Canada Is First G7 Central Bank to Cut Interest Rates

North of ♓the border, interest rates are going south.

The Bank of Canada became the first major central bank to approve a rate cut Wednesday, marking a turning point in the international fight against inflation following its post-pandemic surge. The Canadian central bank cut its interest r𝄹ate a quarter-point to 4.75%, its first reduction in four years.

 That makes Canada the first member of the 澳洲幸运5官方开奖结果体彩网:Group of Seven (G7) economies to lower borrowing costs.

So why is Canada cutting rates before the U.S. and other countries? In short, Canada's central bank is more confident than its U.S. counterpart that it is winning the war on 澳洲幸运5官方开奖结果体彩网:inflation. 

Like the U.S., Canada has a 2% 澳洲幸运5官方开奖结果体彩网:target for inflation, and also like its southern neighbor, price increases there have slowed since peaking in mid-2022, with Canadian CPI falling to 2.7% i♛n April.💜3

That’s not much different than the 澳洲幸运5官方开奖结果体彩网:2.7% inflation measured by the U.S. Personal Consumption Expenditures (PCE), which the Federal Reserve uses to track price changes. However, Canada's inflation has steadily declined since the beginni🦄ng of the year. Meanwhile, in the U.S., inflation was stoked in the first quarter.

Read more about Canada's interest rate cut here.

-Terry Lane

Will The Labor Market Extend Its 27-Month Winning Streak?

The unemp🧔loyment rate has stayed below 4% for 27 months, a streak only exceed💞ed during the 1950s.

High demand for workers since the economy began to recover from the pandemic has kept widespread layoffs at bay since 2022. Employers likely added 190,000 jobs in May, close to the 175,000 added in April, a report Friday from the Bureau of Labor Statistics will show, according to forecasts by economists surveyed by Dow Jones Newswires and The Wall Street Journal.

However, the low unemployment streak is at risk of coming to an end. Employers have been 澳洲幸运5官方开奖结果体彩网:pulling back job openings, suggesting that a rise in unemployment could be around the corner. However, forecasters e🌸xpect the rate to hold steady at 3.9%. 

Read more about historically low unemployment here.

New Orders Drive Up Service Sector Activity in May

Activity in the 澳洲幸运5官方开奖结果体彩网:services sector jumped in May, with a pair of industry sur🐠veys showing business gr🌌owing as orders increased, despite continued price pressures and signs of slower hiring. 

The service sector 澳洲幸运5官方开奖结果体彩网:Purchasing Managers’ Index (PMI) from the 澳洲幸运5官方开奖结果体彩网:Institute of Supply Manag🔴ement (ISM) showed a jump in May to 53.8%. It was a rebound from a 澳洲幸运5官方开奖结果体彩网:decline in April which was the first time in more than a year. The increase surprised economists surveyed by the Wall Street Journal and Dow Jones Newswire, whose forecast undershot by more than three percentage points.

"This was a stronger-than-expected ISM Services report that goes against the grain of the steady stream of weaker-than-expected data we have seen from the U.S. economy of late," wrote Scott Anderson, chief U.S. economist at BMO. "This report suggests the service sector expansion still has quite a bit of resilience and vibrancy left even as the manufacturing sector continues to struggle under the weight of a stronger dollar, sluggish global demand, and higher interest rates."

As expected, the S&P Global Market Intelligence flash U.S. services PMI in May came in at 54.8, reaching its highest level in the past 12 months. 

Both surveys showed new orders rebounded after dipping in April. Howeverꦦ, the S&P Global service PMI showed that firms lowered their hiring levels for the second straight month, while the ISM services employment index contracted for the fifth of the past six months, despite improving in May. 

"Although the service sector has not matched the same weakness as the manufacturing sector, the labor market remains muted," wrote Brian Wesbury, chief economist at First Trust Advisors.

-Terry Lane

This blog post has been updated to include commentary from economists.

Government-Backed Mortgages Lead Demand During Holiday-Shortened Week

In results adjusted for the Memorial Day holiday, mortgage applications 📖dropped 5.2% last week, as increasing interest in government-backed housing loans wasn’t able to offset declines in demand for standard mortgage loans, according to Mortgage Brokers Association data.

The declining demand comes as mortgage rates ticked upward 澳洲幸运5官方开奖结果体彩网:for a second week, with the 30-year fixed-rate mortgage coming in at 7.07%, reaching its highest levels in a month.  Purchase activity declined 4% during the holiday week, while refinancing was down 7%. However, the share of both 澳洲幸运5官方开奖结果体彩网:Veterans Administration (VA) and 澳洲幸运5官方开奖结果体彩网:Federal Housing Administra🦩tion (FHA) loans increased

“Government purchase volume was down less, helped by growth in VA applications. The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs,” said🐭 Mike Fratantoni, senior vice president and chief economist at MBA.

-Terry Lane