Economic data released this week will be closely examined by the Fed as it prepares for the meeting May 3-4 to determine its next interest rate move. There is also more banking news, including the release of the Fed’s own research into what went wrong with Silicon Valley Bank.

Economics

• GDP for the first quarter came in at 1.1%, well below the 4^th quarter of last year (2.6%) and below an expected 2%. The weak number is largely due to a contraction of inventories. But has raised concerns about recession or stagflation. (CNBC)
• Friday’s data releases included March consumer spending (flat), and PCE inflation (0.1%/4.2% total, 0.3%/4.6% core). (Reuters) First quarter wages picked up 1.2%, or 4.8% year-over-year. (Morningstar)
• U.S. consumer confidence falls to 9-month low on worries about jobs and recession (MarketWatch)
• The WSJ (subscription may be required) takes a detailed look at which companies are still able to weild pricing power, and which ones are starting to see customers pull back.
• Morning Brew explains why rents remain stubbornly high. 

Investing

• A Wealth of Common Sense discusses the pros and cons of moving some of your portfolio into money market funds and the like.

Banking

• What went wrong at SVB? Management was caught out on the wrong side of a big interest rate bet. The Fed review also lays blame on the failure of their own supervisors/systems to take action sooner and more forcefully. (NYT)

The findings suggested that supervisors failed to fully understand how much risk Silicon Valley Bank was taking. Fed supervisors flagged issues at the bank, but it did not catch them all or follow up on them intensively enough…..

Silicon Valley Bank had 31 open supervisory findings when it failed in March 2023, about three times the number at its peers, based on the Fed’s report.

• If you would like to understand the underlying issue that brought SVB down, this academic but accessible paper from the Kansas City Fed looks at the implications of the net unrealized losses on banks. It goes through the bank accounting and moved on from there.  If that is more than you can handle, just read the intro, review the graphs, and read the conclusion and you will get a good grounding in the topic.
• First Republic deposits have dropped 40%. (CNBC)
• Some banks are offering attractive rates on CDs. How long might it last? (NYT)

Debt

• Here is a link to an NPR LifeKit video that addresses how people should manage their debt that might be helpful as a review (18 mins). (See if your students can pick up on the “error” just past the 2-minute mark.) It delves into the social/emotional implications of carrying debt or being in a tight financial situation and might be helpful in deciding what/how to communicate with others about it.

Student Loans

• The US Department of Education awards new contracts for administering student loans.

Financial Pitfalls

• Last week, Apple’s financial products got NGPF attention between the reading list and FinCap Friday. Here is a downside to the new Apple savings account – your iphone is even more attractive to thieves. (The Information)

Financial Literacy

As Financial Literacy month comes to an end, here are two more articles discussing the state of personal finance.

• CNBC features Courtney Poquette and her success in Vermont, but reviews the current status of personal finance requirements across the country.
• Yahoo Finance includes some statistics about young people and money, as well as a discussion of the evolution of what financial literacy means as the way we handle money has changed drastically with technology.

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.