Looking really Bad Now

 

Between the most aggressive rate hike campaign in history and an easing pace of inflation, it looks the Fed Funds rate is finally in neutral territory.

Like Goldilocks’ porridge, when you subtract inflation of 4.96% (the latest year-over-year increase for the PCE deflator – the Fed’s preferred inflation gauge) from the Fed Funds rate, the Federal Open Market Committee seems to have landed at not too hot and not too cold. And while the Fed takes a wait-and-see approach, the question becomes how soon before fighting recession becomes the priority. Job Openings have tumbled…

The housing continues to contract with construction down…

Fewer new homes being constructed…

And plans for new homes on the decline…

Bank sector credit tightening is also taking a bite.  Consumer credit has turned lower…

And industrial loans have turned lower, as well…

For the better part of 2 years, retail sales have remained relatively stable having plateaued at COVID stimulus highs…

We’ll get an updated read on this stat tomorrow, with the median forecast expecting Retail Sales to increase by 0.8% during April. But with the debt ceiling breach now moved up to June 1, the Fed might not have the luxury of waiting.