Monday Update: Signs of a Slowdown?

Posted by Sam Millette

This entry was posted on Aug 28, 2017 1:33:18 PM

and tagged In the News

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Monday updateToday's post is from Sam Millette, a fixed income analyst on Commonwealth's Investment Management and Research team.

Last week, some of the economic news reports we monitor came in slightly worse than expected. They all had positive results the month before, however, so this slowdown may be temporary.

Last week’s news

On Wednesday and Thursday, new and existing home sales data was released. Both measures came in below expectations, with new home sales down 9.4 percent on a monthly basis and existing home sales down 1.8 percent. These declines are attention grabbing, but the slowdown appears to be due primarily to a lack of supply rather than demand. Plus, home prices continue to rise. Going forward, it will be interesting to see how home builders address this lack of supply, given high levels of confidence and the low housing stock.

Friday saw the release of durable goods orders, which also came in lower than expected. This measure of business confidence was expected to decline 5.8 percent but dropped 6.8 percent. The miss was due primarily to a decline in volatile aircraft orders, as the core figure grew by 0.5 percent. This core reading is more indicative of overall business confidence, so the growth in this measure is certainly welcome.

What to look forward to

This week, we’ll see a number of data points that have the potential to move markets.

First, we’ll get a look at consumer confidence with the Conference Board’s survey. Last week, another popular measure of consumer confidence produced by Bloomberg rose to a 16-year high. A similar increase is expected for the Conference Board’s measure.

On Thursday, personal income and spending data will be released. Given the ongoing strength of the job market, both of these figures are expected to increase. A surge in retail sales data earlier this month indicates that there might be some upside potential here as well.

Speaking of the job market, on Friday we’ll see the August employment report. Consensus forecasts call for an addition of 180,000 jobs, with the unemployment rate staying at 4.3 percent. Because of the tight labor situation, average hourly earnings are expected to increase.

Finally, the Institute for Supply Management will release its manufacturing index on Friday. This measure is expected to increase slightly from 56.3 to 56.4, due in large part to a recovery in manufacturing activity. The recent decline of the U.S. dollar has helped manufacturers compete globally, and an increase in this measure will be considered a boon for the economy.

Have a great week!

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