US Macro Weekly 14:16 CET

17 May 2024

C https://research.ca-cib.com

April CPI better than Q124, but still more work to do

Nicholas Van Ness
The US Macro Weekly will be on a brief hiatus, with publication resuming 7 June US Economist
+1 212 261 7601
Week ahead [email protected]

 With the early April inflation reports out of the way, it will be a quieter
week, with focus on the minutes from the May FOMC meeting along with
a slew of Fed speakers. On the data front, releases include durable goods
orders, UofM consumer sentiment, and some housing data.

 The minutes will provide some insight into the Fed’s discussions from Key Market Movers
its latest meeting in May, though we do not expect any major revelations
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that we have not already heard. We will keep an eye out for any Indicator CA-CIB Prior
discussion of possible hikes, and how large a group may be open to such FOMC Minutes (Wed) N/A N/A
a move, but it is abundantly clear that the bar for a hike is very high, with Durables (Fri) -0.5% 2.6%
Chair Jerome Powell having explicitly said that one is “unlikely”. Source: Bloomberg, Crédit Agricole CIB

 As well, we will watch for any indication as to what exactly the Fed needs
Highlighted US Publications
to see to be ready to cut and any hints on potential timing. That said, with
committee members generally indicating comfort with holding at the 13 May – April CPI preview
current stance for an extended period, we expect that the FOMC will want 10 May – US Macro Weekly with 13-31
to keep its options open and stress data dependence, thus taking pains May Eco Calendar
to avoid any clear signals on timing. 7 May – 2024 US Elections: polling update
3 May – Further cooling in labour market
Week in review could prompt Fed reaction
2 May – Fed retains easing bias despite
 Inflation data provided a bit of relief as CPI broke a Q124 trend of upside
surprises to come in very close to expectations in April, including a hotter Q124 inflation
softer MoM core print. The inflation data is still far from sending an all- 1 May – April employment preview
clear signal, but when combined with some weaker data elsewhere, such 26 Fri – May FOMC preview: holding
as a downside surprise in retail sales, it keeps the Fed on track to cut steady
rates later in the year, even if the timing remains uncertain. 17 Apr – Immigration helps explain recent
labour market data
 We will not repeat all the details in the intro bullets, but the key 16 Apr – What does the CPI to PCE
development in the largely as-expected CPI report was a step down in wedge mean for Fed easing prospects?
the sequential pace of core CPI to 0.3% after three straight months at 11 Apr – 2024 US Elections: policy
0.4%. Additionally, while the main PPI metrics surprised to the upside in implications
April, the components relevant to PCE were mostly benign, aside from 10 Apr – March CPI report shows
portfolio management and investment advice, and March saw a notable progress stalling
downward revision.

 Taken together, the CPI and PPI reports signal a relatively soft print for
core PCE in April, with a MoM reading between 0.2% and 0.3% likely. We
are tentatively expecting something more like 0.26% so are leaning
towards rounding up, but would not be surprised by 0.2%.

 Aside from inflation, other data leaned to the softer side, most notably
retail sales, which missed expectations in April on top of downward
revisions to March. Overall, Q224 consumption is still on track for a
solidly positive quarter, though we do see momentum slowing. As well,
we expect further slowdown moving forward given developing cracks
such as consistently rising consumer delinquencies that were on display
in the New York’s Fed’s latest household credit data.

 For the Fed, rate cuts remain on the table later this year, but timing is still
up in the air. Our base case of July is essentially the earliest possible
timing for a cut at this point, with risks tilted towards a later start to the
easing cycle, barring a sharp and unexpected deterioration in the labour
market.

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 US Macro Weekly 17 May 2024 (14:16 CET)

US Economic Outlook
 The US economy has remained resilient overall, with solid H123 growth
accelerating further in H223. We do not believe this is sustainable and
look for activity to slow as we move into 2024, though we expect that
growth can muddle along at a below-trend but still-positive pace through
mid-2024. However, we are more downbeat by later in 2024 and expect a
delayed recession to begin towards the end of the year.

Any changes in the view from last week in italics

Growth in 2023 was more resilient than expected, and we expect the
economy to continue to grow through the middle of 2024. However, we are
more downbeat on the latter portion of 2024 into early 2025 and now expect
a delayed recession in Q424 and Q125.
For now, we keep our base-case recession as a relatively mild one given
factors such as healthy household balance sheets, though the longer rates
remain high, the greater the risk of something breaking and a more severe
downturn. That said, our base case leaves annual average growth slowing to
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2.1% in 2024 from 2.5% in 2023, before dipping further to 0.4% in 2025, despite
quarterly growth beginning to bounce back towards 2% by late 2025.
The pattern and risks highlighted above are largely reflective of our views on
the lagged transmission of monetary policy. With many households and
corporates having locked in low rates on existing debt, the economy has been able
to withstand monetary tightening well to this point. However, as more debt must be
re-financed at higher rates in 2024 and into 2025, we anticipate that the impact of
monetary policy will be felt more fully only with a substantial lag.
Despite the downturn in the economy, inflation has become a bit more
entrenched, with services prices relatively sticky and only declining slowly.
As a result, we see headline CPI gradually slowing to around 3% and core to just
above 3% by end-2024 before holding a few tenths below those levels through
2025 to remain above target over our entire forecast horizon.
We expect the labour market to cool further, with a peak unemployment rate
of around 4.6%. However, this is less of an increase than would be typical based
on prior recessions, as an unprecedented imbalance between labour demand and
labour supply, which may continue to face headwinds as baby boomers retire,
allows labour market cooling to be more skewed toward declining job openings
than mass layoffs.
Taking these together, the Fed is still cautious about cutting too early, and
we expect the first cut in July 2024, followed by one more in November to
leave the upper bound at 5.00% at end-2024. When economic weakness
becomes more evident by late-2024 into 2025, the pace of cuts should pick up with
the Fed cutting by 50bp in each of the first three quarters of 2025 for a total of
150bp of cuts before pausing with the upper bound at 3.50%.

