Goldilocks Week of Data

We’ve seen a recent data deluge covering jobs, inflation, and business activity, not to mention a Federal Reserve (Fed) policy meeting. Economic reports were solid but not so strong that the Fed would accelerate its interest-rate hiking campaign; and that, some might say, is just right.

The Fed’s policy statement, released last Wednesday, noted a pickup in some economic activity, but it also called the Fed’s inflation goals “symmetrical,” signaling members may be willing to tolerate inflation somewhat above its 2% target before needing to implement more aggressive policy. Following the Fed’s meeting, several business surveys indicated activity was off recent peaks last quarter but remains firmly in expansionary territory, whereas the nonfarm payrolls report showed employers hired 164,000 workers in April, missing expectations but roughly in line after prior months’ revisions. The report also showed largely in-line inflation readings, including data on wage growth.

After the team analyzed the recently-released data in conjunction with other key indicators, LPL Research Chief Investment Strategist John Lynch reiterated the group’s outlook for the U.S. economy: “We believe current risks are very manageable given the economy’s momentum and ongoing positive catalysts such as fiscal stimulus and coordinated global growth, both of which support our expectations for the U.S. economy to grow in the 2.75 – 3.0% range this year.” However, Lynch noted that the team will continue to monitor various indicators for signs of tightening financial conditions, some which are discussed in our Weekly Economic Commentary.

So while the Fed’s preferred inflation gauge, shown in the LPL Chart of the Day, came in just shy of its 2% target, the post-meeting statement combined with not-too-hot but not-too-cold economic data likely soothed concerns that the economy may be starting to overheat.

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