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Just when everyone is abandoning the recession call, the data starts to slow down.
1) The Restaurant Performance Index has sharply declined in recent months, see the first chart below.
2) Credit card and auto loan delinquencies continue to rise, and these trends will continue with the Fed on hold well into next year; see the second and third charts.
3) Weekly data for bank lending is slowing rapidly, and weekly credit card data shows that consumer spending on durables that require financing, such as furniture and electronics, is slowing, see the fourth and fifth charts.
The bottom line is that Fed hikes are starting to negatively impact consumer spending, as also shown in the weekly data in the sixth chart.
Weaker consumer spending is not surprising. The whole idea from the Fed raising interest rates is to slow down growth and ultimately inflation.
Source: National Restaurant Association, Haver, Apollo Chief Economist 
Source: New York Fed Consumer Credit Panel / Equifax, Apollo Chief Economist 
Source: FRBNY Consumer Credit Panel, Equifax, Haver Analytics, Apollo Chief Economist 
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist. 
Source: BEA, Haver Analytics, Apollo Chief Economist. Note: The weekly values represent the predicted percentage difference from the typical level of spending (prior to the pandemic declared by the World Health Organization on March 11, 2020) after adjusting for day-of-week, month, and year effects, based on daily data. The typical level corresponds to a value of zero. 
Source: Redbook, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The ongoing rebound in the housing market is putting upward pressure on growth and inflation at a time when the Fed is trying to slow down growth and inflation, see chart below.
Source: BEA, NAHB, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The Fed has started to increase its estimate of the long-run Fed funds rate, see chart below. The implication is that the Fed is beginning to see the costs of capital as permanently higher. A permanent increase in the risk-free rate has important implications for investors.
Source: FRB, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Cellphone traffic in downtown San Francisco is now at 29% of pre-pandemic levels. For Chicago, it is 56%, and for New York City, it is 71%. The data compares the week of April 10, 2023 with the corresponding week in 2019.
Source: University of Toronto School of Cities, Apollo Chief Economist. The data compares week of April 10, 2023 to corresponding week in 2019. See downtownrecovery.com for more information. See important disclaimers at the bottom of the page.
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The chart below shows the weights of different components in core CPI plotted against the inflation rate in each of the categories, and the bottom line is that inflation is higher than the Fed’s 2% inflation target for the vast majority of components of core inflation.
Source: BLS, Haver Analytics, Apollo Chief Economist. Note: Data as of May 2023. See important disclaimers at the bottom of the page.
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The consensus continues to revise higher forecasts for core inflation in 2023 and 2024, see chart below.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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For the first time in 20 years, the consensus is now predicting that long rates will go down, see chart below.
Source: Bloomberg, Philadelphia Fed Survey of Professional Forecasters, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Apollo Academy members are split on the outlook for the US economy in the next three quarters regarding the potential for a soft or a hard landing. But a combined majority believes that inflation will remain above the Fed’s 2.0% target through 2024, while a large majority predicts that interest rates—as measured by the 10-year Treasury yield—will be between 3.0% and 4.0% at the end of next year.
The results reflect the answers to three poll questions presented to Apollo Academy members participating in my live class on the mid-year outlook for the economy and capital markets on June 28, 2023. The accompanying charts below provide details.
Watch the full Apollo Academy class on demand here (eligible for one CE credit).
Also, download my white paper.
Source: Apollo Academy. Chart shows results of a poll taken during a live Apollo Academy class with Chief Economist Torsten Sløk on the outlook for the US economy and capital markets on June 28, 2023. Poll results reflect the votes of 433 participants. 
Source: Apollo Academy. Chart shows results of a poll taken during a live Apollo Academy class with Chief Economist Torsten Sløk on the outlook for the US economy and capital markets on June 28, 2023. Poll results reflect the votes of 476 participants. 
Source: Apollo Academy. Chart shows results of a poll taken during a live Apollo Academy class with Chief Economist Torsten Sløk on the outlook for the US economy and capital markets on June 28, 2023. Poll results reflect the votes of 482 participants. See important disclaimers at the bottom of the page.
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Weekly data for corporate bankruptcy filings has started to meaningfully deteriorate in recent weeks, see chart below. The faster speed of slowing in the weekly data is not consistent with the gradual rise in the monthly default rates seen in HY, IG, and loans.
Source: Bloomberg, Apollo Chief Economist. Note: Filings are for companies with more than $50 million in liabilities. For week ending June 21, 2023. See important disclaimers at the bottom of the page.
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The quality of auto loans and mortgages originated today is significantly higher than auto loans and mortgages originated before the GFC in 2006, see charts below.
Source: FRBNY Consumer Credit Panel, Equifax, Haver Analytics, Apollo Chief Economist 
Source: FRBNY Consumer Credit Panel, Equifax, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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