Weekly economic and financial commentary

Summary

United States: Stowin' away the time

• The economic calendar was quiet the past few days, so market participants continued to digest last week's slew of data. Stronger-than-expected inflation, underpinned by the mildly hawkish minutes from the January FOMC meeting, drove a move higher in mortgage rates. We currently forecast the first rate cut to take place in May, but the timing of that cut is at risk of slipping further into the summer.
• Next week: New Home Sales (Mon.), Durable Goods (Tue.), Personal Income (Thu.)

International: European February PMIs show modestly firmer growth, persisting price pressures

• European February PMI surveys were mildly encouraging: The Eurozone services PMI rose more than expected, and the U.K. services PMI remained steady and comfortably in growth territory. Those same surveys showed persisting cost and price pressures across Europe. The reports increase the risk that the European Central Bank will wait until June (rather than April) to cut interest rates, while we expect the Bank of England to start lowering interest rates in June as well.
• Next week: Canada GDP (Thu.), China PMIs (Fri.), Eurozone CPI (Fri.)

Interest rate watch: Why put off until tomorrow what can be put off until the next day?

• In the seven months since the Fed’s last rate hike in July, Chair Powell has cautioned the best policy prescription might be to keep rates higher for longer and that any policy decision would be dependent upon the data. Financial markets have not always taken that at face value. We unpack how the expected timing of cuts has changed.

Topic of the week: Personal food expenditure: Eating out taking a bigger bite of what's coming in

• Consumer outlays on food as a share of disposable personal income have shifted higher over the past two years. Digging down, consumer spending on eating out as a share of income has come back with a vengeance from its brief decline during the pandemic, and it has been the biggest driver of food taking a bigger bite out of consumers’ wallets.

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