Last week saw a number of important economic updates, covering housing sales, business orders, and second-quarter growth. Much of the news came in better than expected, with mixed housing sales serving as the only fly in the ointment. This will be a very busy week for updates, as we finish off July and head into August.
Last week’s news
On Tuesday, June’s existing home sales data was released. Existing sales fell by 1.7 percent during the month, against expectations for a smaller decline of 0.4 percent. This marks the 16th straight month of year-over-year declines in existing home sales. Rising prices and a lack of supply in some regions remain headwinds for potential buyers.
On a brighter note, Wednesday’s release of new home sales data came in better than expected. New home sales grew by 7 percent in June, higher than the 5.1 percent growth that was expected. Although this result was encouraging, existing homes are a much larger part of the housing market. So, overall, this was a disappointing month for housing sales.
On Thursday, June’s durable goods orders report was released. Orders grew by 2 percent in June against expectations for 0.7 percent growth. This faster growth was largely driven by higher-than-expected aircraft orders, which increased despite the ongoing struggles with the grounded Boeing 737 MAX. With that being said, the core durable goods figure, which strips out transportation orders, grew by a solid 1.2 percent, indicating that overall business equipment spending was strong during the month.
We ended the week with the release of the first estimate of second-quarter GDP growth on Friday. The economy grew at an annualized rate of 2.1 percent in the second quarter. This result is down from the 3.1 percent growth rate of the first quarter but higher than expectations for 1.8 percent growth. This result was due to a rise in personal consumption, which grew by 4.3 percent during the quarter, up from just 1 percent in the first quarter. Higher-than-expected government spending also helped fuel some of the second quarter’s growth. Net trade and business inventories, which were the major drivers of first-quarter growth, both ended up detracting from second-quarter GDP growth.
What to look forward to
The week will start with June’s personal income and personal spending reports, which are scheduled to be released on Tuesday. Both are expected to show solid 0.3 percent monthly growth, following similar growth figures from May. If these estimates hold, it will mark five straight months of income growth and four straight months of spending growth.
One of the major drivers of consumer spending is high consumer confidence levels. On Tuesday, we will see the Conference Board Consumer Confidence Index for July, which is expected to increase from 121.5 to 125. With low unemployment and equity markets near or at all-time highs, a bounce back in confidence following May’s decline makes sense.
The FOMC is meeting on Tuesday and Wednesday and will release its rate decision on Wednesday afternoon. Economists widely expect the Fed to cut the range for the federal funds rate by 25 bps in response to increasing trade tensions and slowing global economic growth. There is an outside chance that the FOMC will choose to cut rates by 50 bps, but recent comments from Fed officials indicate that a 25 bp cut is more likely. The market is currently pricing in a roughly 85 percent chance of a 25 bp cut. This would be the first rate cut since December 2008 and would likely signal a more supportive monetary policy going forward.
On Thursday, the ISM Manufacturing survey is set to be released. This measure of manufacturers’ confidence is expected to increase from 51.7 to 52 in July, following a large decline in June. Although the expected increase isn’t large, manufacturer confidence has been declining since April, so any positive result here would be welcome.
On Friday, we will get a look at June’s international trade balance. The trade deficit is expected to decline slightly from $55.5 billion in May to $54.5 billion in June. Both imports and exports are expected to show declines in the face of ongoing trade turbulence and slowing global economic growth.
Also on Friday, we will see the release of July’s employment report. Approximately 160,000 new jobs are expected in July after a surge of 224,000 new jobs in June. The unemployment rate is expected to stay flat at 3.7 percent, which is near multidecade lows. Overall, the jobs market remains healthy, despite job growth slowing from 2018 levels.
Finally, we’ll finish out the week with the second and final report for the University of Michigan consumer sentiment survey for July. Similar to the Conference Board figure set to be released on Tuesday, the University of Michigan survey is expected to increase modestly from 98.4 to 98.5 in July, based on the same tailwinds for the Conference Board survey.
That’s it for this week—thanks for reading!