Fig 1. Crédit Agricole CIB US Economic Forecasts

2023 2024 2025 Annual Average
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2022 2023 2024 2025
Real GDP (QoQ SAAR %) 2.2 2.1 4.9 3.4 1.6 1.8 0.5 -0.8 -0.5 1.1 1.4 2.0 1.9 2.5 2.1 0.4
Consumption 3.8 0.8 3.1 3.3 2.5 2.1 0.6 -0.5 -0.4 1.0 1.2 1.9 2.5 2.2 2.1 0.5
Nonresidential Fixed Investment 5.7 7.4 1.4 3.7 2.9 2.2 0.8 -1.8 -2.4 1.4 1.8 2.9 5.2 4.5 2.5 -0.1
Residential Investment -5.3 -2.2 6.7 2.8 13.9 2.0 2.5 -2.0 -3.0 0.5 1.6 1.8 -9.0 -10.6 5.1 -0.3
Government Spending 4.8 3.3 5.8 4.6 1.2 2.0 1.3 1.0 1.0 1.0 1.0 1.0 -0.9 4.1 2.7 1.1
Inventories (pp contr.) -2.2 0.0 1.3 -0.5 -0.4 -0.3 -0.3 -0.1 0.0 0.0 0.1 0.1 0.6 -0.4 -0.1 -0.1
Net Exports (pp contr.) 0.6 0.0 0.0 0.3 -0.9 0.0 -0.1 -0.2 0.0 0.1 0.0 0.0 -0.5 0.5 -0.2 0.0

CPI (YoY %) 5.7 4.0 3.6 3.2 3.2 3.4 2.8 2.9 2.6 2.3 2.4 2.5 8.0 4.1 3.1 2.5
Core CPI (YoY %) 5.5 5.2 4.4 4.0 3.8 3.5 3.4 3.4 3.1 2.8 2.8 2.8 6.2 4.8 3.5 2.8

Unemployment Rate (%) 3.5 3.6 3.7 3.8 3.8 4.0 4.2 4.3 4.4 4.6 4.6 4.5 3.7 3.7 4.1 4.5

Fed Funds Upper Bound (EOP) 5.00 5.25 5.50 5.50 5.50 5.50 5.25 5.00 4.50 4.00 3.50 3.50 4.50 5.50 5.00 3.50

Source: Bloomberg, Crédit Agricole CIB

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 US Macro Weekly 17 May 2024 (14:16 CET)

US Economic Calendar
Main data/event calendar
Mon, 20 May Tue, 21 May Wed, 22 May Thu, 23 May Fri, 24 May
Bostic (0)* Gives Welcome Barkin (0)* Gives Welcome Existing Home Sales: 10:00 Initial Jobless Claims: Durable Goods Orders:
Remarks (8:45) Remarks (9:00) Apr: 4.30m/2.6% est. (cons: 18 May (8:30) 8:30
Barr (0)* Gives Keynote Waller (+1)* on US 4.19m/-0.1%) Chicago Fed Nat’l Activity Apr P: -0.5% est. (cons: -
Remarks (9:00) Economy (9:00) Mar: 4.19m/-4.3% Index: Apr (8:30) 0.8%)
Waller (+1)* Givers Opening Williams (0)* Gives Opening Goolsbee (-1)* Gives Mar: 0.9%
Remarks (9:00) Remarks (9:05) S&P Global Mfg/Svcs PMIs:
Opening Remarks (9:40) May P (9:45) UofM Consumer Sentiment:
Jefferson (0)* on Economic Bostic (0)* Offers Welcome FOMC Meeting Minutes: 1 10:00
Outlook, Housing (10:30) Remarks (9:10) May (14:00) New Home Sales: 10:00 May F: 67.4 est. (cons: 67.4)
Bostic (0)* Moderates Barr (0)* in Fireside Chat Apr: 679k/-2.0% est. (cons: May P: 67.4
Keynote Remarks (19:00) (11:45) Auction: 4-mo bill (11:30) 675k/-2.6%)
Bostic (0)*, Collins (0)*, and Auction: 20-yr bond $16bn Mar: 693k/8.8% Waller (+1)* Gives Keynote
Auction: 3-mo bill; 6-mo bill (13:00) Address on r* (9:35)
(11:30) Mester (+1)* on Panel
Kansas City Fed Mfg Index:
(19:00) Optional Freddie Mac May (11:00)
Announcement: 4-wk bill; Reference Note
Announcement Bostic (0)* in Student Q&A
8-wk bill; 4-mo bill (11:00)
(15:00)
Announcement: 3-mo bill;
6-mo bill; 2-yr FRN $28bn
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est.; 2-yr note $69bn est.; 5-

