Economic Commentary by Pohlad Companies Chief Economist John Beuerlein suggests that while economic activity is holding up better than expected, there are signs of a potential slowdown. The Federal Reserve’s efforts to slow inflation seem to be working, with the CPI for July reporting a 0.2% increase and the year-over-year Core CPI at 4.7%. However, other metrics indicate a possible economic downturn.
GDP has declined in Q2 of 2023 and adjusted pretax corporate profits have also fallen compared to the previous year. Consumer spending has slowed due to higher prices, causing consumers to dip into their savings at an eight-month low rate of 3.5%. This is significantly lower than pre-COVID levels.
Credit quality is also eroding as credit card balances continue to rise and delinquency rates for past-due payments are at their highest since Q4 of 2019. Regional banks have seen their ratings cut by Moody’s due to rising funding costs and exposure in commercial real estate loans.
Overall, these factors point towards an accelerating economic slowdown on the horizon.
