Economic Risk Factor Update: July 2024 [SlideShare]

Service sector confidence fell in June, bringing the index into contractionary territory, said Sam Millette, director of fixed income, in his latest Economic Risk Factor Update.

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1. Economic Risk Factor Update July 2024

2. Source: Institute for Supply Management, Haver Analytics As of 7/3/2024 ISM Services: Services PMI Composite Index Seasonally adjusted, 50+ = Increasing The Service Sector Risk Level

3. The Service Sector continued Service sector confidence fell in June, with the index dropping from 53.8 in May to 48.8 in June. This result brought the index into contractionary territory for the month, marking a four-year low. Due to the notable decline in June, we have downgraded this indicator to red. Risk Level

4. Source: Bureau of Labor Statistics, Haver Analytics As of 7/5/2024 All Employees: Total Nonfarm % Change – Year to Year, Seasonally adjusted Private Employment: Annual Change Risk Level

5. Private Employment: Annual Change continued 206,000 jobs were added in June, following 218,000 jobs in May. This marked 42 consecutive months of job growth, highlighting the current health of the labor market despite the challenges created by inflation. Risk Level

6. Source: Haver Analytics As of 6/28/2024 Spread Between 10-Year U.S. Treasury and 3-Month U.S. Treasury Yield Curve (10-Year Minus 3-Month Treasury Rates) Risk Level

7. Yield Curve (10-Year Minus 3-Month Treasury Rates) continued The yield curve inversion widened modestly during the month. The 10-year Treasury yield fell from 4.51% to 4.36%. The 3-month Treasury yield rose from 5.46% in May to 5.48% in June. This marked 21 consecutive months with an inverted 3-month 10-year yield curve. While this doesn’t guarantee that the economy will enter a recession, it’s a widely monitored technical signal that could indicate further slowdowns. Risk Level

8. Source: The Conference Board/Haver Analytics As of 6/25/2024 Conference Board: Consumer Confidence % Change – Year to Year Seasonally adjusted, 1985=100 Consumer Confidence: Annual Change Risk Level

9. Consumer Confidence: Annual Change continued Consumer confidence fell from 101.3 in May to 100.4 in June. Consumer confidence fell 8.81 percent on a year-over-year basis in June, marking four consecutive months of declining year-over-year confidence. Given the continued year-over-year decline, we have left this indicator at yellow for now with an eye for future downgrades. Risk Level

10. Conclusion: Slower Growth Ahead The data releases in June showed signs of continued economic growth during the month. The strong hiring growth was a positive development. Given the recent declines, service sector and consumer confidence are worth monitoring going forward. The path of recovery remains uncertain in the short term, and caution is still warranted. Risk Level

11. Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged, and investors cannot invest directly in an index. The information contained herein is provided for informational purposes only and is based upon sources believed to be reliable. No guarantee is made as to the completeness or accuracy of the information. Disclosure