Making Sense: In Brief
The week ahead for markets and the economy
Phil: Last week, investors analyzed the Federal Open Market Committee's decision to hold interest rates steady, along with the Committee's unchanged federal funds rate forecast.
Looking to the week ahead, the most important data is released on Friday in the form of February's personal income and spending report. Both consumer spending and income are expected to grow, but the most important data point in the report is the personal income expenditure deflator, which is the Fed's preferred inflation measure. For two consecutive months, the Consumer Price Index has surprised to the upside, driving renewed inflation concerns.
In this week's report, the PCE deflator is expected to post 2.5% headline inflation, an increase from 2.4% in January. The core deflator, which excludes food and energy, is forecasted to be unchanged at 2.8%.
Sticky inflation is a problem not only for consumers but also for the Fed. Chairman Powell made it clear last week that the FOMC expects and would like to cut rates this year. For this to happen, inflation needs to cooperate.
The housing market will again be in focus this week with new home sales data on Monday and fresh Case-Shiller home price data on Tuesday. New home sales are below their 2020 highs but have remained far more resilient than existing home sales because home builders continue to build new homes in the face of a tight housing market. The market tightness has also supported home price appreciation. In the January data released last month, home prices rose 5.5% year over year nationally—a trend that's unlikely to reverse in this week's data.
So items to watch this week. One, personal income and spending. Two, housing data.
Making Sense In Brief Outro Slide
Brent Ciliano
CFA | SVP, Chief Investment Officer
Capital Management Group | First Citizens Bank
8510 Colonnade Center Drive | Raleigh, NC 27615
brent.ciliano@firstcitizens.com | 919-716-2650
Phillip Neuhart SVP, Director of Market and Economic Research
Capital Management Group | First Citizens Bank
8510 Colonnade Center Drive | Raleigh, NC 27615
phillip.neuhart@firstcitizens.com | 919-716-2403
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