The Beige Book paints a clouded outlook

Summary

United States: Higher mortgage rates begin to bite

• The sharp rise in mortgage rates appears to be slowing residential activity. Existing home sales fell 2.7% during March. Housing starts inched up 0.3% during March. However, single-family starts declined 1.7% during the month and single-family permits dropped 4.8%. The NAHB index fell two points to 77 in April. The Leading Economic Index (LEI) expanded 0.3% in March, reflecting slower-but-still positive economic growth.

• Next week: Durable Goods (Tue), New Home Sales (Tue), GDP (Thu)

International: China's still stumbling economic momentum

• China's economy started 2022 on a reasonable note as Q1 GDP rose 1.3% quarter-over-quarter, with manufacturing activity holding up quite well and services activity somewhat softer. However, March retail sales fell particularly sharply, while the ongoing impact of COVID lockdowns suggests April activity data could be even weaker. We forecast Chinese GDP growth of 4.9% for full-year 2022, but see the risk around that outlook as tilted to the downside.

• Next week: Australia CPI (Wed), Sweden Policy Rate (Thu), Eurozone CPI (Fri)

Credit market insights: Student loan developments are a boost to young adult balance sheets

• On Tuesday, the Department of Education announced another policy designed to bring student loan borrowers closer to debt forgiveness and ease their ability to pay off debts, affecting an estimated 3.6 million borrowers.

Topic of the Week: The Beige Book paints a clouded outlook

• The Fed's Beige Book, released eight times per year, qualitatively reports on regional economic conditions. Although activity was generally solid over the survey period, this week's report underscores a growing sense of uncertainty about the economy's path in the coming months.