Last week saw a handful of important economic updates, primarily focused on the housing market. The data was mixed, with disappointing home builder sentiment offset by better-than-expected sales growth. This will be another relatively quiet week on the economic update front, with only a few notable releases scheduled.
Last week’s news
Last week got off to a rocky start. The National Association of Home Builders Housing Market Index fell from 66 to 64 in May, against expectations for a modest increase to 67. This unexpected drop was due to declining sentiment in the northeastern and western regions, which was possibly weather related. Although this decline was disappointing, the index still sits well above lows seen in December and January. As such, there is no immediate cause for concern.
On Tuesday, May’s housing starts and building permits were released. These results were mixed. Starts declined by 0.9 percent, while permits increased by 0.3 percent. Economists had forecast modest growth for both figures, but housing starts surged by 5.7 percent in April. So, the pullback in May is understandable.
The Federal Open Market Committee met last week and released its rate decision on Wednesday. As expected, the committee left rates unchanged during the meeting. But it also indicated that low inflation figures and the headwinds from continued trade wars could lead to rate cuts at upcoming meetings. There is still more than a month before the committee next meets, but market participants largely expect a rate cut at the July meeting, barring any major economic upheaval in the meantime.
The week ended with the release of May’s existing home sales figure on Friday. Existing home sales increased by 2.5 percent during the month, which beat expectations for 2.1 percent growth. Given the decline in home builder confidence during this same period, the better-than-expected growth in sales is very encouraging.
What to look forward to
Tuesday will see the release of May’s new home sales report. Economists expect sales to grow by 2.2 percent month-over-month, which would be in line with the growth in existing home sales we saw last month. If we do see this modest growth, it would bring new home sales to their second-highest level in the past 12 months, nearing postrecession highs.
Tuesday will also see the release of the Conference Board consumer confidence survey. It is expected to decline slightly from 134.1 to 131 in June. Despite this expected pullback, consumer confidence remains near multiyear highs, as a healthy job market and a rebound in U.S. equities supported confidence during the month.
On Wednesday, we will receive the first report for May’s durable goods orders. Headline orders are expected to decline by 0.2 percent, primarily driven by a decline in transportation orders. There is further downside risk here, as the impact from the ongoing grounding of the Boeing 737 MAX could lead to even steeper declines in headline orders. Core orders, which strip out volatile transportation figures, are expected to show modest 0.2 percent growth.
On Friday, May’s personal income and personal spending reports are both set to be released. Income is expected to grow by 0.3 percent, while spending is set to increase by 0.5 percent. This would follow similar growth figures from April. Consumer spending is the backbone of the economy, so this continued steady growth in consumers’ ability and willingness to spend is very encouraging.
Finally, we finish the week with the second and final release of the University of Michigan Consumer Sentiment Index for June. It is expected to decline slightly from 97.9 to 97.7. Similar to the Conference Board measure of confidence, this index remains near postrecession highs, so this slight pullback is nothing to worry about.
That’s it for this week—thanks for reading!