Economic Data Tracker – 
Encouraging signs of progress 

Economic Data Tracker

May 10, 2024

Our weekly view on the economy including rationale on GDP, jobs report, and Fed policy decisions.

Trend watch

The resilience of global supply chains has been truly remarkable, which we highlight on slide 11. Furthermore, there have been several encouraging developments in recent weeks. For instance, the Port of Baltimore opened the temporary channel much faster than expected, while the demolition of the collapsed portions of the F.S. Key bridge is progressing quickly. In fact, the bridge section on top of Dali should be freed this weekend, though more work is needed to fully clear the channel, including dredging to remove mud and debris. The vessel calendar for the Port of Baltimore is filling quickly, with shipping giant Maersk saying it could resume activity in Baltimore as early as the end of May; again, well ahead of expectations.

Meanwhile, the Panama Canal, which has been hampered by a roughly two-year drought, has seen water levels at the Gatun Lake stabilize at higher levels than 2023. May also marks the start of Panama’s rainy season. The Panama Canal Authority has increased booking slots starting later this week and will add an additional slot for the massive Neopanamax ships in June.

Most of the activity-based indicators (slides 5 and 6) ebbed slightly on a week-to-week basis for a second consecutive week. 

What’s new this week

  • Banks lending standards stable in 1Q24, which should help economy grow (slide 7).
  • Loan pricing relaxed in past 9 months, but demand slipped slightly (slide 8).
  • Used car prices haven’t increased in 7 months, EVs down sharply from ’23 (slide 9).
  • Consumer confidence slumped to 6-month low, inflation outlook up again (slide 10).
  • Supply chain performance continues to improve despite challenges (slide 11).
  • Small businesses are favorable towards their own business conditions but are less optimistic over larger economic trends (slide 12).

Our take

The aforementioned encouraging developments for shipping are quite welcomed, especially in light of mounting evidence that consumer confidence has soured further.

Last week we noted the fairly wide perception gap. On slide 12, we show some of the results of the 2024 Truist Small Business Pulse survey, which was conducted during February. Within it, we were struck by how many small businesses are favorable towards their own business conditions but are less optimistic about larger economic trends.

Several recent polls have shown similar results for consumers more broadly. Ultimately, there appears to be a mismatch between how consumers and small businesses view their own circumstances and that of the U.S. economy.

While we can speculate whether the causes are inflation fatigue, or the recession drumbeat, or politics – it isn’t entirely clear why there is such a disconnect. Perhaps it’s all of it.

Another factor is likely that many consumers seem to be focusing on the dramatic increase in price levels rather than the price changes. The latter is what the various inflation gauges are attempting to measure.

Used car prices are an excellent example (slide 9). Prices have continuously dropped for more than two years, down 21 of the past 27 months. Prices have dropped 22.7% since the peak in January 2022. Of course, the reply from many consumers is, “yeah, but even with that decline, prices are still up 29.4% from December 2019!”

While it’s true that the prices for many goods and services are up more than they otherwise would be, we feel it’s important to avoid pre-pandemic time anchoring, which appears to be compressing perceptions. For instance, many folks regularly remark that the pandemic wasn’t that long ago. We, too, have been guilty of this faulty time anchoring. But it has been more than four years.

Yet, it’s equally unrealistic to expect no price increases over a four-year span. In the case of used car prices, simply using the pre-pandemic 20-year average, we’d expect a nearly 8% increase over a 52-month span.

Accordingly, we recommend taking a balanced view of prices. Both prices levels and price changes (inflation) remain elevated, though both are cooling. We expect inflation will continue to cool as the year progresses, but it will most certainly be a bumpy path on a month-to-month basis. 

Bottom line

The U.S. economy remains resilient and should sidestep a recession. Most economic data continues to steadily improve. Yet, the cumulative impact of higher rates does weigh on economic growth. We maintain our view that the Fed will reduce rates at least once this year. 

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