Pronounced Trends
We have been awaiting the numbers from the first half to validate what we already know. Volume for the half was just a tad under $175 billion for a decline of 19.9%. A range of $350 to $375 billion for the full year is most probable at this point assuming rates continue to climb and there is no easing of rates by year end.
Most states experienced down years in issuance with some exceptions. The states that had increases in YTD volume include NJ, OK, OR, TX, VT, WV, and WY. Five of those states had increases in volume of over 25% including NJ, OR, VT, WV, and WY. Texas is the largest state in terms of population and had an increase of just 7.9% for a total issuance of $26.7 billion for the period.
Volume in the month of June was a respectable $34.4 billion for this time of year with the prevalence of rollovers. But the result was still 8.8% below last year’s issuance in the month.
In terms of categories, there were just four that had increases for the period. Public Facilities, Environment, Counties & Parishes, and General Purpose had increases in descending order of 180%; 146%; 25%; and 14% respectively.
At this point, there is a consensus among Fed watchers that the tone remains hawkish. There is now more conviction that the Fed will follow through with two more hikes before year end as they have suggested is quite possible depending on the data.
The latest read on inflation is that we are slowing down with the latest reading of 3.8% on the PCE. Core readings remain stubbornly high. But progress is being made, it is just whether it is fast enough or not. This topic will remain a factor in a presidential election year.
The impact of federal asylum seekers on the New York City budget is quite clear. The expenditure of providing services to the group may be impacting the ability to providing services for other priorities. This problem is national in scope and requires a federal solution that has not been forthcoming over a considerable time and over many administrations.
I recently participated in a conference where it was stated by a panelist that the average age of a municipal professional is fifty-eight. The turnover tsunami is coming soon. One consideration is whether there is enough leeway in budgets to bring on new employees before all the experienced ones depart the scene. We think there is not enough leeway to bring on new talent from a budget perspective. What effect this circumstance will have on the business is ponderable.
At the same Smith’s Research & Gradings conference, I moderated a panel on transportation that made it clear that the volume has been decreasing despite all the federal programs that now may be accessed. The collective view is that there will not be an uptick in volume until 2024 or beyond.
Another interesting topic was a discussion of the use of AI in the analytical process. The bottom line is that participants view AI as a tool but the industry should not become overly reliant on its use.
John Hallacy
John Hallacy Consulting LLC
June 30, 2023
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