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Economic Equilibriums and Disruptions: MacroSlate Weekly

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Regional Banks and debt ceiling drama

In a week filled with ups and downs, small US banks were doing well while the country was on the edge of a big money problem known as the ‘debt ceiling crisis.’

The US government’s savings at the Federal Reserve took a big hit, dropping by $53bn on Monday to just $87bn, which is very close to the lowest point it hit before the tax payments in April.

As the week went on, the money in the government’s account dropped even more to $57 billion after a decrease of $11 billion on May 19.

Treasury General Account: (Source: FRED)
Treasury General Account: (Source: FRED)

However, the good news is that people’s trust in the banking sector seems to be growing for now. A popular bank-related stock market fund (KRE ETF) jumped by over 5.0% on the week, boosted by the $2bn increase in deposits at Western Alliance Bank, according to MacroScope.

Japan inflation woes

In the middle of all this, President Biden went to a G7 meeting in Japan, where top leaders have been having tough discussions. They’re trying to find a way to solve this money problem without making the US government default (or fail to pay its debt).

At the same time, Japan is dealing with inflation, which is when prices of things go up – it’s now over 4%, the highest in 40 years.

Japan Core Inflation: (Source: Bloomberg)
Japan Core Inflation: (Source: Bloomberg)

Confusion at the UK’s Central Bank

Across the ocean, the head of the Bank of England (BoE), Governor Bailey, has been trying to manage high inflation, or rising prices, in the UK. He’s still focused on keeping inflation at 2%, but he says these are unusual times, and that’s why inflation is in the double digits right now.

Bailey believes that once energy costs start going down, inflation will too. People watching the markets aren’t sure what to think, and they’re predicting one to two more small increases in interest rates this year.

In other UK news, wages are still growing strong, even though companies are not hiring as much. People who work for the government saw their pay go up by 5.6%, a high point in 20 years, while people in private companies also saw a decent increase of 7%. Unemployment rose a little bit to 3.9%, but more people are actively looking for jobs. On the flip side, there are fewer job openings now, according to MacroScope.

UK Unemployment Rate: (Source: Trading Economics)
UK Unemployment Rate: (Source: Trading Economics)

Housing Market Cooling Down in the US

In the U.S., data shows that more new homes are being sold, but fewer existing homes. People who have 30-year mortgages with 3% interest rates are choosing to keep their homes. So, there are fewer old homes for sale, while new homes are being sold with the help of lower-cost mortgages and discounts. The number of people applying for mortgages to buy homes has dropped 26% compared to last year, according to MacroScope.

Mixed News from China

In China, the economic growth in April was less than expected. Factory production only grew 5.6% compared to last year, instead of the predicted 10.9%. Similarly, retail sales and investment in things like buildings and infrastructure also fell short of predictions. However, there was some good news. The unemployment rate dropped to 5.2%, and more homes were sold compared to the same period last year, according to MacroScope.

Summary

In summary, as this macroeconomic saga unfolds across the globe, financial resilience and strategic adaptability remain at the core of these dynamic markets. From the corridors of regional banks to the BoE’s chambers and the heart of Asian economies, the future lies in both the subtle nuances and the grand narratives of global economic activity.

Posted In: Featured, Macro



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