Summary

United States: Demand Continuing to Outstrip Supply

  • Although the headline rate of Q2 GDP came in softer than expectations, part of that was due to supply chain problems as businesses had to draw down inventories to meet demand, resulting in a drag on growth.
  • Consumer spending exceeded expectations and the latest consumer confidence figures rose to a post-pandemic high.
  • Next week: Construction Spending (Monday), ISM Manufacturing (Monday), Employment (Friday)

International: Eurozone Enjoying an Economic Recovery Sweet Spot

  • Eurozone Q2 GDP rose more than expected, with particularly large gains for Italy and Spain, while confidence surveys suggest that momentum carried into at least the early part of the third quarter. Meanwhile, CPI inflation quickened only moderately in July, while core CPI actually slowed. Given this favorable growth and inflation mix, we expect the European Central Bank to maintain its accommodative monetary policy and, indeed, ease policy further by December.
  • Next week: China PMIs (Saturday), Brazil monetary policy announcement (Wednesday), Bank of England policy announcement (Thursday)

Interest Rate Watch: "Progress" Has Been Made, But Is It Enough To Taper?

  • The Federal Open Market Committee (FOMC) announced no major policy changes at the conclusion of its two-day meeting on July 28, leaving the target range for the federal funds rate unchanged at 0.00% to 0.25%, and maintaining its monthly purchase rate of Treasury securities and mortgage-backed securities at $80 billion and $40 billion, respectively.

Credit Market Insights: Millennial Market Makers

  • Despite high home prices and elevated debt burdens, homeownership among younger cohorts is starting to pick up meaningfully in the post-pandemic economy.

Topic of the Week: Infrastructure Deal Is the Appetizer to the Fall Fiscal Feast

  • This week, Congress took a major step toward enactment of the $559 billion bipartisan infrastructure deal. The Senate voted 67-32 in favor of clearing an important procedural hurdle to eventual passage.

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