yr note $70bn est.; 7-yr
note $44bn est. (11:00)
Auction: 4-wk bill; 8-wk bill
(11:30)
Auction: 10-yr TIPS $16bn
(13:00)
Mon, 27 May Tue, 28 May Wed, 29 May Thu, 30 May Fri, 31 May
Memorial Day Holiday Case-Schiller Home Prices: Richmond Fed Mfg Index: Initial Jobless Claims: Personal Income &
Mar (9:00) May (10:00) 25 May (8:30) Spending: Apr (8:30)
Conf Board Consumer Beige Book: 29 May (14:00) Wholesale/Retail PCE Inflation: Apr (8:30)
Confidence: May (10:00) Auction: 4-mo bill; 2-yr FRN Inventories: Apr (8:30) Chicago PMI: May (9:45)
Dallas Fed Mfg Index: May (11:30) Advance Goods Trade Bostic (0)* Commencement
(10:30) Auction: 7-yr note (13:00) Balance: Apr (8:30) Address (18:15)
Mester (+1)* at BoJ Event Optional Fannie Mae GDP: Q1 S (8:30)
(00:55) Benchmark Announcement Pending Home Sales: Apr
Announcement: 4-wk bill; (10:00)
8-wk bill; 4-mo bill (11:00) Announcement: 3-mo bill;
Auction:3-mo bill; 6-mo bill 6-mo bill (11:00)
(11:30) Auction: 4-wk bill; 8-wk bill
Auction: 2-yr note; 5-yr (11:30)
note (13:00)
Mon, 3 Jun Tue, 4 Jun Wed, 5 Jun Thu, 6 Jun Fri, 7 Jun
S&P Global Mfg PMI: May F JOLTS Job Openings: Apr ADP Employment Report: Challenger Job Cuts: May Employment Report: May
(9:45) (10:00) May (8:15) (7:30) (8:30)
ISM Manufacturing: May Factory Orders: Apr (10:00) S&P Global Svcs PMI: May Initial Jobless Claims: Wholesale Inventories: Apr
(10:00) Announcement: 4-wk bill; F (9:45) 1 Jun (8:30) (10:00)
Construction Spending: 8-wk bill; 4-mo bill (11:00) ISM Services: May (10:00) Nonfarm Productivity & Household Change in Net
Apr (10:00) Auction: 4-mo bill (11:30) ULC: Q1 F (8:30) Worth: Q1 (12:00)
Motor Vehicle Sales: May Optional FHLB Global Trade Balance: Apr (8:30) Consumer Credit: Apr
(PM) Bullet Announcement Announcement: 3-mo bill; (15:00)
Auction:3-mo bill; 6-mo bill 6-mo bill; 1-yr bill; 3-yr note
(11:30) $58 bn est.; 10-yr note
$39bn est.; 30-yr bond
$22bn est. (11:00)
Auction: 4-wk bill; 8-wk bill
(11:30)

Source: Bloomberg, Crédit Agricole CIB; * the number in parenthesis next to an FOMC member’s name indicates their rating on our dove/hawk
scale, with -2 representing the most dovish and +2 the most hawkish

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 US Macro Weekly 17 May 2024 (14:00CET)

Week Ahead
 With the early April inflation reports out of the way, it will be a quieter
week, with focus on the minutes from the May FOMC meeting along with
a slew of Fed speakers. On the data front, releases include durable goods
orders, UofM consumer sentiment and some housing data.

The minutes will provide some insight into the Fed’s discussions from its FOMC Meeting Minutes (1 May)
latest meeting in May, though we do not expect any major revelations that Wednesday, 14:00 EDT
we have not already heard. We will keep an eye out for any discussion of possible
hikes, and how large a group may be open to such a move, but it is abundantly
clear that the bar for a hike is very high, with Chair Jerome Powell having explicitly
said that one is “unlikely”.
As well, we will watch for any indication as to what exactly the Fed needs to see to
be ready to cut and any hints on potential timing. That said, with committee
members generally indicating comfort with holding at the current stance for an
extended period, we expect that the FOMC will want to keep its options open and
stress data dependence, thus taking pains to avoid any clear signals on timing. We
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will also read any discussions on the balance sheet carefully, though with the QT
taper announcement having been made at the meeting, we likely already have the
major details on this front.
Durable goods orders have been mixed recently, with some ups and downs Durable Goods Orders (Apr P)
in recent months that have been reflected in mixed equipment investment in Friday, 8:30 EDT
recent quarters. We expect April will be a down month and look for a -0.5% decline
on the heels of a 0.9% increase in March, largely driven by transportation as civilian
aircraft orders are likely to drop following a plunge in Boeing orders, even if
seasonal adjustment may mitigate the extent of the decline. This would set the
stage for relatively subdued equipment investment in Q224.
Housing data has stabilised after the sharp decline in 2022, albeit with some Existing Home Sales (Apr)
divergence between metrics. For example, existing home sales have dropped Wednesday, 10:00 EDT
sharply and are at rock bottom levels given a lock-in effect that has kept inventories
New Home Sales (Apr)
historically low, though new home sales have performed much better as they are
Thursday, 10:00 EDT
not subject to this same lock-in effect. Though in April we expect existing home
sales to rebound 2.6% to a 4.30m unit-rate due to a recent uptick in pending home
sales and new home sales to pull back -2.0% to a 679k unit-rate, this would not
change the overall picture outlined above. Even if our forecasts are on track, the
level for existing home sales would remain very weak while the level for existing
home sales would be well within the pre-Covid range.
Consumer spending has been resilient so far, but sentiment has taken a hit UofM Consumer Sentiment (May F)
more recently. We expect the final May print for the UofM index to hold at 67.4, Friday, 10:00 EDT
which would be down from above 79 as recently as March. While we would caveat
that the correlation between actual spending and sentiment is a relatively loose
one, a continued pullback would point to risks of consumers reining in spending
later in the year.

