At the moment, the U.S. economy is in a sweet spot. In the 3 months ended June 2023, the Atlanta Fed’s NowCasting model predicts that business activity rose at an annual rate of 2.4%, and that in the last 12 months consumer prices were up 2.97%. The latter is within the Fed’s 1% to 3% control range. Lower personal savings, reduced trade deficits and higher government spending deficits are the main macro sources behind the strength of the economy and the normalization of the supply chain combined with a weaker Chinese economy and tightening monetary conditions at home, were the main reasons behind falling inflation.
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By Hubert Marleau