Weekly economic and financial commentary

Summary

United States: Recession Risks Rise

• Last week's stronger-than-expected CPI print laid the groundwork for this week, sending markets into a churn and raising the risks of recession. We now look for the U.S. economy to experience a mild contraction in mid-2023. Economic data released this week add to evidence that the chances of a soft landing are fading.
• Next week: Existing Home Sales (Tues), New Home Sales (Fri)

International: Bank of England Raises Rates by 25 bps as Growth Unexpectedly Contracts

• The outlook for the U.K. economy may be starting to cloud, as the economy saw an unexpected contraction, with GDP falling 0.3% month-over-month in April. Against a backdrop of slowing growth and high inflation, the BoE delivered a 25 bps rate hike at its June monetary policy meeting, bringing the Bank Rate to 1.25%.
• Next week: Canada CPI (Wed), U.K. CPI & PMIs (Wed/Thurs), Eurozone PMIs (Thurs)

Interest Rate Watch: Treasuries Tumble as Yields React to CPI, Fed

• New economic data and aggressive Federal Reserve actions sent Treasury yields up sharply this week.Monday, in particular, was one of the most volatile days of the year for bond markets as yields spiked roughly 30 bps across most parts of the Treasury curve.

Topic of the Week: So What's Happening with Our Old Friend Supply Chains?

• There is still ample backlog to be chipping away at, but overall things tend to be gradually improving on the supply front. That doesn't mean we are out of the woods yet, as there are still mentions of supply chain disruptions among many industries, particularly in reference to lockdowns in China.

Download the full report