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 US Macro Weekly 17 May 2024 (14:00CET)

Week in Review
Data Review
Inflation data provided a bit of relief as CPI broke a Q124 trend of upside
surprises to come in very close to expectations in April, including a softer
MoM core print. The inflation data is still far from sending an all-clear signal, but
when combined with some weaker data elsewhere, such as a downside surprise
in retail sales, it keeps the Fed on track to cut rates later in the year, even if the
timing remains uncertain.
Overall, the April CPI report indicated some modest improvement from the
last few months. Specifically, headline CPI rose 0.3% MoM, below
expectations of 0.4% and down from 0.4% in March, with the YoY pace edging
lower to 3.4% from 3.5% in March. Energy prices contributed to the advance in
April, rising 1.1% MoM, though were partially offset by softer food prices, which
came in flat MoM.
Core CPI also rose 0.3% MoM, matching consensus to take a step down from
three straight months at 0.4%. As a result, the YoY pace slowed to 3.6% from
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3.8%, resuming a decline after holding steady last month. This print saw the
three-month annualised pace drop back down to 4.1% from 4.5%, still too high but
at least breaking the uptrend that persisted through Q124 (see Figure 2).

Fig 2. Three-month annualised core reverses uptrend Fig 3. Services prices, especially ex-shelter, still sticky
Core CPI YoY % 14% Core Services ex-Shelter CPI (YoY %)
10.0 Core CPI 3M Annualized %
Core CPI 6M Annualized % Core Goods CPI (YoY %)
12% Shelter CPI (YoY %)
8.0
10%
6.0
8%
4.0
6%
2.0
4%
0.0
2%

-2.0 0%

-4.0 -2%
Jan-12 Nov-13 Sep-15 Jul-17 May-19 Mar-21 Jan-23 Jan-18 Dec-18 Nov-19 Oct-20 Sep-21 Aug-22 Jul-23

Source: Bloomberg, Crédit Agricole CIB Source: Bloomberg, Crédit Agricole CIB

The details continued to show that inflation is currently services-driven,

though again represented a small step in the right direction. Core goods prices
declined MoM for a second straight month, and though the sequential pace for core
services ticked down from the Q124 range, it remains firm.
To start with core goods, a -0.1% MoM decline in April on the heels of a -0.2%
drop in March saw the YoY pace drop deeper into negative territory at -1.3%
from -0.7%. The monthly decline in core goods was led by motor vehicles, as used
cars fell by -1.4% MoM and new cars dipped -0.4% MoM, outweighing an increase
of 1.2% MoM in apparel. Overall, core goods inflation has made very good
progress after peaking above 12% YoY in February 2022, though we expect the
disinflationary impulse for goods to be on the wane going forward.
This means that further disinflation will have to be more driven by services,
where prices have been stickier. In April, core services prices rose 0.4%, its
lowest level since December, meaning there was some improvement from
Q124 even if the sequential pace remains firm overall. As a result, core services
inflation edged very slightly lower on a YoY basis to 5.3% from 5.4%.
The stickiness in services has been most pronounced in the super-core
portion, which has accelerated on a YoY basis since the end of last year (see
Figure 3). This month, core services less shelter rose by +0.46% MoM, down from
a very strong +0.68% last month, though the YoY rate still edged very slightly

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 US Macro Weekly 17 May 2024 (14:00CET)

higher to 5.05% from 5.02%. A slight variation, core services less housing, showed
a similar trend with the MoM pace coming in at +0.42% MoM, decelerating from a
strong +0.56% last month, and the YoY pace rising to +4.91% from 4.80%.
Once again, the MoM increase for super-core was led by transportation services,
which jumped another 0.9% MoM even if this slowed compared to +1.5% MoM in
March. Motor vehicle insurance continues to run extremely hot, surging 1.8% MoM
on the heels of the 2.6% increase in March, with the YoY pace for this component
now at a whopping 22.6%.
Turning to the last major CPI component, shelter rose 0.4% MoM, with the
YoY rate falling to 5.5% from 5.7% on a rounded basis, though the decline in
the unrounded number was closer to one-tenth. Shelter has taken a step back
down after the unexpected 0.6% MoM increase in January, and continues to slow,
though the process has been and is likely to continue to be a gradual one.
Within shelter, both OER and rent rose 0.4% MoM, coming in very close to our
expectations and adding to the evidence that the strength in OER in January was
mostly noise. That said, as for overall shelter, the improvement in these two
components has been very gradual and the YoY rate remains elevated for now.
Looking past March, we expect further decline in 2024 but there remains a
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ways to go to get back to 2%. In detail, we currently see core CPI gradually
slowing to around 3.3% by year-end, before dipping a bit further in 2025 and then
stalling around the 2.7% range. For headline CPI, we look for it to hover around
3% for the remainder of the year, before dipping to roughly 2.4% and holding
around that range for much of 2025 (see Figure 10).

