The economy grew at a 2.0% annualized rate in 1Q23, a deceleration compared to last quarter\u2019s 2.6% pace. Consumption, exports and government spending all looked strong, growing at annual rates of 4.2%, 7.8% and 5.0%, respectively. However, most of the consumption gains can be attributed to a strong January. These gains were partially offset by decreases in private inventory and residential fixed investment. Notably, a sharp decline in equipment spending indicated a slowdown in business investment spending. Looking ahead, normalizing inventory levels should support growth, but a strained consumer, tighter lending conditions and weaker business spending remain headwinds in the coming months.<\/p>\n\n\n\n
The June Jobs report showed that the labor market, while strong by historical standards, is moderating. Nonfarm payrolls rose by a weaker than expected 209K, while private payrolls rose by 149K, the slowest pace of growth since 2020. In the details, a tick up in wage growth to 4.4% y\/y and tick down in the unemployment rate to 3.6% highlighted continued strength. However, wage growth remains well below its peak of 5.9%. Overall, this report does not change the outlook for a Fed hike in July, but further evidence of a moderating labor market and easing inflationary pressures will make it difficult to justify further tightening in September and beyond.<\/p>\n\n\n\n
The 1Q23 earnings season has delivered better than expected results, reflective of the success that companies have had in defending margins. Our final estimate for 1Q23 earnings per share is $52.54, representing y\/y growth of 6.4% and q\/q growth of 4.3%. In total, 70% of companies beat earnings expectations, while 66% beat revenue expectations. Importantly, profit margins bounced to 11.7% during the first quarter, while revenue growth was the largest contributor to earnings. Looking ahead, recession risk is still rising and analyst estimates for earnings likely remain too high, making it difficult to be overly bullish on equities right now.<\/p>\n\n\n\n
The disinflationary trend gathered steam in June, with headline inflation gaining 0.2% m\/m seasonally adjusted and 3.0% y\/y non-seasonally adjusted, representing only a third of last June\u2019s peak inflation of 9.2%. Core CPI also eased, rising 0.2% m\/m seasonally adjusted and 4.8% y\/y non-seasonally adjusted. In the details, declines in airline fares and used car prices contributed most to the easing. Inflation in auto services remained strong, but moderation in owners\u2019 equivalent rent helped core inflation. Moving forward, base effects may make further declines in y\/y inflation more modest. That said, we expect to see further easing in shelter costs and auto services ahead, allowing inflation to remain closer to 3.0% for the rest of the year before moving toward 2% in 2024.<\/p>\n\n\n\n
For the first time since January 2022, the FOMC voted to leave the federal funds rate unchanged at a range of 5.00%-5.25% at its June meeting. While this pause was largely expected, the statement language and press conference commentary were decisively hawkish, suggesting that another increase is to be expected. The updated Summary of Economic Projections and dot plot were also surprisingly hawkish, with the median FOMC member anticipating two more hikes this year. While we do not think further tightening is necessary, the Fed made it clear that they need further evidence that inflation is swiftly decelerating.<\/p>\n\n\n\n
This weekly update provides a snapshot of changes in the economy and markets and their implications for investors.<\/a><\/strong><\/p>\n\n\n\n \u2014<\/p>\n\n\n\n Originally Posted July 17, 2023 \u2013 Economic Update<\/a><\/p>\n\n\n\n This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of J.P. Morgan Asset Management, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from personal financial, legal, tax and other professionals that take into account all of the particular facts and circumstances of an investor\u2019s own situation.<\/p>\n\n\n\n Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.<\/p>\n\n\n\n INFORMATION REGARDING MUTUAL FUNDS\/ETF: Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund or ETF before investing. The summary and full prospectuses contain this and other information about the mutual fund or ETF and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or download<\/a> it from this site. Exchange Traded Funds: Call 1-844-4JPM-ETF or download<\/a> it from this site.<\/p>\n\n\n\n J.P. Morgan Funds and J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA<\/a> FINRA\u2019s BrokerCheck<\/a><\/p>\n\n\n\n INFORMATION REGARDING COMMINGLED FUNDS: For additional information regarding the Commingled Pension Trust Funds of JPMorgan Chase Bank, N.A., please contact your J.P. Morgan Asset Management representative.<\/p>\n\n\n\n The Commingled Pension Trust Funds of JPMorgan Chase Bank N.A. are collective trust funds established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The funds are not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The funds are available only to certain qualified retirement plans and governmental plans and is not offered to the general public. Units of the funds are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing.<\/p>\n\n\n\n INFORMATION FOR ALL SITE USERS: J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.<\/p>\n\n\n\n NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE<\/p>\n\n\n\n