Economics Weekly: US Data Shows No Panic Over Banks
- United States: US consumer confidence index better than consensus despite regional bank failures
- Asia: Lack of cyclical synchronicity holds Asia in good stead
- Thailand: Economic recovery on track, driven by tourism and private consumption
United States: Data and the Fed are not panicking over banks. The next FOMC meeting on 3 May comes after the Fed reviews the failure of Silicon Valley Bank (SVB) on 1 May. St. Louis Fed President James Bullard was crystal clear that rate hikes aim to control inflation and not address bank stress. Testifying before the Senate Banking Committee, Fed Vice Chair for Supervision Michael Barr did not pin SVB’s failure on rate hikes but on its failure to prepare for higher rates, i.e., a textbook case of mismanagement. The Fed’s review will also seek to determine if the ineffective board oversight, risk management weaknesses, and internal audit function lapses resulted from former President Donald Trump’s rollback of Dodd-Frank rules in 2018.
Despite the failed banks, the US Conference Board’s consumer confidence index was better than expected at 104.2 in March 2023 vs the 101 consensus, and February 2023 level was revised to 103.4 from 102.9. Although the present situation index fell to 151.1 from 153, it was significantly higher than expectations (73 vs 70.4). Overall, the ratio of respondents expecting employment prospects to remain the same in six months increased to a post-Covid high of 65.1% from 64.3%. However, income prospects in the next six months slipped to 71.5% from a 21-month high of 74% on a modestly softer business outlook (62.3% vs 64.6%) in the next six months. As per consensus, last Friday’s PCE deflators for February are still high at 0.3% m/m (vs 0.6% previously) and 0.4% (vs 0.6% previously) for headline and core inflation respectively. If the data does not pander to the market’s recession fears from banking woes, the Fed still sees “some ways to go” in bringing inflation down to its 2% target.
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