Fig 4. Retail sales level solid, but momentum slowing Fig 5. Delinquencies continue to trend higher
750 16 Auto Credit Card Mortgage
Total Retail Sales ($bn) Home Equity Student Loan
Retail Sales Pre-Covid Trend ($bn)
700 14

12
650
10
600
8
550
6
500
4
450
2

400 0
Jan-17 Feb-18 Mar-19 Apr-20 May-21 Jun-22 Jul-23 03:Q1 05:Q2 07:Q3 09:Q4 12:Q1 14:Q2 16:Q3 18:Q4 21:Q1 23:Q2

Source: Bloomberg, Crédit Agricole CIB Source: Bloomberg, Crédit Agricole CIB

PPI data at first glance was less encouraging, as the April MoM figures easily
topped expectations with both headline and core jumping 0.5%. However,
this came on the heels of notable downward revisions to -0.1% MoM for each
in March, which meant that YoY metrics were close to expectations at 2.2%
for headline and 2.4% for core.
Additionally, the PPI components that are relevant for the Fed’s preferred
PCE inflation metric were relatively benign on the whole. Admittedly, portfolio
management and investment advice came in hot, but airfares showed a notable
decline, medical care services components were relatively subdued, and car
insurance was much softer than in CPI.
Taken together, we think this means a relatively softer core PCE print in April,
which should come in between 0.2% and 0.3% MoM. If we had to put a more
exact number we are tentatively around 0.26% MoM and so would round up to
0.3%, but would not at all be surprised if it ended up rounding down to 0.2%. If our
MoM forecast is on track, the YoY rate would hold at 2.8%, though again it is close
to rounding down to 2.7%, especially if March were to see any downward revision.
Overall, the April data represents a clear improvement compared to Q124,
with the downtick in MoM core the most notable of the main CPI numbers.

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 US Macro Weekly 17 May 2024 (14:00CET)

That said, there is still a long way to go given that we expect only gradual progress
as we move forward, with super-core likely to remain sticky. As such, the FOMC
will likely feel a bit better than it did before the April report, but still less confident
than it did entering the year.
In this vein, the April inflation data likely keeps rate cuts on the table for later
in the year, though the timing remains uncertain. Our base case of a first cut
by July is still possible if the next couple of inflation reports come in on the
softer side, especially if the labour market were to show further signs of
cooling, though we continue to believe that risks are clearly tilted towards a
later start to the cycle.
Aside from the inflation data, we would also highlight the April retail sales
report, which surprised to the downside while March figures were revised
lower. Specifically, headline retail sales were flat in April while the control group
declined by -0.3%. Given the strong handoff from February and March, overall
consumption is still on track for a solidly positive quarter in Q224 at the moment.
That said, momentum does look to be slowing (see Figure 4) and we continue to
expect consumers to rein in spending in the latter portion of the year.
Contributing to this view are some cracks that we see developing under the
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surface, which can be seen in the continuing rise in consumer delinquencies

that was evident in this week’s update to the New York Fed’s Household Debt
and Credit Report. Here, both auto and credit card delinquencies once again
trended higher, extending a clear pattern that has seen each rise to their highest
level in more than a decade (see Figure 5). Additionally, mortgage delinquencies
have started to rise as well even as most are locked into extremely low rates, and
while the level is still just below the pre-Covid period right now, any further increase
would indicate additional pressure on consumers.
Fed
While a number of Fed speakers hit the tapes throughout the week, including
Chair Powell on Tuesday, there were really no updates of note. Overall, FOMC
members seem comfortable with the current stance of policy and have downplayed
the possibility of a hike, while at the same time acknowledging that it will likely take
longer than previously anticipated to gain the needed confidence to cut rates.

Fig 6. Market sees little chance of June cut Fig 7. Fed pricing softens slightly in wake of April CPI
Target Range Probabilities for 12 June 2024 FOMC 5.4 % As of 10 May 2024 As of 16 May 2024
Meeting
100% 91.3% 5.3
90%
5.2
80%
70% 5.1
Probability

60%
50% 5
40%
4.9
30%
20% 4.8
8.7%
10% 0.0%
0% 4.7
475-500 500-525 525-550: Current
Target Range (bps) 4.6
Dec-23 Feb-24 Apr-24 Jun-24 Aug-24 Oct-24 Dec-24

Source: Bloomberg, Crédit Agricole CIB; as of 11:00 on 16 May 2024 Source: Bloomberg, Crédit Agricole CIB

Washington DC
The Biden Administration concluded its review of former President Donald
Trump’s Section 301 tariffs levied on China, and ended up deciding to further
raise tariffs on certain Chinese imports. Specifically, tariffs on semiconductors
and solar cells will be raised to 50% from 25% and tariffs on EVs will be quadrupled
to 100% from 25%, with a handful of other products seeing new tariffs (see our EM
team’s Emerging Market Focus article for more details). That said, the tariffs are
targeted, with a limited scope (covering an estimated USD18bn of imports) and are

