Weekly Economic & Financial Commentary: April Economic Data Show Resilient U.S. Economy

Summary

United States: April Economic Data Show Resilient U.S. Economy

• U.S. retail sales topped expectations in April, while industrial production also grew more rapidly than economists expected. Data on housing starts, home sales and homebuilder sentiment, however, showed tentative signs of cooling.
• Next week: New Home Sales (Tue), Durable Goods (Wed), Personal Income & Spending (Fri)

International: U.K. and Canada Inflation Reach New Cycle Highs

• U.K. inflation surged to a fresh 40-year high in April, quickening to 9.0% and placing additional pressure on the Bank of England (BoE) to double down and tighten monetary policy. Inflation in Canada also reached a new high, but this time of “only” 30 years; headline CPI inched up to 6.8% year-over-year in April.
• Next week: Eurozone PMIs (Tue), U.K. PMIs (Tue), RBNZ Rate Decision (Wed)

Interest Rate Watch: Bond Yields Up Significantly in Many Foreign Economies

• The United States is not the only major economy in which long-term interest rates have risen significantly. For example, the yield on the two-year government bond in Germany has risen about 100 bps since the beginning of the year, while the comparable yield in the United Kingdom is up about 80 bps over the same period.

Topic of the Week: The Outlook for Corporate Debt in a Rising Rate Environment

• After nearly tripling from just over $4T at the turn of the century to about $12T today, non-financial corporate (NFC) debt is at an all-time high. With recent Federal Reserve rate hikes and likely more to come, we outlined some hypothetical scenarios to analyze future debt serviceability in the NFC sector considering rising rates.

Full report here.