Looking at today’s news, the lack of worrisome economic headlines is remarkable. Considering all that’s happened in the past couple of weeks—not to mention that markets are closing out their worst month in years—this seems to reinforce the idea that things here in the U.S. really are moving back to normal.
A Look at Last Week’s Data
Housing. The consumer economy continued to improve last week, as evidenced by positive housing news:
- New home sales in July rose 5.4 percent month-on-month, slightly below expectations but up significantly from a decline of 7.7 percent the previous month.
- July sales numbers increased to 507,000, slightly below expectations of 510,000 but up from 481,000 the previous month.
- House prices also rose between 4.5 percent and 5 percent, according to the S&P/Case-Shiller index.
Consumer confidence. The Conference Board’s Consumer Confidence Index posted a substantial increase for August, from 90.9 to 101.5, well above expectations and more than offsetting the prior month’s fall. The rise was broad based, with improvements in the present conditions index and in the number of people reporting that jobs were hard to get.
Personal income and spending. Although not outstanding, these figures continue to show steady growth:
- Income was up by 0.4 percent in July, a reasonably strong number in line with both the previous month and with expectations.
- Spending increased 0.3 percent, also in line with the previous month but slightly below expectations.
Business results. From a business perspective, the news was positive as well:
- Durable goods orders, which were expected to decline by 0.4 percent, actually increased by 2 percent in July, a drop from the previous month’s very strong number but still well above expectations.
- Stripping out aircraft and defense, the improvements were even better, with orders up 2.2 percent versus a 0.9-percent increase the previous month and expectations of 0.3 percent.
GDP growth. The big news last week was the jump in second-quarter GDP growth, which was revised up to 3.7 percent from the previous estimate of 2.3 percent. Coming in well above expectations of 3.2 percent, this result indicates that growth remained strong despite all the turbulence during the quarter.
What to Watch This Week
Tuesday: The ISM Manufacturing Index is expected to remain stable, with the potential for a small increase. Although results may not be especially strong, the fact that the index should stay in growth territory despite many headwinds for manufacturing is a positive sign.
Thursday: The ISM Non-Manufacturing Index, which covers the much larger U.S. service sector, is expected to decline from last month’s exceptionally strong level while continuing to indicate high growth.
Friday: The major release of the week, the employment report should show continued growth at healthy levels. Based on the coverage of the Federal Reserve conference in Jackson Hole over the weekend, it appears that a rate increase this year is still on the table. Friday's employment report should have a lot of influence on whether that happens.