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 US Macro Weekly 17 May 2024 (14:00CET)

thus unlikely to have a major impact on the US economy. We view the decision as
mostly political posturing ahead of the upcoming election.
Markets
Fed pricing softened modestly in the wake of the April CPI report as the
market moved towards pricing two full cuts by year-end. The market still sees
a June cut as highly unlikely (see Figure 6), with September now at around 90%
odds. For the year as a whole, the market is pricing 47bp by December, slightly
more than the roughly 42bp at the end of last week.
With some relief after the April CPI report resulting in slightly softer Fed
pricing, Treasury yields dropped as well. From last Friday’s close through mid-
day Thursday, the 2Y yield fell almost 10bp to 4.77% from 4.87%, while the 10Y
yield was down 14bp at 4.36% from 4.50%. Equities enjoyed the ride with the
S&P 500 jumping 1.9% over the same timeframe.
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 US Macro Weekly 17 May 2024 (14:00CET)

US Dashboards
Fig 8. Macro Matrix
Consumers
Sentiment High Medium Low Very low Rock bottom

Retail Sales (YoY) Rising fast Rising Stable Declining Falling Sharply

CPI (YoY) Below 2% 2% < x < 3% 3% < x < 4.5% 4.5% < x < 6% Above 6%

Average Hourly Earnings Well Above CPI Above CPI -/+ CPI Below CPI Far below CPI

Unemployment Rate Very Low Low Medium High Very High


Nonfarm Payrolls Above 300k 300k > x > 150k 150k > x > 0k 0k > x > -150k Below -150k

Corporates
Manufacturing ISM Above 60 60 > x > 55 55 > x > 50 50 > x > 40 Below 40

Services ISM Above 60 60 > x > 55 55 > x > 50 50 > x > 40 Below 40
This document should not be used by a non legitimate recipient.

PPI (YoY) Below 0% 0 0 < x < 3% 3% < x < 7% Above 7%

Industrial Production (YoY) Above 3% 3% > x > 0% ~0 0% > x > -3% Below -3%

Housing
Existing Home Sales (YoY) Above 5% 5% > x > 2% 2% > x > -1% -1% > x > -4% Below -4%

New Home Sales (YoY) Above 5% 5% > x > 2% 2% > x > -1% -1% > x > -4% Below -4%

Housing Starts (YoY) Above 5% 5% > x > 2% 2% > x > -1% -1% > x > -4% Below -4%

Home Prices (YoY) Above 10% 10% > x > 5% 5% > x > 0% 0% > x > -5% Below -5%

Sovereign
GDP (YoY) >3% 3% to 2% 2% to 0% 0% to -2% Below -2%


Source: Bloomberg, Crédit Agricole CIB

Fig 9. Recession Dashboard

NBER Recession Indicators May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24
Real Personal Income Less Transfers (MoM %) 0.2 0.1 0.3 0.2 0.1 0.3 0.5 0.2 0.3 -0.1 0.2
Change in Nonfarm Payrolls (k) 303 240 184 210 246 165 182 290 256 236 315 175
Real Personal Consumption (MoM %) 0.1 0.3 0.5 -0.1 0.4 0.2 0.4 0.5 -0.3 0.5 0.5
Real Manufacturing & Trade Sales (MoM %) 0.9 0.0 0.8 -0.2 0.7 -0.2 0.6 0.7 -1.3 0.5
Change in Household Survey Employment (k) -255 297 205 291 50 -270 586 -683 -31 -184 498 25
Industrial Production (MoM %) -0.2 -0.6 0.9 -0.1 0.2 -0.7 0.3 -0.3 -0.8 0.8 0.1 0.0
Leading Indicators May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24
Conference Board Leading Indicator (MoM %) -0.7 -0.7 -0.3 -0.4 -0.8 -0.9 -0.6 -0.2 -0.5 0.2 -0.3
Initial Jobless Claims (k) 231 248 240 234 216 216 213 198 225 213 222 209
ISM New Orders Minus Inventories -2.9 1.2 1.2 2.1 3.2 2.6 3.5 3.1 6.3 3.9 3.2 0.9
Consumer Confidence Minus Consumer Sentiment 43.5 45.9 42.5 39.3 36.4 35.3 39.7 38.3 31.9 27.9 23.7 19.8
Building Permits (MoM %) 4.2 -2.5 0.5 5.1 -4 1.3 -1.7 1.5 -1.4 3.6 -5 -3
Yield Curve May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24
2Y-10Y Spread (bp, EOM) -75.9 -106.0 -91.7 -75.6 -47.4 -15.7 -35.5 -37.1 -29.6 -36.9 -42 -35.5
3M-10Y Spread (bp, EOM) -174.2 -144.4 -143.8 -132.6 -87.4 -53.0 -106.1 -145.2 -144.7 -112.9 -116.1 -71.1
Near Term Forward Spread (bp, EOM) -177.2 -96.4 -106.3 -109.6 -84.0 -77.7 -115.8 -162.103 -164.6 -114.6 -115.6 -55.1

Source: Bloomberg, Crédit Agricole CIB

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 US Macro Weekly 17 May 2024 (14:00CET)

