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Economic Commentary – April 2024

Providing a degree of credence to the adage “April showers bring May flowers”, April sure held up its end of the arrangement. Across risk assets, both equity and fixed income markets were battered, ending the month in negative territory on the backdrop of declining economic indicators, broadly good earnings reports tempered by forward guidance riddled with uncertainties, and an inflationary landscape that has proven to remain stubborn throughout the first four months of 2024. Moreover, and not to be overlooked, financial markets as a whole seem to have an insatiable desire for rate cuts, but to the markets’ dismay, is toe-to-toe with a Federal Reserve that is reluctant to appease this desire until it has “gained greater confidence that inflation is on a sustainable path to its 2% objective.”

Analyzing a few key economic variables, CPI and PCE both registered modestly to the upside compared to expectations, real GDP growth surprised to the downside underwhelming expectations by 0.9%, and several ISM gauges recorded figures that were not only lower than expectations, but also below those produced in March. However, job creation and the employment landscape, which has been the bulwark of the U.S. economy, remained healthy, and retail sales proved to be robust, displaying that U.S. consumers had sustained their inclinations to spend. Taken all together, this was evidence of a U.S. economy that has continued to expand, albeit at below-trend growth, with inflation stuck within a range that is above the Federal Reserve’s preferred target.

April 30 was the commencement of the FOMC’s third policy meeting of the calendar year, with a decision on interest rate policy to be announced on May 1. While the market widely expected the FOMC to take no action and maintain the federal funds target rate range at 5.25% - 5.50%, it will be how the rate-setting committee outlines its intentions for the remainder of the year that will have economists and market participants most intrigued. As of April 30, the interest rate futures market had priced in essentially just one/two rate cuts prior to the conclusion of 2024, once again at odds with the Fed’s March Summary of Economic Projections, which had three rate cuts still penciled in. However, as time has elapsed since the March FOMC meeting, it should be noted that several Fed hawks, most notably Board Governor Michelle Bowman, have made several insinuations that if desired decelerations in inflation do not materialize, a further rate hike may be warranted.

Due to the obstinate and uncompromising nature of 2024’s inflation readings, market participants expected Fed Chairman Jerome Powell to emit a hawkish tone at his post-meeting press conference. In anticipation of a sustained restrictive policy stance, and an environment where interest rates are held higher for longer, fixed income markets underwent a month-long selloff, and yields spiked across the entire yield curve, with the most pronounced increases in the longer-dated tenors as the market presumes it will take the central bank longer to attain its 2% policy objective.  Lastly, an announcement regarding the tapering of the Fed’s quantitative tightening (balance sheet reduction) is expected to be provided at the conclusion of the meeting as well.

U.S. Treasury yield curve underwent a bear steepening as longer-dated yields surged, abridging inversions between key short-dated and long-dated tenors.


2-year/10-year spread: -36 basis points

3-month/10-year spread: -72 basis points

2-year/5-year spread: -32 basis points

3-month/30-year spread: -62 basis points

U.S. Treasury Yield Curve Source: Bloomberg

April 2024 Macroeconomic Highlights

Inflation, Expectations, and Consumer Sentiment1:

CPI: 3.5% year-over-year (0.4% month-over-month); Core CPI: 3.8% year-over-year (0.4% month-over-month)

PCE: 2.7% year-over-year (0.3% month-over-month); Core PCE: 2.8% year-over-year (0.3% month-over-month)

PPI: 2.1% year-over-year (0.2% month-over-month); Core PPI: 2.4% year-over-year (0.2% month-over-month)

Core PPI less trade services: 2.8% year-over-year (0.2% month-over-month)

Inflation Expectations: 1-year horizon: 3.0%, 3-year horizon: 2.9%, and 5-year horizon: 2.6%

Consumer Sentiment: 77.2 vs. 79.4 in March; Current Conditions: 79.0 vs. 82.5 in March

Consumer Expectations: 76.0 vs. 77.4 in March


Labor Market2: The U.S. economy added 303,000 nonfarm payrolls in March, outstripping the 214,000 expected by economists surveyed by Bloomberg. Notable job gains occurred in health care (+72,000), government (+71,000), leisure and hospitality (+49,000), and construction (+39,000).

  • U-3 official unemployment rate: 3.8% vs. 3.8% expectation: -0.1% from February 2024.

  • U-6 unemployment rate (marginalized, part-time workers for economic reasons): 7.3% (unchanged).

  • Labor force participation rate: 62.7% (+0.2%); Employment-to-population ratio: 60.3% (+0.2%).

  • Average hourly earnings for private nonfarm payrolls rose 12 cents to $34.69 (+0.3% month-over-month, +4.1% year-over-year).

  • Employment revisions: February 2024 trimmed -5,000 to 270,000; January 2024 lifted +27,000 to 256,000.

  • Employment Cost Index: +1.2% in the first quarter of 2024 vs. +0.9% in the fourth quarter of 2023.

Gross Domestic Product (GDP)3: According to the advance (initial) estimate, real GDP increased at annual rate of +1.6% in the first quarter of 2024 vs. +3.4% in the fourth quarter of 2023.

  • First Quarter 2024: GDP Price Index: +3.1%; PCE Price Index: +3.4%; Core PCE Price Index +3.7%.

  • Real disposable personal income: +1.1% vs. +2.0% in the fourth quarter of 2023.

  • Personal savings rate as a percentage of disposable income: 3.6% vs. 4.0% in the fourth quarter of 2023.

Housing Market4: Existing-home sales abated -4.3% (month-over-month) from February to a seasonally-adjusted annual rate of 4.19 million in March. Month-over-month sales in the West, South, and Midwest retreated -8.2%, -5.9%, and -1.9%, respectively, while sales in the Northeast advanced +4.2%.

  • Year-over-year sales ebbed -3.7%, down from 4.35 million in March 2023.

  • Total housing inventory registered 1.11 million units, +4.7% from February, and +14.4% from one year ago (0.97 million units). Unsold inventory sits at a 3.2-month supply at the current sales pace.

  • The median existing-home price for all housing types was $393,500, +4.8% from March 2023 ($375,300), as prices rose in all four major U.S. regions.

  • Average commitment rate for a 30-year, conventional, fixed-rate mortgage: 7.17%.

  • New Home Sales: 693,000 (+8.8% month-over-month).


1 Source: Bureau of Labor Statistics (BLS), U.S. Department of Commerce, Federal Reserve Bank of New York – Survey of Consumer Expectations, and University of Michigan Surveys of Consumers

2 Source: Bureau of Labor Statistics (BLS)

3 Source: Bureau of Economic Analysis (BEA)

4 Source: National Association of Realtors (NAR), U.S. Census Bureau, and The Department of Housing and Urban Development

SWSCM Economic Commentary - April 2024
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