The CHIPS and Science Act has led to a construction boom in advanced manufacturing, with some $189 billion being sunk into building out capacity for high technology goods, most importantly, advanced computer chips. Policy helpĮqually important, despite expectations to the contrary, fiscal stimulus is back and providing a potent offset to monetary tightening. Same for corporations, which "termed out" their debt, borrowing cheaply with long-term debt that doesn't have to be refinanced anytime soon, giving them more staying power in a slightly slower growth economy. Hence, they can keep spending money without having to service higher monthly mortgage payments. While it's true that households locked in to 3.5% mortgages are unlikely to sell their homes, constraining supply among existing home inventory, those same homeowners are not suffering the sticker shock normally associated with rate hikes.
That would suggest interest rate sensitivity is lower today than in other tightening cycles. Where some of us erred or may have erred - the jury is still out - is that the economy's resilience comes from several factors that may have been underestimated even as the Fed raised rates so quickly and so dramatically since early 2022.įirst, both corporations and households locked in low, long-term interest rates before the Fed began tightening monetary policy. The unemployment rate remains near historic lows and sits at the lowest level in history for people of color.Ĭonstruction spending is surging while the rollout of new technologies involving generative artificial intelligence is boosting the tech sector and, at least potentially, ushering in yet another era of disinflation or, quite possibly, outright deflation. However, first-quarter GDP was revised upward to show a 2% annual rate of growth.
We've never seen a stretch of declines in LEI without a recession hitting the economy … so too for the decline in home sales. Leading economic indicators have been negative for over a year now. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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