US Inflation Forecast
Fig 10. US CPI Forecast
US NSA CPI, YoY, % Services CPI, details Core goods CPI, details Brent
Headline Core Services Core goods Food Energy OER Rent Lodging Pub. transp. Med. care Car insur. Used cars New carsApparel
Weight, % NSA Index 100.0 79.7 61.0 18.7 13.4 6.9 26.6 7.6 1.5 1.1 6.5 2.9 1.9 3.6 2.6 USD/bl
Jan-22 281.148 7.48 6.02 4.09 11.66 6.95 27.0 4.09 3.8 20.5 4.0 2.7 4.1 40.5 12.2 5.3 86.7
Feb-22 283.716 7.87 6.41 4.40 12.30 7.90 25.6 4.31 4.2 25.1 8.3 2.4 4.3 41.2 12.4 6.6 97.8
Mar-22 287.504 8.54 6.47 4.67 11.75 8.80 32.0 4.54 4.4 25.1 14.9 2.9 4.2 35.3 12.5 6.8 119.0
Apr-22 289.109 8.26 6.16 4.93 9.74 9.38 30.3 4.79 4.8 19.7 21.8 3.5 4.4 22.7 13.2 5.4 104.8
May-22 292.296 8.58 6.02 5.16 8.49 10.15 34.6 5.09 5.2 19.3 26.3 4.0 4.5 16.1 12.6 5.0 113.4
Jun-22 296.311 9.06 5.92 5.48 7.16 10.44 41.6 5.48 5.8 10.0 23.7 4.8 6.0 7.1 11.4 5.2 123.4
Jul-22 296.276 8.52 5.91 5.54 6.98 10.93 32.9 5.83 6.3 1.0 19.0 5.1 7.4 6.6 10.4 5.1 113.0
Aug-22 296.171 8.26 6.32 6.07 7.06 11.37 23.8 6.29 6.7 4.0 21.1 5.6 8.7 7.8 10.1 5.1 99.6
Sep-22 296.808 8.20 6.63 6.65 6.63 11.24 19.8 6.68 7.2 2.9 27.1 6.5 10.3 7.2 9.4 5.5 90.0
Oct-22 298.012 7.75 6.28 6.74 5.08 10.95 17.6 6.89 7.5 5.9 28.1 5.4 12.9 2.0 8.4 4.1 93.4
Nov-22 297.711 7.11 5.96 6.82 3.68 10.63 13.1 7.13 7.9 3.2 23.8 4.4 13.4 -3.3 7.2 3.6 91.8
Dec-22 296.797 6.45 5.71 7.05 2.15 10.41 7.3 7.53 8.3 3.2 18.9 4.1 14.2 -8.8 5.9 2.9 80.9
Jan-23 299.170 6.41 5.58 7.16 1.44 10.13 8.7 7.76 8.6 7.7 17.1 3.0 14.7 -11.6 5.8 3.1 82.9
Feb-23 300.840 6.04 5.54 7.26 1.03 9.49 5.2 8.01 8.8 6.7 18.0 2.1 14.5 -13.6 5.8 3.3 82.7
Mar-23 301.836 4.98 5.59 7.13 1.53 8.50 -6.4 8.04 8.8 7.3 12.4 1.0 15.0 -11.2 6.1 3.3 78.2
Apr-23 303.363 4.93 5.52 6.84 2.01 7.65 -5.1 8.12 8.8 3.3 0.3 0.4 15.5 -6.6 5.4 3.6 84.6
May-23 304.127 4.05 5.33 6.57 2.03 6.69 -11.7 8.05 8.7 3.4 -8.9 -0.1 17.1 -4.2 4.7 3.5 75.7
Jun-23 305.109 2.97 4.83 6.15 1.31 5.74 -16.7 7.81 8.3 4.5 -13.3 -0.8 16.9 -5.2 4.1 3.1 74.8
Jul-23 305.691 3.18 4.65 6.12 0.76 4.86 -12.5 7.66 8.0 6.0 -13.2 -1.5 17.8 -5.6 3.5 3.2 80.0
Aug-23 307.026 3.67 4.35 5.90 0.23 4.25 -3.6 7.32 7.8 3.0 -9.4 -2.1 19.1 -6.6 2.9 3.1 86.2
Sep-23 307.789 3.70 4.15 5.69 0.02 3.69 -0.5 7.08 7.4 7.3 -9.3 -2.6 18.9 -8.0 2.5 2.3 91.5
This document should not be used by a non legitimate recipient.

