded concerns over a slow down. The Conference Board is in expecting inflation at the year end to read 1.6%, which is the same as the FOMC’s projections. In context, the end of 2024 showed inflation at 2.8%
Inflation is declining in large part as a result of falling shelter costs. As you can imagine, the cost of housing (the government calls it “shelter”) is life’s largest expense for most people. So falling rent prices and lower interest rates are having a marked impact on the fight against inflation.
We all know that the Fed lowered their overnight rate this week by 0.25%, after having expressed concerns over Jobs futures in the weeks leading up to the FOMC meeting. However, in their statement that Jerome Powell read subsequent to the rate cut, the Fed said they are seeing renewed strength in the labor market. As a result, mortgage rates and treasury yields have reversed course over the last few days heading back northward.
The Philadelphia Fed index, which tracks regional manufacturing along the East Coast alarmingly rose to 23.2 yesterday. Last month saw a -0.3, and a +1.7 was the expectation for this month. So, a 23.2 reading is either a massive uptick in manufacturing (which is probable due to the impact that foreign tariffs have on imported goods), or a massive computational error that will be refuted and corrected as a revision in next months report. Given the wide swings of the Philly Fed, and the lower than expected Jobless Claims nationwide this week, I anticipate it’s the former. An increase in manufacturing activity means more jobs, higher pay, and …four steps down the line, has the ability to push interest rates higher.
So there you have a synopsis of the success of the two Fed mandates in a nutshell: maximum employment and stable prices. The reports of economic activity produced this week would suggest that the Committee is succeeding in their appoint mission. And I am speechless.
