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Weekly Economic Report 9.15.23

US economic data continued to come in hotter than expected all week – but revisions to previous months’ data left the aggregate outcome not far from market expectations. Revisions have been relatively large lately, reflecting lower response rates on surveys, encouraging some caution about sharp shifts in direction. Indeed, the downward revision in retail sales helped erase some of the plunge in the savings rate seen in July. Bottom line, more than ever one has to rely on the preponderance of the data, rather than any “key” leading indicator. That is the position of the Federal Reserve, and their recent rhetoric has suggested that they would like to see even more data before adding to tightening in perhaps November or December – and they are not yet thinking of easing. The market is even more skeptical, with less than a 50% chance of an increase by December priced in (only 11 basis points) and then easing throughout 2024. We remain in the Fed’s camp on rates – not because we think that is the proper path, but because we believe the Fed does, and we do not see the data running weak enough to move them from their path. Unlike the consensus, we still see no recession in 2024.

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