The US Economy is Starting to Reaccelerate

Apollo Chief Economist

The charts below show that homebuilder confidence is starting to improve, traffic of prospective homebuyers has bottomed, and the number of homeowners going into foreclosure has peaked.

Consumer sentiment has bottomed, CEO confidence has bottomed, and car buying confidence is turning more positive.

The Fed’s own measure of the true Fed funds rate has peaked, and, perhaps most importantly, inflation expectations are rising again.

Combined with strong nonfarm payrolls, very low jobless claims, and the lowest unemployment rate in more than 50 years, the bottom line is that the US economy is starting to reaccelerate.

This is a problem for the Fed with inflation at 6.5%. The risks are rising that inflation will be sticky at levels well above the Fed’s 2% inflation target.

In short, the Fed will be raising rates more than the market is currently pricing and keeping rates higher for longer than the market is currently pricing.

Our daily and weekly indicators for the US economy are available here.

Homebuilder confidence starting to improve
Source: NAR, Haver Analytics, Apollo Chief Economist
Traffic of prospective homebuyers starting to improve
Source: National Association of Homebuilders, Bloomberg, Apollo Chief Economist
New foreclosures starting to move down
Source: FRBNY Consumer Credit Panel, Equifax, Haver Analytics, Apollo Chief Economist
Consumer sentiment improving
Source: University of Michigan, Haver Analytics, Apollo Chief Economist
CEOs are more optimistic about the outlook
Source: The Conference Board, Haver, Apollo Chief Economist
US car buying sentiment is turning more positive
Source: Bloomberg, Apollo Chief Economist
The Fed's own proxy Fed funds rate has rolled over
Source: Bloomberg, Apollo Chief Economist. Note: Source: Monthly series of the proxy funds rate, from Doh and Choi (2016) and Choi, Doh, Foerster, and Martinez (2022). This measure uses public and private borrowing rates and spreads to infer the broader stance of monetary policy. When the Federal Open Market Committee uses additional tools, such as forward guidance or changes in the balance sheet, these policy actions affect financial conditions, which the proxy rate translates into an analogous level of the federal funds rate. The proxy rate can be interpreted as indicating what the federal funds rate would typically be associated with prevailing financial market conditions if these conditions were driven solely by the funds rate.
inflation expectations starting to rise again
Source: University of Michigan, Bloomberg, Apollo Chief Economist

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