Oct-23 307.671 3.24 4.03 5.50 0.09 3.30 -4.5 6.85 7.2 1.2 -8.9 -2.0 19.2 -7.1 1.9 2.6 92.7
Nov-23 307.051 3.14 4.01 5.47 0.05 2.95 -5.4 6.68 6.9 0.9 -8.1 -0.9 19.2 -3.8 1.3 1.1 85.0
Dec-23 306.746 3.35 3.93 5.31 0.17 2.70 -2.0 6.35 6.5 0.2 -6.9 -0.5 20.3 -1.3 1.0 1.0 78.7
Jan-24 308.417 3.09 3.86 5.37 -0.29 2.57 -4.6 6.23 6.1 1.0 -4.8 0.6 20.6 -3.5 0.7 0.1 79.3
Feb-24 310.326 3.15 3.75 5.22 -0.30 2.23 -1.9 5.97 5.8 -0.4 -5.2 1.1 20.6 -1.8 0.4 0.0 83.5
Mar-24 312.332 3.48 3.80 5.40 -0.65 2.24 2.1 5.91 5.7 -1.9 -5.6 2.1 22.2 -2.2 -0.1 0.4 84.9
Apr-24 313.548 3.36 3.61 5.35 -1.27 2.21 2.6 5.75 5.4 -0.3 -4.6 2.7 22.6 -6.9 -0.4 1.3 89.7
May-24 314.224 3.32 3.45 5.36 -1.96 2.10 4.1 5.53 5.3 -0.1 -2.9 3.0 22.0 -10.5 -0.7 0.8 83.7
Jun-24 314.848 3.19 3.42 5.37 -2.12 2.03 2.7 5.38 5.1 0.5 1.9 3.2 21.3 -11.5 -1.0 0.9 82.3
Jul-24 314.544 2.90 3.38 5.23 -1.96 1.96 -0.9 5.19 5.0 0.1 5.3 3.8 19.9 -11.0 -1.2 0.7 82.3
Aug-24 315.139 2.64 3.38 5.17 -1.86 1.94 -4.2 5.12 4.9 4.0 5.1 3.9 18.3 -9.5 -1.5 0.4 82.3
Sep-24 315.615 2.54 3.34 4.89 -1.29 1.99 -5.2 4.87 4.7 1.3 5.3 4.0 17.7 -6.7 -1.8 1.7 82.3
Oct-24 315.768 2.63 3.37 4.85 -1.13 1.86 -4.2 4.72 4.5 5.0 4.2 4.1 16.4 -5.8 -1.6 1.3 82.3
Nov-24 315.669 2.81 3.33 4.64 -0.77 1.98 -1.7 4.50 4.4 3.4 4.1 4.0 16.4 -6.9 -1.0 2.5 82.3
Dec-24 315.661 2.91 3.28 4.52 -0.72 2.14 0.0 4.29 4.3 2.9 5.5 3.7 15.6 -6.7 -0.3 1.1 82.3
Jan-25 316.681 2.68 3.20 4.27 -0.25 1.99 -2.2 4.04 4.3 2.6 4.7 3.4 14.2 -2.8 0.2 1.0 82.3
Feb-25 318.081 2.50 3.10 4.12 -0.20 2.01 -3.6 3.87 4.1 3.6 2.7 4.0 13.3 -2.5 0.4 0.6 82.3
Mar-25 319.330 2.24 2.84 3.74 -0.09 2.06 -4.4 3.77 4.0 1.0 2.2 3.6 10.7 -1.7 0.6 -0.5 82.3
Apr-25 320.530 2.23 2.81 3.66 0.03 2.04 -4.0 3.73 4.1 2.1 1.3 3.5 9.3 -0.9 0.5 -0.6 82.3
May-25 321.147 2.20 2.79 3.61 0.08 1.99 -4.0 3.72 4.1 1.9 0.9 3.5 8.5 -0.4 0.5 -0.6 82.3
Jun-25 321.836 2.22 2.77 3.58 0.10 1.92 -3.5 3.72 4.1 1.8 0.6 3.5 8.0 -0.3 0.5 -0.6 82.3
Jul-25 322.150 2.42 2.76 3.57 0.10 1.85 -0.5 3.74 4.1 1.7 0.4 3.5 7.6 -0.3 0.5 -0.6 82.3
Aug-25 322.807 2.43 2.76 3.56 0.10 1.78 -0.1 3.76 4.2 1.6 0.2 3.5 7.2 -0.3 0.5 -0.6 82.3
Sep-25 323.340 2.45 2.75 3.54 0.09 1.71 0.3 3.78 4.2 1.5 0.0 3.5 6.7 -0.3 0.5 -0.6 82.3
Oct-25 323.592 2.48 2.75 3.55 0.10 1.66 0.8 3.83 4.2 1.5 -0.2 3.5 6.3 -0.3 0.5 -0.6 82.3
Nov-25 323.584 2.51 2.76 3.55 0.10 1.61 1.2 3.88 4.3 1.4 -0.4 3.5 5.9 -0.3 0.5 -0.6 82.3
Dec-25 323.670 2.54 2.77 3.56 0.11 1.57 1.6 3.93 4.3 1.4 -0.5 3.5 5.5 -0.3 0.5 -0.6 82.3

2022 8.01 6.15 5.63 7.72 9.93 25.5 5.72 6.02 11.66 19.75 4.29 7.87 14.5 10.48 5.04 101.2
2023 4.14 4.79 6.26 0.89 5.83 -4.5 7.48 7.97 4.29 -2.52 -0.33 17.34 -7.1 3.75 2.75 82.7
2024 3.00 3.50 5.11 -1.19 2.10 -0.9 5.29 5.11 1.29 0.70 3.01 19.46 -6.9 -0.69 0.93 83.1
2025 2.41 2.84 3.69 0.02 1.85 -1.5 3.81 4.17 1.84 0.99 3.54 8.59 -0.9 0.46 -0.33 82.3
Forecaster: Nick Van Ness 16 May 2024

Source: Bloomberg, Crédit Agricole CIB

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 US Macro Weekly 17 May 2024 (14:00CET)

Global Markets Research contact details

v. 06/09/18 Jean-François Paren Head of Global Markets Research +33 1 41 89 33 95
Asia (Hong Kong, Singapore & Tokyo) Europe (London & Paris) Americas (New York)
Takuji Aida Arata Oto Louis Harreau Valentin Giust Nicholas Van Ness **
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