Economy in Brief: June 2023

The world economy’s underlying vulnerabilities have been in sharp focus over the past few weeks, but more deep-seated wounds with longer-lasting scars have been avoided, at least for now. This applies specifically to the anxiety that had surfaced about the health of the US banking sector and more recently to the willingness of politicians to lift the US debt ceiling. But it applies more generally to the outlook for the world economy, partly thanks to the relief that’s been provided by weaker energy prices. Still, as most of our charts this week suggest, while deeper wounds have been avoided for now, this does not mean that underlying vulnerabilities have been erased. We illustrate, for example, the heightened tendency of incoming data for global growth to disappoint expectations to the downside (in chart 1). Inasmuch as that trend toward disappointment has been rooted in a deteriorating outlook in Europe and Asia (compared with the US) we look next at the renewed upward pressure on the US dollar (in chart 2). The downward pressure on European inflation and on bank credit growth (in Europe and the US) is our next focus (in charts 3 and 4). Then, on labour market issues, we home in on the mixed messages that were conveyed about employment activity in the US from this week’s April JOLTs report (in chart 5). And finally we turn to the worrying trend toward higher youth unemployment that’s established itself in China over the last few months (in chart 6).

• Light truck sales lead latest downturn.
• Imports' market share eases.

• Index remains above March low.
• Orders decline offsets improvement in employment & production.
• Price index decline reverses earlier strength.

• Pay increases moderate, notably for “job changers.”
• Small business employment firms.
• Natural resource & mining, leisure & construction remain strong.

• Total Apr. construction +1.2% (7.2% y/y), higher than expected.
• Residential private construction rises 0.5% (-9.2% y/y), led by m/m construction gains in home improvement and multi-family but partly offset by a 0.8% drop (-24.7% y/y) in single-family building.
• Nonresidential private construction increases 2.4% (31.2% y/y), up for the 11th time in 12 months.
• Public sector construction grows 1.1% (16.5% y/y), up for the 10th time in 11 months, led by a 1.1% rise (16.8% y/y) in nonresidential public construction.

• Output revised modestly upward and hours modestly downward.
• Compensation now has more moderate advance in Q1.
• Manufacturing productivity now seen with bigger decline.

• May 27 week initial claims up 2,000.
• May 20 continuing claims up 6,000.
• Insured unemployment rate holds steady for 5th straight week.