hosted by: james hotchkiss director, member strategy and … · 2020-07-23 · a new preliminary...

Hosted by:James HotchkissDirector, Member Strategy and Solutions

Date:July 23, 2020

Contacts

Federal Home Loan Bank of Chicago | Member owned. Member focused. 2

James HotchkissDirector, Member Strategy and [email protected]: @econ_james_

Jessica NickAssociate Director, Member Strategy and [email protected]

Discussion Topics


• Weekly Interest Rate Comparisons

• Economic Data Releases

• COVID-19 Outbreak Updates

• Retail Sales

• University of Michigan Consumer Sentiment Survey

• Preview of the Coming Week

• Q and A

Weekly Interest Rate MovementsFor the Week Ending 07/23/2020


U.S. Treasury Yields

7/23/20 7/16/20

3mo 0.11% 0.16%

2yr 0.15% 0.16%

5yr 0.27% 0.28%

10yr 0.58% 0.64%

FHLBank Chicago Advance Rates

7/23/20 7/16/20

3mo 0.29% 0.31%

2yr 0.41% 0.41%

5yr 0.63% 0.63%

10yr 1.18% 1.20%

Source: U.S. Treasury, FHLBank Chicago

U.S. Economic Data ReleasesFor the Week Ending 07/23/2020

Federal Home Loan Bank of Chicago | Member owned. Member focused.

Existing Home SalesJune: 4.72M vs. May: 3.91M

• Surged 20.7% in June to an annual rate of 4.72M. All four regions experienced growth, with the West rebounding the most at 31.9%. As a result, sales are down 11.3% from one year ago.

Housing StartsJune: 1,186K vs. May: 1,011K

• Missed expectations of a 22.2% increase, rising by 17.3% to 1,186K in May. Almost all regions grew month-over-month with the Northeast rising the most at 114.3%. The West was the only region to decline this month at 7.5% Year-over-year, housing starts decreased 4.0%.Source: U.S. Census Bureau, NAHB

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Chicago Fed Nat’l Activity IndexJune: 4.11 vs. May: 3.50

• Rose to 4.11 in June. Three of the four categories within the index increased and contributed to this month’s growth. The index’s 3-month moving average increased to -3.49 in June from -6.36 in May.

FHFA House Price IndexMay: -0.3% vs. April: 0.1%

• Fell 0.3% in May. As a result, house prices are up 4.9% from one year ago. The East North Central division—including Illinois, Indiana, Michigan, Ohio, and Wisconsin—decreased 0.3% from the prior month and the index is up 5.0% year-over-year.

Source: Federal Reserve Bank of Chicago, Federal Housing Finance Agency

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Initial Jobless ClaimsJuly 18: 1,416K vs. July 11: 1,307K

• Increased by 109K to 1,416K in the week ending July 18 for the first weekly increase since late March. The previous week was upwardly revised by 7K to 1,307K. As a result, the 4-week moving average decreased by 16.5K to 1,360.25K.

Continuing ClaimsJuly 11: 16,197K vs. July 4: 17,304K

• Decreased by 1,107K to 16,197K in the week ending July 11. The prior week was downwardly revised by 34K to 17,304K. As a result, the 4-week moving average decreased by 785.5K to 17,505.25K. The insured unemployment rate decreased 0.7% to 11.1%.

Source: Department of Labor

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COVID-19 UpdateGlobal Cases and Deaths


Source: WHO; CDC as of July 22, 2020

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COVID-19 Update Illinois and Wisconsin


Source: Illinois DPH; Wisconsin DHS as of July 22, 2020

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COVID-19 UpdateGreen Shoots as States Open Up


Source: EIA, OpenTable, STR, TSA

June Retail Sales Retail Sales Beat Expectations

Source: U.S. Census Bureau


The importance of the consumer to the health of the U.S. economy can never be underestimated, as consumer spending accounts for approximately 70% of GDP.

Retail sales beat expectations and jumped 7.5% in June 2020, which was 1.1% higher than June 2019.

Sales this month were aided by a 105.1% increase in clothing and clothing accessory stores, an 37.4% jump in electronics and appliance stores, and a 32.5% surge in furniture and home furnishing stores.

Food services and drinking places increased 20.0% this month compared to a 31.5% increase from the previous month.

After excluding volatile components such as auto sales, gasoline sales, and building material sales, “core” retail sales increased 6.7% in June.

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June Retail Sales Retail Sales Rise Above Expectations

Retail sales jumped 7.5% in June, compared to a 18.2% surge in the previous month. As a result, the year-over-year growth increased to 1.1% in June.

Excluding autos, retail sales rose 7.3% in June. Year-over-year, retail sales excluding autos dropped 8.72%.


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June Retail Sales Discretionary Sales Across Sectors Rise

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Source: U.S. Census Bureau, Bureau of Labor Statistics


June Retail Sales Retail Sales vs. Employment

Retail sales are generally correlated to payroll growth.

Retail sales growth tends to lead employment by approximately six months, suggesting payrolls may begin to rise.

In June, both retail sales and payrolls increased significantly from the previous month.

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University of Michigan Consumer Sentiment

Source: University of Michigan

On a monthly basis, the University of Michigan conducts several surveys to measure consumer sentiment in the economy. The surveys have long stressed the important influence of consumer spending and saving decisions in determining the course of the national economy.

The surveys focus on three areas: how consumers view prospects for their own financial situation, how they view prospects for the general economy over the near term, and their view of prospects for the economy over the long term.

