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How Long Will It Take For a Full Budget To Get Passed?
13 hr 26 min ago
Congress avoided a shutdown for the fourth time in this budget cycle today, but only another week.
Lawmakers continue to delay passing a budget that was originally due in October. For a budget to pass the entire Congress, it must get a nod from Democrats, who control the Senate, and Republicans who have the majority in the House of Representatives.
Leaders in the two chambers have agreed to a compromise, setting a spending limit. Still, they have yet to hammer out the details of how that money will be distributed, with a contingent of Republicans calling for deep spending cuts for social programs.
If the two parties can’t find common ground, funding will run out for some agencies on March 8 and others on March 22.
Fed’s Officials Still Say Inflation Is on Downward Path
17 hr 3 min ago
Inflation remained stubborn in January by all accounts, but some Federal Reserve officials think it is just a temporary blip.
Atlanta Federal Reserve President Raphael Bostic and his counterpart in Chicago, Austan Goolsbee, said Thursday’s inflation report doesn’t indicate that the fight against inflation has stalled.
Bostic reiterated his previous expectations of a “summertime” cut in interest rates, noting that today’s Personal Consumption Expenditure index showed that inflation’s downward path continued to be “bumpy.”
“The last few readings have come in higher than people have hoped, but if you look over the long arc, the slope is still coming down,” Bostic said at a fireside chat in Atlanta. “The slope is not as steep as it was before, but it’s still negative and that’s positive. We just need to make sure it stays that way.”
In a separate online presentation to Princeton University, Goolsbee warned against extrapolating a trend from one month of data.
“The main thing to see is that we’ve had very substantial progress over a long-term basis,” Goolsbee said.
Fed officials are starting to see progress on core PCE for services, which are more closely tied to labor costs, Goolsbee said. However, one area where inflation has remained persistently elevated is housing.
“Why hasn’t housing inflation improved more than it has?” Goolsbee asked. “There has been some progress, but it’s still running way hotter than it was before. That’s been the surprise. This is the thing that’s weird.”
-Terry Lane
Mortgage Rates Rise, Inch Closer to 7%
17 hr 22 min ago
Mortgage rates approached the 7% threshold Thursday, keeping potential buyers on the sideline during a historically busy season for selling houses.
Mortgage rates ticked up slightly to 6.94% this week up from 6.90%, according to government-sponsored enterprise Freddie Mac. Interest on home loans hit a peak in October and has been trending down since, according to Freddie Mac. The falling rates had pulled more shoppers back into the market, but increases over the last four weeks are making the number of potential home buyers recede.
“The recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for home buying,” said Freddie Mac’s Chief Economist Sam Khater in a statement. “ While sales of newly built homes are trending in a positive direction, higher rates and elevated prices continue to pose affordability challenges that may leave potential homebuyers on the sidelines.”
Have Consumers Reached Their Spending Limit?
18 hr 23 min ago
Experts have been scrutinizing Thursday’s data on spending and income for clues about how well Americans will be able to continue the spending that has been fueling the economy.
From the perspective of household budgets, a surge in government benefits was canceled out by taxes and higher prices, especially for food, according to Thursday’s report on Personal Consumption Expenditures from the Bureau of Economic Analysis. The resulting stagnation of real disposable personal income could lead to a cutback in consumer spending, several economists noted. Up to this point, surprisingly high consumer spending has helped keep the economy growing fast and has staved off a recession.
“Investors should pay close attention to the slowdown in real disposable income as a potential sign that consumers are nearing the end of their spending splurge,” Jeffrey Roach, chief economist for LPL Financial, said in a commentary.
“The lack of real disposable income growth in January should weigh on real consumer spending growth in Q1, despite the eye-popping headline increase in nominal income growth,” Scott Anderson, chief U.S. economist at BMO Capital Markets, said in a commentary.
Taking a longer view, economists at Wells Fargo Securities said the inflation uptick shown in Thursday’s report is not likely to last, and predicted people will be able to continue to keep cash registers ringing.
“The gain in price growth is likely not the start of renewed sustained inflationary pressure. We expect consumer momentum remains intact and that a still-sturdy labor market should offer support to spending this year, even if that pace of spending is set to moderate,” they wrote.
