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Weekly Economic & Financial Commentary: What Is the Yield Curve Saying about Recession?


United States: Labor Market Slowly Losing Its Swagger

  • This week’s data continue to demonstrate an underlying resiliency in the economy, but with flickers of moderation. Employers added 187K net new jobs in August. The cooling labor market makes another rate hike this cycle unlikely in our view, yet with the labor market still tight and wage growth elevated, cuts are a ways off.
  • Next week: Trade Balance (Wed.), ISM Services Index (Wed.)

International: Moderating Global Growth and Moderating Global Inflation

  • This week’s key international data continued the trend of slowing global growth and gradual easing of inflation pressures. China’s August services PMI fell for a fifth straight month to 51.0, while in Canada the economy unexpectedly contracted in Q2. In the Eurozone, the August headline CPI held steady at 5.3% year-over-year, but core inflation moderated to 5.3%.
  • Next week: Reserve Bank of Australia Policy Rate (Tue.), Bank of Canada Policy Rate (Wed.), Mexico CPI (Thu.)

Interest Rate Watch: What Is the Yield Curve Saying about Recession?

  • Many financial market indicators seem consistent with the rising odds of a soft landing. The S&P 500 is up nearly 18% year-to-date, and corporate bond spreads have narrowed since the start of the year. However, one market indicator continues to flash some warning signs about the economic outlook: the shape of the yield curve.

Credit Market Insights: Middle-Upper Income Households Increasingly Relying on Credit Cards

  • The Household Pulse survey has been showing an increasing trend of middle-to-upper income households using credit cards and other loans to meet their weekly spend. These data come on the heels of data released earlier this month that showed consumers racked up an outstanding balance of over $1 trillion for the first time ever.

Topic of the Week: The State of U.S. Agriculture 2023

  • The nation’s farmers have endured tough economic and climate conditions over the past few years. Fortunately, the tide seems to be turning, with easing cost inflation and supply chain frictions.

Full report here.

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