Each monthly survey contains approximately 50 core questions, each of which tracks a different aspect of consumer attitudes and expectations. Each month, a minimum of 500 interviews are conducted by telephone with participants from across the nation.


University of Michigan Consumer SentimentPreliminary July Survey Results


• In the preliminary survey results for July, the Index of Consumer Sentiment measured in at 73.2.

• Consumer sentiment retreated in the first half of July due to the widespread resurgence of the coronavirus. Following the steepest two-month decline on record, it is not surprising that consumers need some time to reassess the likely economic impact from the coronavirus on their personal finances and on the overall economy.

• Declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring. An aggressive fiscal response is needed that focuses on financial relief for households as well as state and local governments.

• While financial relief is needed for the most vulnerable households, that relief will not stimulate the extent of renewed consumer spending necessary to restore employment and income to pre-crisis levels anytime soon. No single policy could provide financial relief and stimulate economic growth, and without both, neither one could be ultimately successful.


University of Michigan Consumer SentimentComponents of the Survey


The index of current economic conditions declined, falling 3.6 points to 84.2. The index of consumer expectations surged down 12.7 points to 66.2 while the index for consumer sentiment rose slightly to 73.2 points.

Expectations for price increases in the next year increased 0.1% to 3.1%, month-over-month. Expected prices changes in the next five years rose 0.2% to 2.7%.


This and That

Source: MIT

A new preliminary study by the Federal Reserve and Massachusetts Institute of Technology found that the PPP lending program of the CARES act increased U.S. employment by 1.4 million to 3.2 million jobs from the program’s inception to the first week of June.

The study used data from ADP, tracking hirings through the first week of June to find that the PPP program also lifted employment at small businesses by 2% to 4.5%.


The week ends with the economic data release on New-Home Sales.

Next week, there are economic data releases on Durable Goods, the S&P Case-Shiller HPI, Consumer Confidence, and Pending Home Sales.

All eyes will be focused on the FOMC’s rate decision on Wednesday.

Economic Data Release CalendarJuly 2020

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Notes: 1 2 3

6 7 8 9 10

13 14 15 16 17

20 21 22 23 24

27 28 29 30 31

July 2020Monday Tuesday Wednesday Thursday Friday

MBA Mortgage Applications Jobless Claims ADP Employment Report Employment Construction Spending Factory Orders ISM Manufacturing IndexFOMC Minutes

ISM Nonmanufacturing JOLTS MBA Mortgage Applications Jobless Claims Producer Price Index Consumer Credit Wholesale Trade

Small Buisness Optimism MBA Mortgage Applications Jobless Claims Consumer SentimentConsumer Price Index Industrial Production Philadelphia Fed Outlook Housing Starts

Atlanta Fed Outlook Retail Sales Beige Book Buisness Inventories

Chicago Fed Nat'l Activity MBA Mortgage Applications Jobless Claims New-Home Sales FHFA House Price Index Kansas City Fed Outlook

Existing Home Sales

Durable Goods S&P Case-Shiller HPI MBA Mortgage Applications Jobless Claims Personal Income Dallas Fed Outlook Consumer Confidence Pending Home Sales GDP Consumer Sentiments

Richmond Fed Outlook FOMC Rate Decision


Certain information included in this presentation speaks only as of a particular date or dates included in this presentation. The information in the presentation may have become out of date. The Federal Home Loan Bank of Chicago (FHLBC) does not undertake an obligation, and disclaims any duty, to update any of the information in this presentation. “Mortgage PartnershipFinance®”, “MPF®”, “MPF Xtra®”, “Downpayment Plus®”, “DPP®”, “Downpayment Plus Advantage®”, “DPP Advantage®”, and “Community First®” are registered trademarks of the Federal Home Loan Bank of Chicago . The “MPF Mortgage Partnership Finance” logo is a trademark of the Federal Home Loan Bank of Chicago.

The data, scenarios and valuations provided to you in this presentation are for information purposes only and are provided as anaccommodation and without charge and are not intended for further distribution. The data, scenarios and valuations are estimates only and may not represent the actual or indicative terms at which new (or economically equivalent) transactions couldbe entered into or the actual or indicative terms at which existing (or economically equivalent) transactions could be prepaid, terminated, liquidated, assigned or unwound. The scenarios and valuations were derived using proprietary pricing models and estimates and assumptions about relevant future market conditions and other matters, all of which are subject to change without notice. The scenarios and valuations were prepared without specific information about your institution’s balance sheet composition, hedging strategies or financial assumptions and plans, any of which may affect the relevance of these valuations toyour own analysis.

The Federal Home Loan Bank of Chicago makes no representations or warranties about the accuracy or suitability of any information in this presentation, and no representation of non-infringement. This presentation is not intended to constitute legal, accounting, investment or financial advice or the rendering of legal, accounting, consulting, or other professional services of any kind. You should consult with your accountants, counsel, financial representatives, consultants and/or other advisors regardingthe extent these scenarios and valuations may be useful to you and with respect to any legal, tax, business and/or financial matters or questions. This presentation may contain forward-looking statements which are based upon the FHLBC’s current expectations and speak only as of the date hereof. These forward-looking statements involve risks and uncertainties including, but not limited to, the risk factors set forth in the FHLBC’s periodic filings with the Securities and Exchange Commission, which are available on its website at www.fhlbc.com

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hosted by: james hotchkiss director, member strategy and … · 2020-07-23 · a new preliminary...

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