Government Benefits Boosted Incomes In January
19 hr 8 min ago
January wasn’t a great month for people’s household finances for the most part, according to the Bureau of Economic Analysis report on Personal Consumption Expenditures Thursday, but there was one bright spot.
Personal incomes rose 1% from December, more than triple the 0.3% increase forecasters had expected according to economists surveyed by Dow Jones Newswires and the Wall Street Journal. It was the largest one-month increase in income since July 2021, and it gave people a little more breathing room to deal with rapidly rising prices, especially for food.
Government benefits were responsible for the boost, the BEA said. Namely, a 3.2% increase in Social Security payments from the annual cost of living adjustment, combined with a surge in tax credits given to people who enrolled in Affordable Care Act health care plans on government-run health care exchanges.
A record number of people enrolled in ACA plans for 2024 after being kicked off of Medicaid, the federal health insurance program for people with lower incomes, after a pandemic-era policy preventing people from being booted from the program expired.
ACA plans keep premiums low by subsidizing them with federal tax credits, which the bureau counts as income. The average person enrolled in one of those plans received $527 a month worth of tax credits, according to an analysis by the KFF, a nonprofit healthcare research organization.
However, the government taketh away as well as giveth. After accounting for taxes and inflation, the spending power of households was a wash, with real disposable income rising 0% over the month.
Pending Home Sales Slump To Start The Year
19 hr 52 min ago
Pending home sales took an unexpected dive in January, as mortgage rates keep people out of the home-buying market.
Pending home sales dropped 4.9% from the month prior and 8.8% from the same time last year, according to the National Association of Realtors. That’s far lower than the 1.5% increase economists expected and the 8.3% growth of December.
“The job market is solid, and the country’s total wealth reached a record high due to stock market and home price gains,” said NAR Chief Economist Lawrence Yun. “This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that’s impacting home sales.”
Initial Jobless Claims, Continuing Claims Tick Higher
20 hr 15 min ago
Unemployed workers applying for jobless benefits increased by 13,000 for the week ending on Feb. 24, with 215,000 workers claiming initial jobless claims. It’s more than the 210,000 initial jobless claims that economists were expecting to see.
The results ticked upward after it reached a four-week low last week.
“We may see some increase in jobless claims as labor market conditions loosen a bit further, but we expect claims will remain below the level that would be consistent with no net job growth,” wrote Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
Continuing unemployment claims, which can be a more volatile measurement, moved higher for the week of Feb. 17, while the four-week moving average also moved higher.
“That trend is consistent with other indicators showing that some unemployed individuals are finding it slightly more difficult to find new jobs,” Vanden Houten said.
-Terry Lane
The Federal Reserve’s Preferred Inflation Gauge Shows Prices Grew In January
21 hr 26 min ago
Inflation grew in January, according to the Federal Reserve’s preferred measure, revealing bumps in what many predict is still a soft landing.
The Personal Consumption Expenditures price index increased 0.3% from December and 2.4% from the prior year. That’s exactly what economists expected and up from December’s 0.1%. The core index, which excludes volatile food and energy prices, grew even more at 0.4%.
This report echoed January’s Consumer Price Index numbers that showed inflation remained stubbornly sticky. Since then, Federal Reserve officials have said there isn’t evidence that inflation is moving in the wrong direction, rather just a temporary setback in the fight against inflation.
However, Thursday’s report may push back the timeline in which Fed officials feel confident that inflation is on a sustainable path, allowing them to cut the influential fed funds rate.
Read more about what the accelerated inflation in January means here.
The Economy Historically Grows More In Leap Years, BMO Says
21 hr 51 min ago
Leap years are good for the economy historically.
When there’s an extra day in the year, gross domestic product growth is better than in years there isn’t, according to analysis by BMO. From 1948 to 2019, the average GDP growth in leap years is 3.60% compared to the 3.06% in the rest of the years.
The reason for that extra growth is simple, BMO thinks. Because there is an extra day, businesses and people often use that time working, adding 0.38% of work to the year. That’s similar to the additional GDP in leap years.