Economic Risk Factor Update: May 2024 [SlideShare]

Service sector and consumer confidence both fell in April, while the yield curve inversion narrowed, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.

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1. Economic Risk Factor Update May 2024

2. Source: Institute for Supply Management, Haver Analytics As of 5/3/2024 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 April, as the index dropped from 51.4 in March to 49.4 in April. This marks three consecutive months of falling confidence. This decline brought the index into contractionary territory for the first time since December 2022. We have downgraded this indicator to red due to the index's decline into contractionary territory. Risk Level

4. Source: Bureau of Labor Statistics, Haver Analytics As of 5/3/2024 All Employees: Total Nonfarm % Change – Year to Year, Seasonally adjusted Private Employment: Annual Change Risk Level

5. Private Employment: Annual Change continued 175,000 jobs were added in April, following an upwardly revised 315,000 jobs in March. This marks 40 consecutive months of job growth, highlighting the current health of the labor market despite the challenges created by inflation and the tight labor supply. Risk Level

6. Source: Haver Analytics As of 4/30/2024 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 narrowed in April, due to a rise in long-term interest rates. The 10-year Treasury yield rose from 4.20% to 4.69%. The 3-month Treasury yield ended the month unchanged at 5.46%. This marks 19 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 4/30/2024 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 103.1 in March to 97.0 in April. Consumer confidence fell 6.46 percent on a year-over-year basis in April, marking two consecutive months of declining year-over-year confidence. Given the continued year-over-year decline, we have downgraded this indicator to yellow with the potential for further downgrades ahead. Risk Level

10. Conclusion: Slower Economic Growth Ahead The data releases in April showed signs of continued but slower economic growth. The strong hiring growth was a positive development. Given the declines during the month, 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