Highlights
“With anti-inflationary policy holding interest rates at a nearly 17-year high, the Federal Reserve finally softened their hawkish stance in the wake of March’s banking crisis. The Fed indicated that while further tightening may be deemed necessary, it would depend on careful monitoring of economic conditions. ”
Summary
In the 1st quarter of 2023, the U.S. economy grew more slowly but spending remained strong, as did the job market, with unemployment equal to its pre-pandemic low. Inflation waned a bit further, mainly due to falling energy prices. Crude oil prices dropped to a 15-month low in the wake of multiple bank insolvencies in March; prices largely recovered as banking relief came swiftly. The banking crisis also briefly rocked stock and bond markets, but calmer conditions prevailed with the arrival of reassuring inflation data. The housing market continued to slow from its blazing pace of recent years as demand and price growth were hampered by high interest rates.
With anti-inflationary policy holding interest rates at a nearly 17-year high, the Federal Reserve finally softened their hawkish stance in the wake of March’s banking crisis. The Fed indicated that while further tightening may be deemed necessary, it would depend on careful monitoring of economic conditions.
As predictions of slower growth begin to come to fruition, many forecasters expect a recession, although the timing remains uncertain. FOMC members lowered projections of economic growth to 0.4% in 2023.
Recorded COVID-19 cases fell throughout the 1st quarter of 2023. With widely available at-home tests and relaxed testing policies in public and private spaces across the U.S., official COVID case rates likely no longer give an accurate picture of the virus’s reach.
Vaccines have been established as a reliable way to limit serious illness and death from COVID-19. During the 1st quarter, 7.7 million vaccine doses were administered in the U.S. The number of vaccinated people in the U.S. rose by 1.34 million and the number fully vaccinated rose by 0.88 million. Although new research out of Canada suggests COVID-19 may be approaching endemic levels, death rates from COVID-19 remained approximately 4 times that of a typical flu season. Still, a combination of vaccination and prior infection has allowed many aspects of life and commerce to return closer to normal, and the federal public health emergency is set to end May 11, 2023. The coming months will reveal more about the seasonality of COVID-19 risk going forward.
A multifactor indicator of economic strength, the Philadelphia Fed’s coincident index of economic activity in the U.S. rose 0.3% in March 2023 and 0.9% during the 1st quarter. For the quarter, coincident indexes increased in 49 states and declined in 1 state. Coincident indexes reflect unemployment, payroll employment, manufacturing hours, and wages and salaries.