Staff Reports
Last week, panic hit the streets as the unemployment rate took an unexpected spike, sending financial gurus into a tailspin. However, amidst the chaos, the Institute for Supply Management’s data revealed a silver lining: the services sector inched forward in July. Meanwhile, the Department of Commerce reported a drop in initial jobless claims, proving that perhaps things aren’t as dire as some would like to think. The stock market, not one to be completely outdone by negative news, staged a modest rebound, undeterred by the week’s earlier jolts.
For those who are perpetually on the edge of their seats regarding recession talk, it seems the worries may be a bit overcooked. Investors will have their eyes glued to this week’s retail sales figures, which are expected to be pivotal in assessing whether consumer spending is about to take a nosedive or continue its glorious upward trajectory. After all, it’s the consumer who’s been fueling the economy like a gas-guzzling beast amidst rising prices.
How will retail sales hold up as the lags of bank tightening work through the economy? Banks’ lending standards lead retail sales by an average period of two quarters. #macro #HOPE pic.twitter.com/i96s3oCcds
— Kantro (@MichaelKantro) August 28, 2023
Private consumption has been the backbone of the U.S. economy. While growth took a slight breather in the second quarter, final sales to private domestic consumers still managed a respectable 5.1%, though that’s a smidgen down from the sturdy 5.6% seen earlier in the year. Thanks to lower inflation, households may be feeling a bit more flush, with real wages having increased, delinquencies going down, and banks feeling generous with their lending practices. This new economic climate is making things look a bit rosier for regular American families.
The Consumer Price Index and Producer Price Index reports from July are poised to be crucial, potentially steering the Federal Reserve toward a rate cut come September. In June, consumer prices dipped by 0.1%, resulting in a year-over-year inflation rate of a modest 3%. This news should tickle the fancies of those at the Fed who’ve been itching for an opportunity to make some adjustments to interest rates. With the benchmark 10-year Treasury yield tumbling from a high of 4.7% down to below 4% by the end of July, it seems the economy might still have a few tricks up its sleeve. But with concerns of a sluggish labor market looming, another market plunge could be just around the corner for investors who like to live on the edge.
In a final twist, the U.S. Census Bureau is gearing up to unveil its latest estimates for housing starts in July. Historically, these numbers are like a crystal ball for predicting economic shifts and business activity. This year, rising mortgage rates have put the squeeze on home sales and sent inventory levels skyrocketing. Builders are feeling the pinch, with many delaying new projects as confidence wanes. June saw housing starts hit an eight-month low, and this week’s report could either spell doom or provide a glimmer of hope. If mortgage rates have enjoyed a downward trend, will we see a resurgence of home-buying excitement that could get builders back on their feet? Only time will tell.
